New Economics Papers
on Microfinance
Issue of 2010‒10‒02
six papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Microfinance and Gender: Is There a Glass Ceiling in Loan Size? By Isabelle Agier; Ariane Szafarz
  2. Microfinance Over-Indebtedness: Understanding its drivers and challenging the common myths By Jessica Schicks
  3. Technical Efficiency of Microfinance Institutions in India- A Stochastic Frontier Approach By Masood, Tariq; Ahmad, Mohd. Izhar
  4. Liability structure in small-scale finance : evidence from a natural experimen By Carpena, Fenella; Cole, Shawn; Shapiro, Jeremy; Zia, Bilal
  5. Women empowerment and micro finance : Case study from Kerala By DHANYA , M B; SIVAKUMAR , P
  6. Différence de performance sociale des institutions de microfinance au Mali By Yaya Koloma

  1. By: Isabelle Agier; Ariane Szafarz
    Abstract: Microfinance institutions serve a majority of female borrowers. But do men and women benefit from same credit conditions? This paper investigates this issue by presenting an original model and testing its predictions on an exceptional database including 34,000 loan applications from a Brazilian microfinance institution over an eleven-year period. The model considers a lender that offers standardized loan contracts with a fixed interest rate, which is common practice in microfinance. It demonstrates that biased loan attribution may lead to three different outcomes, depending on the bias intensity: 1) denial of all applications from a given group, 2) a “glass ceiling” effect, namely loan downsizing of the largest projects from a given group, or 3) no impact. The empirical analysis detects no gender bias in approval rate, but uncovers a glass ceiling effect hurting female applicants. Moreover, this effect is insensitive to the credit officer's gender. In conclusion, the good news is that the microfinance practice does ensure a fair access to credit. The bad news is the presence of a glass ceiling faced by female entrepreneurs with larger projects.
    Keywords: Microcredit; Microfinance; Discrimination; Loan Size; Loan Approval; Gender
    JEL: O16 D82 J33
    Date: 2010–09
  2. By: Jessica Schicks
    Abstract: The microfinance industry has been celebrated both for its social impact on poverty alleviation and for its profitability. With issues of over-indebtedness emerging among microfinance customers, both achievements are at risk. This paper contributes to the industry's understanding of the definition and causes of over-indebtedness. It reveals why the 5 myths of microfinance over-indebtedness erroneously oversimplify the reality of microfinance customers. The paper works with theoretical and empirical contributions from economics, psychology and sociology, and unites microfinance specific findings with the general consumer finance literature. In addition to external influences, it highlights the responsibility of lenders in driving microfinance customers into over-indebtedness. It also recognises the role that borrowers involuntarily play in over-indebting themselves. Enhancing our understanding of what microfinance over-indebtedness is and how it is caused, the paper provides the basis for tailoring over-indebtedness solutions to the root causes of the phenomenon and addressing the challenge at all suitable levels.
    Keywords: Microfinance; Microcredit; Over-Indebtedness; Debt; Customer Protection; Consumer Finance; Behavioural Economics
    JEL: O16 O50 G21
    Date: 2010–09
  3. By: Masood, Tariq; Ahmad, Mohd. Izhar
    Abstract: Study attempts to measure the efficiency level and its determinants of a sample of microfinance institutions operating in India by applying stochastic frontier approach for unbalanced panel of 40 microfinance institutions for the 2005-08. It has been found that mean efficiency level of microfinance institutions is quite low but it increases over the period of study. Age of microfinance institutions is positive determinant of efficiency level but size does not matter much. Higher outreach is associated with higher efficiency which negates the general perception of trade off between outreach and efficiency. Microfinance institutions operating in southern states are more efficient than their counterparts. It has been found that regulated microfinance institutions are less efficient.
    Keywords: Microfinance Institutions; Technical Efficiency; Stochastic Frontier Method; India
    JEL: C23
    Date: 2010–03–15
  4. By: Carpena, Fenella; Cole, Shawn; Shapiro, Jeremy; Zia, Bilal
    Abstract: Microfinance, the provision of small individual and business loans, has witnessed dramatic growth, reaching over 150 million borrowers worldwide. Much of its success has been attributed to overcoming the challenges of information asymmetries in uncollateralized lending. Yet, very little is known about the optimal contract structure of such loans -- there is substantial variation across lenders, even within a particular setting. This paper exploits a plausibly exogenous change in the liability structure offered by a microfinance program in India, which shifted from individual to group liability lending. The analysis finds compelling evidence that contract structure matters: for the same borrower, required monthly loan installments are 6 percent less likely to be missed under the group liability setting, relative to individual liability. In addition, compulsory savings deposits are 19 percent less likely to be missed under group liability contracts.
