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on Microfinance |
| By: | Ahmad Nawaz (Pakistan Institute of Development Economics.) |
| Abstract: | The social nature of Microfinance Institutions (MFIs) is mainly financed by subsidies received from the donors. This paper investigates the relationship between the sustainability and the efficiency of microfinance. Using Yaron’s Subsidy Dependence Index (SDI) as a measure of sustainability, a panel data set has been generated from the audit reports of the 179 MFIs worldwide. This essay empirically investigates some important relationships and phenomenons in microfinance. Even after correcting for the endogeneity bias, the results lend some support to the existence of mission drift tendency in microfinance. Notwithstanding interest rate policy, evidence is found that MFIs do charge higher interest rate to women borrowers with small loan sizes. Further, the determinants of MFIs profitability and sustainability have also been identified. Furthermore the evidence does not support the trade-off between outreach and sustainability, however, the trade-off between costs and sustainability of MFIs is well supported. While the productivity and efficiency of MFIs contributes towards sustainability. |
| Keywords: | Microfinance, Sustainability, Profitability, Mission Drift |
| JEL: | G21 H2 G28 O57 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:10-010&r=mfd |
| By: | Virginie Allaire (CEREN, Burgundy School of Business (Groupe ESC Dijon-Bourgogne), France); Arvind Ashta (Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels and CEREN, Burgundy School of Business (Groupe ESC Dijon-Bourgogne), France); Laurence Attuel-Mendes (CEREN, Burgundy School of Business (Groupe ESC Dijon-Bourgogne), France); Karuna Krishnaswamy |
| Abstract: | This paper looks at whether Morocco meets the usual criteria of a country where MFIs can succeed and what distinguishes Morocco from its North African neighbors (Algeria, Tunisia, Libya and Egypt) where a priori the culture is similar even though institutions may be different. The paper uses the similarities and differences of these five countries to identify cultural, institutional, economic and geographic factors which explain why Microfinance in particular and development in general arrives sooner in some environments than in others. The objective of the research is to identify controllable institutional factors which can be introduced in regulation to enable Microfinance to succeed in a country. We used a case study approach combined with a little bit of correlation analysis. The case study approach is the most adapted to studying small samples in more detail. The success of Microfinance is linked to population density, smallness of a country's geographical size and its poverty as well as the amount of international donor funds it has received. The availability of oil exports as revenues may lead to a delay in developing microfinance. Establishing a specific legal framework for Microfinance, such as in Morocco, may help foster the growth of Microfinance. The existence of Apex organizations for centralizing international aid and redistributing funds may in fact lead to lower donor participation since their choices are reduced and an extra level of bureaucratic costs is imposed. The results also indicate the need for a better quality database than that currently provided by the MIX. Biases may come in from the small sample size as well as from the lack of data on Libya. Future research may focus on correlation with violence, corruption, women's rights, political risk and economic sanctions. The findings would lead microfinance institutions to lobby for specific laws, more initial direct donor funding, less government apex distribution and better information databases. This kind of comparative institutional analysis has not been performed, at least for this region. |
| Keywords: | Institutional analysis, regulation, microfinance, North Africa |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:09-057&r=mfd |
| By: | Arvind Ashta (CEREN, Burgundy School of Business (Groupe ESC Dijon-Bourgogne), France and Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.); Djamchid Assadi (CEREN, Burgundy School of Business (Groupe ESC Dijon-Bourgogne), France) |
| Abstract: | Purpose of the paper: With the development of web 2.0, a new kind on lending is taking place on the internet, termed peer to peer lending or social lending. In Europe, this includes commercial lending websites such as Zopa, smava, boober, Kokos, Monetto. At the same time, following the lead of Kiva in the US, European microcredit web platforms are coming up including MyC4 and Babyloan in Europe. The paper examines how the legal design of the online websites differs from the microcredit websites in Europe and how this impacts social performance issues of the different models. Design/Methodology/Approach: Since the population size of these websites is rather small, we use a comparative case study approach. The case study approach is the most adapted to studying small samples in more detail. The case studies are based on exploring of websites and review of academic literature and press reports. Key results: We find that although web2.0 permits platform models, most sites (commercial or micro-lending) have retained intermediary roles and have not permitted direct peer to peer contact. The paper will outline the advantages to both borrowers and lenders in the different models and their motivations. Challenges for expansion, such as trust-building as well as a marketing analysis will also be presented. Impact: The findings would lead microfinance institutions to lobby for specific laws, and invest in online lending solutions to radically reduce operating costs as well as to increase outreach. Value: This research would add value to those who are operating in or launching new online microcredit platforms to understand this young and fast changing marketplace. |
| Keywords: | online lending, regulation, social performance, microfinance |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:09-059&r=mfd |
| By: | Arvind Ashta (Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels and CEREN, Burgundy School of Business (Groupe ESC Dijon-Bourgogne), France); Djamchid Assadi (CEREN, Burgundy School of Business (Groupe ESC Dijon-Bourgogne), France) |
| Abstract: | Microcredit interest costs remain higher than those of commercial banks in spite of significant donor funds, largely owing to transaction costs relative to small loan sizes. With the rise of Web 2.0 and online social interactivity, can these transaction costs be reduced through peer to peer lending? Peer to Peer lending and Web 2.0 have two things in common. The first common denominator is that both of them are rather newcomers in their respective fields and growing fast. The second is that they are both based on mutual and social exchanges between people instead of centrally controlled communications and relationships. The main objective of this paper was to investigate whether they are integrated to support a higher level of social interactions and associations for less (transaction) costs. We find that peer to peer lending consists of diverse websites of microcredit (Kiva, Wokai), social investing (MicroPlace) as well as small loans at market rates (Prosper, Zopa, Lending Club), and even lending between friends and family members (Virgin Money). The paper studies the use of web 2.0 technologies (blogs, interactivity between lenders and buyers, peers' reviews and comments, peers communities and chats) in six such peer-to-peer lending sites. It finds that most of the peer-to-peer lenders are in fact intermediaries between the peers (lender and borrowers) and there is little direct contact between the peers. One website used none of the web 2.0 tools. None of the websites used all the web 2.0 tools. The impact on transaction costs is therefore very little. A discussion of difficulties in establishing platforms in this field and directions for future research are provided. |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:09-056&r=mfd |