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on Microfinance |
| By: | Thi Minh-Phuong Ngo; Zaki Wahhaj |
| Abstract: | In the past 30 years, microfinance has carried many promises of social and economic transformation, with the shift towards targeting women being seen as a major strategic move through which the promise of social development could be most effectively delivered. However, ethnographic studies have shown that many women relinquish the use of their loans to male members of the household, belying the empowering promise of microfinance. We propose a simple model of household bargaining which examines how providing women with credit affects production and decision-making power in the household. Following Bergstrom (1996), we account for the roles of both divorce and non-cooperation in the household as relevant fall-back options in the bargaining strategy of each spouse. We show that the introduction of a microcredit programme is likely to have widely heterogeneous impacts, and can adversely affect the bargaining power of some women. We demonstrate that access to credit allows a woman to strengthen her bargaining position through an expansion of her autonomous activities (the causal mechanism hoped for) only in a limited number of cases: when she is able to invest her new capital profitably in an autonomous activity, and her husband has no alternative activity in which the same capital would generate comparable returns, or lacks the power to overrule her preferred investment choice. The two cases in which it is most likely that the availability of credit would enable the woman to strengthen her bargaining position within the household are (i) when capital can be invested in a cooperative activity to which both spouses contribute in an important way, and (ii) when a large share of the household budget is devoted to expenditures on household public goods. |
| JEL: | D13 D91 J16 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2010-34&r=mfd |
| By: | Gine, Xavier; Menand, Lev; Townsend, Robert; Vickery, James |
| Abstract: | Rainfall index insurance provides a payout based on measured local rainfall during key phases of the agricultural season, and in principle can help rural households diversify a key source of idiosyncratic risk. This paper describes basic features of rainfall insurance contracts offered in India since 2003, and documents stylized facts about market demand and the distribution of payouts. The authors summarize the results of previous research on this market, which provides evidence that price, liquidity constraints, and trust all present significant barriers to increased take-up. They also discuss potential future prospects for rainfall insurance and other index insurance products. |
| Keywords: | Climate Change Economics,Debt Markets,Financial Literacy,Emerging Markets,Banks&Banking Reform |
| Date: | 2010–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5459&r=mfd |
| By: | Khaleque, Abdul |
| Abstract: | This paper uses Plan-InM household survey data on the participants of Plan Bangladesh Funded Flexible Microfinance Services. The analysis suggests that the extreme poor households who may have likelihood to be self excluded from the financial services have a significant higher preference or demand for flexible saving services. The migrant households have a positive significant demand for flexible saving services. But the demand for flexible saving service is inversely related to the households’ food vulnerability and unexpected financial crisis, such as loss in income due to injury of household members, price hike, etc. |
| Keywords: | Flexible saving; demand; counter-factual; ultra poor |
| JEL: | D12 D01 |
| Date: | 2010–10–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:26152&r=mfd |
| By: | Erlend Berg |
| Abstract: | Credit constraints are an almost ubiquitous assumption in development economics. Yet direct evidence for credit constraints is limited, and many observations consistent with credit constraints are equally compatible with precautionary saving or myopic (non-forward-looking) consumption. Using household panel data and a source of widely anticipated income in South Africa, this paper first tests and rejects the standard consumption model with perfect capital markets. The standard model enriched with credit constraints is then contrasted with precautionary saving and myopic consumption as alternative explanations for the observed expenditure pattern. The standard model with credit constraints cannot be rejected in favour of precautionary saving or myopic consumption. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2010-31&r=mfd |
| By: | Dercon, Stefan; Christiaensen, Luc |
| Abstract: | Much has been written on the determinants of input and technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented: the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data for Ethiopia. Historical rainfall distributions are used to identify the counterfactual consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just exante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertiliser. The lack of insurance causes inefficiency in production choices. |
| JEL: | O12 Q12 O33 Q16 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ner:oxford:http://economics.ouls.ox.ac.uk/14921/&r=mfd |
| By: | Emerson, Patrick M. (Oregon State University); McGough, Bruce (Oregon State University) |
| Abstract: | This paper constructs a two-period overlapping generations model of human capital investment decisions where a microloan program designed to finance entrepreneurial activities is active. It is shown that, in the presence of human capital externalities (social returns to education) there exists a range of microloan amounts that are growth depressing and welfare decreasing through their affect on the opportunity cost of schooling. By increasing the opportunity cost of schooling, microloans divert investment away from human capital: by failing to internalize the social returns to education, households’ individually optimal investment decisions in the face of microcredit availability act to depress the growth of the economy and result in sub-optimal welfare outcomes. |
| Keywords: | microloans, growth, human capital |
| JEL: | E24 O10 O40 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5249&r=mfd |
| By: | Daniel Kraus (University of Rostock) |
| Abstract: | This paper examines the conditions for credit volume or borrower rationing in a competitive credit market in which the project characteristics are private information of the borrowers. There can only be credit volume rationing if the higher-risk credit applicants have a higher return in the event of a project success than the lower-risk credit applicants. Then the higher-risk borrowers are not rationed and obtain the social efficient credit volume. If the incentive compatibility constraint of the higher risk borrowers is binding, the lower-risk borrowers are credit volume rationed such that the constraint holds as an equation. If credit volume rationing is not sufficient to separate the borrower types, there is additionally a rationing of the low-risk borrowers. If the low-risk borrowers prefer a pooling to a separating contract, then there will not be a Cournot-Nash separating equilibrium, but a Wilson and a Grossmann pooling equilibrium. |
| Keywords: | Credit rationing, Credit Size, Loan, Asymmetric Information, Adverse Selection, Non-linear optimization |
| JEL: | D82 G21 |
| Date: | 2010–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:ros:wpaper:117&r=mfd |