    Keywords: Debt Markets,Bankruptcy and Resolution of Financial Distress,Access to Finance,Microfinance,Deposit Insurance
    Date: 2010–09–01
    Abstract: The subject of micro-finance is considered as significant and emerging trend in the present scenario for the empowerment of women. Micro finance programmes are promoted as an important strategy for women’s empowerment. Micro finance builds mutual trust and confidence between bankers and rural poor to encourage banking in a segment of population where formal financial institutions usually find difficult to reach. The present paper examines the economic impact of micro finance beneficiaries and whether the economic empowerment has resulted in the generation of a set of self reliant women. The Thiruvananthapuram district of Kerala State was selected for the case study. The survey shows about the positive impact of the development programme of Kudumbashree, a micro financial institution in Kerala, India.
    Keywords: women empowerment micro finance poverty.
    JEL: I32 G21 J16
    Date: 2010–09–23
  6. By: Yaya Koloma (GED, Université Montesquieu Bordeaux IV)
    Abstract: Basée sur une vision welfariste – bien-être des bénéficiaires –, la présente étude appréhende une forme réduite de la performance sociale au Mali, à partir de la dimension depth of outreach issue des quatre principaux indicateurs SPI de Cerise. Elle tente de rendre compte de la stratification des structures de microfinance selon leurs objectifs fondateurs de ciblage et donc en fonction des segments de pauvreté des bénéficiaires. Utilisant une méthode de classification en termes de quintile de pauvreté– très pauvres, pauvres, non pauvres vulnérables, non pauvres supérieurs et riches –, et à partir des données de l’enquête « microfinance et réduction de la pauvreté au Mali » recueillies de décembre 2007 à janvier 2008 au Mali, l’analyse conduit à trois principaux résultats. Premièrement, au niveau global, les résultats trouvent que parmi les différentes structures de microfinance, les institutions de type CVECA présentent le pourcentage le plus élevé de plus pauvres (47,5 pour cent), viennent ensuite les institutions mutualistes (18,1 pour cent), les autres formes (11,8 pour cent) et les institutions de crédit solidaire (5,3 pour cent). Deuxièmement, l’analyse en termes de durée d’adhésion montre que les nouveaux bénéficiaires des services microfinanciers des CVECA sont concentrés dans les trois premières classes de bien-être, c’est-à-dire les non pauvres. Dans les autres structures, la tendance serait la même, notamment pour les structures mutualistes. Troisièmement, l’analyse selon le genre des bénéficiaires met en évidence que la proportion des femmes bénéficiaires est légèrement plus importante (21,1 pour cent) dans les quintiles les plus pauvres comparativement aux hommes (19,5 pour cent) et les institutions de type crédit solidaire, qui devraient préalablement et essentiellement fournir les femmes, montreraient une certaine limite en termes de ciblage. Ce sont plutôt les CVECA, qui ne sont par nature pas destinées spécifiquement aux femmes, qui concentrent une part importante de femmes pauvres. La mise en relation de ces résultats avec les objectifs originaux montrent que les institutions de type CVECA sont relativement plus efficientes. Based on a welfariste approach – beneficiaries’ wellbeing –, this paper considers a slight form of social performance in Mali. It results from a depth of outreach dimension among the main SPI four indicators of Cerise. The paper attempts to account for the stratification of microfinance institutions according to their founding goals in terms of targeting, and therefore, in terms of segments of poverty among the beneficiaries. The study is focused on survey data "Microfinance and Poverty Reduction in Mali” collected from December 2007 to January 2008 in Mali, and uses a classification method of quintiles of poverty - very poor, poor, vulnerable non-poor, not poor superior and rich. The analysis leads to three main results. First, globally, results found that, among the different structures of microfinance institutions, CVECA have the highest percentage of poor (47.5 percent), followed by mutual institutions (18.1 percent), other (11.8 percent) and institutions of social credit (5.3 percent). Secondly, the analysis in terms of membership duration also highlights the new microfinance services beneficiaries of CVECA are concentrated in the first three classes of well-being, i.e. the non-poor. In the other structures, the trend is the same, especially for mutual structures. Thirdly, the gender analysis of beneficiaries reveals that the proportion of women is slightly higher (21.1 percent) in the poorest quintile compared to men (19.5 percent), and social credit institutions, which should first and foremost provide women, show a certain failure in terms of targeting. Therefore, the CVECA institutions, which are by nature not designed specifically for women, present a large proportion of poor women. The linking of these results with the original objectives shows that the CVECA institutions are relatively more efficient.(Full text in french)
    JEL: G21 I32
    Date: 2010–08

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