nep-mfd New Economics Papers
on Microfinance
Issue of 2010‒01‒23
four papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Group Lending versus Individual Lending in Microfinance By Maria Lehner
  2. Microfinance as a Poverty Reduction Tool—A Critical Assessment By Anis Chowdhury
  3. Participation in Self-Help Group Activities and its Impacts: Evidence from South India By D., Suresh Kumar
  4. Access to Finance and Its Association with Development in Rural India By Das, Khanindra Ch.

  1. By: Maria Lehner (University of Munich)
    Abstract: Microfinance is typically associated with joint liability of group members. However, a large part of microfinance institutions rather offers individual instead of group loans. We analyze the incentive mechanisms in both individual and group contracts. Moreover, we show that microfinance institutions offer group loans when the loan size is rather large, refinancing costs are high, and competition between microfinance institutions is low. Otherwise, individual loans are offered. Interestingly, our analysis predicts that individual lending in microfinance will gain in importance in the future if microfinance institutions continue to get better access to capital markets and if competition further rises.
    Keywords: microfinance, group loans, individual loans
    JEL: G21 L13 O16
    Date: 2009–08
  2. By: Anis Chowdhury
    Abstract: This paper attempts to provide a critical appraisal of the debate on the effectiveness of microfinance as a universal poverty reduction tool. It argues that while microfinance has developed some innovative management and business strategies, its impact on poverty reduction remains in doubt. Microfinance, however, certainly plays an important role in providing safety-net and consumption smoothening. The borrowers of microfinance possibly also benefit from learning-by-doing and from self-esteem. However, for any significant dent on poverty, the focus of public policy should be on growth-oriented and equity-enhancing programs, such as broad-based productive employment creation.
    Keywords: microfinance, poverty, employment, growth
    JEL: G21 O16 E24
    Date: 2009–12
  3. By: D., Suresh Kumar
    Abstract: Institution building is now recognized as vital for poverty reduction across the world. This paper focuses on the determinants of participation in Self-Help Groups and impacts on household welfare. The participation in SHG activities are influenced by various household level and contextual factors. Our results support that the public policies geared towards increasing women’s participation in SHGs generate substantial income and have significance in household welfare. The quantity and quality of food consumed, the health of household members, and children’s education have improved. Thus, the institution building contributes greatly to improving household welfare. Therefore, continuing public support for the expansion of these SHGs appears crucial to achieve poverty reduction.
    Keywords: Institutions; Self-Help Groups; Impacts; Women Participation; South India
    JEL: Z13 R2
    Date: 2009–06–07
  4. By: Das, Khanindra Ch.
    Abstract: Financial development has been correlated with better development outcomes. Even so, the access dimension of financial development has often been overlooked. In this context, the paper throws initial light on the nuances of horizontal inequality in the access to finance from institutional sources and development outcomes such as poverty, educational attainment and standard of living in rural area for Indian states. It is seen that the percentage of rural households getting access to finance from institutional agencies has remained considerably low and there is significant variation across states. More importantly, there is significant amount of horizontal inequality in the access to finance from institutional sources. Interestingly, better access to finance is found to be associated with better development outcomes. The most important finding of the paper is that lower (higher) inequality in the access to finance from institutional sources is associated with better (worse) development outcomes.
    Keywords: access to finance; development; horizontal inequality; rural household
    JEL: O18 D63 O16 R20
    Date: 2009–08–17

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