nep-mfd New Economics Papers
on Microfinance
Issue of 2010‒05‒15
two papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Unintended Effects of Microfinance: An Increase in Child Labour in Some Contexts? By Christian Lehmann; Guilherme Issamu Hirata
  2. The creditworthiness of the poor: a model of the Grameen Bank By Michal Kowalik; David Martinez-Miera

  1. By: Christian Lehmann (International Policy Centre for Inclusive Growth); Guilherme Issamu Hirata (International Poverty Centre)
    Abstract: An increasing number of policies in developing countries seek to empower women through female entrepreneurship. Many microfinance institutions (MFIs), for example, lend exclusively to women. Loans are usually combined with capacity building workshops on entrepreneurial activities such as the production of handicrafts, clothes or food to be sold in local markets. While there is evidence that these strategies have been successful in empowering women (Panjaitan-Drioadisuryo and Cloud, 1999), less is known about how such an increase in mothers? non-domestic labour affects the working hours of their children. In the few available studies, the results are ambiguous: see, for example, Hazarika et al. (2007) and Dehejia and Gatti (2002). Drawing on a study of Mexico (Lehman, 2010), this One Pager points out that policies which encourage the small business activities of women may lead to an increase in child labour. It hypothesises that the provision of family and/or social support infrastructure (full-day schools and childcare facilities), and/or policies that encourage investment in the children?s future, may help mitigate these unintended impacts.
    Keywords: Unintended Effects of Microfinance: An Increase in Child Labour in Some Contexts?
    Date: 2010–05
  2. By: Michal Kowalik; David Martinez-Miera
    Abstract: This paper analyzes the role of expected income in entrepreneurial borrowing. We claim that poorer individuals are safer borrowers because they place more value on the relationship with the bank. We study the dynamics of a monopolistic bank granting loans and taking deposits from overlapping generations of entrepreneurs with different levels of expected income. Matching the evidence of the Grameen Bank we show that a bank will focus on individuals with lower expected income, and will not disburse dividends until it reaches all the potential borrowers. We find empirical support for our theoretical results using data from a household survey from Bangladesh. We show that various measures of expected income are positively and signficantly correlated with default probabilities.
    Date: 2010

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