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on Microfinance |
| By: | Becchetti, Leonardo (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Conzo, Pierluigi (Associazione Italiana per la Cultura della Cooperazione e del Non Profit) |
| Abstract: | Microfinance institutions are used to claim that their impact goes beyond money since rescuing from exclusion uncollateralized poor borrowers significantly affects their dignity, self-esteem, social recognition and, through it, life satisfaction. Our paper aims to verify the validity of this claim by evaluating whether access to microfinance loans has significant direct impact on life satisfaction beyond its indirect impact via income changes. Empirical findings on a sample of poor borrowers in the suburbs of Buenos Aires show that, after controlling for survivorship, selection and interview bias, the number of credit cycles has a significant and positive effect on life satisfaction. |
| Keywords: | microfinance; happiness; impact study |
| Date: | 2010–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:aiccon:2010_073&r=mfd |
| By: | Becchetti, Leonardo (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Conzo, Pierluigi (Associazione Italiana per la Cultura della Cooperazione e del Non Profit) |
| Abstract: | Microfinance institutions are used to claim that their impact goes beyond money since rescuing from exclusion uncollateralized poor borrowers significantly affects their dignity, self-esteem, social recognition and, through it, life satisfaction. Our paper aims to verify indirectly this claim by evaluating whether access to microfinance loans has significant impact on life satisfaction beyond its indirect impact via income changes. Our empirical findings on a sample of poor borrowers in the suburbs of Buenos Aires show that, after controlling for survivorship bias, the number of credit cycles has a significant and positive effect on life satisfaction. |
| Keywords: | microfinance; happiness; impact study |
| Date: | 2010–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:ris:aiccon:2010_069&r=mfd |
| By: | Schmidt, Oliver |
| Abstract: | A crisis of microfinance in Andhra Pradesh (AP) is of highest interest to microfinance practitioners and scholars and politicians around the world, because some of the world’s largest microfinance institutions (MFIs) are based out of AP. The current crisis has shaken microfinance in India and beyond and fuelled a heated debate on the (de)merits of commercialization, going public and credit-drive of MFIs. However, regulators and politicians are liable for creating an adverse institutional set up (or ‘choice architecture’) – in many places but in India even more. The article shows which poor choices of MFIs flowed from the adverse choice architecture. In particular it highlights the failure of India’s regulators to create formal space for micro-savings and the tendency of politicians to look at (rural) credit as a means of patronage. It concludes that the current crisis is an expression of changes in power relations within MFIs, among practitioners in the MF sector and between the MF sector and the polity/community it operates in. |
| Keywords: | Microfinance; India; Andhra Pradesh; Regulation; Political Economy; Moneylender |
| JEL: | I38 O16 G21 |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27142&r=mfd |
| By: | Becchetti, Leonardo (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Conzo, Pierluigi (Associazione Italiana per la Cultura della Cooperazione e del Non Profit) |
| Abstract: | Creditworthiness and trustworthiness are almost synonyms since the act of conferring a loan has the indirect effect of signaling the trustworthiness of the borrower. We test the creditworthiness-trustworthiness nexus in an investment game experiment on a sample of participants/non participants to a microfinance program in Argentina and find that trustors give significantly more to (and believe they will receive more from) microfinance borrowers. Trustees’ first and second order beliefs are also consistent with this picture. Our findings identify a “horizontal trustworthiness externality” which creates a direct (loan-performance) causality nexus since the mere loan provision increases the borrower’s attractiveness as a business partner. |
| Keywords: | field experiment; microfinance; investment game; trust; trustworthiness |
| JEL: | C93 O16 |
| Date: | 2010–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:aiccon:2009_067&r=mfd |
| By: | Nargiza Maksudova |
| Abstract: | Recent changes in the microfinance landscape are characterized by increasing patterns of its integration with national financial systems and entry of commercial banks. Microfinance is no longer perceived as an isolated marginal sector of informal intermediation but rather constitutes particular lower-end segment of the broader financial system. Addressing the limited research on the interaction of microfinance with the broader economy I aim to reveal whether and how microfinance is transferred to growth through the identification of causality. I also consider the indirect impact of microfinance through its complement/substitute nature with mainstream banks. The empirical analysis is based on data from 1433 microfinance institutions pooled into 102 countries on which I perform a Granger-causality test using the Arellano and Bond (1991) methodology. The results indicate different transfer channels of microfinance to growth for middle and low-income countries, implying that the strength of the impact depends on the underlying level of development. The nature of microfinance interaction with commercial banks and money aggregates is of significant importance due to competition, spillover effects and (counter) cyclical influence, which hints at the potential of microfinance institutions to affect financial sector structure in the long-term. |
| Keywords: | microfinance; economic growth; financial intermediation; dynamic panel; |
| JEL: | G15 G21 O16 O57 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp423&r=mfd |
| By: | Nadeem, Azhar |
| Abstract: | Mudaraba is designed to meet the need of poor Muslim microentrepreneurs for financial services that comply with their religious belief of interest prohibition. It is a partnership where one partner provides capital to the other for investing in a commercial enterprise. The profit-sharing ratio is agreed by the parties at the beginning of the contract, which can be terminated by either party after giving due notice. The article explains the assumptions and terms and conditions of the Mudaraba model, and lists challenges involved. Any bank engaging in Mudaraba transactions should meet the following legal obligations: •Contract details should be clearly documented; •Microfinance program should bear the entire financial risk without demanding collateral; •Profit-sharing ratios as a percentage of profit should be agreed upon before execution of contract; •Microentrepreneur has full control over business management, while supervision is the right of the microfinance program. |
| Keywords: | Microfinance; Islamci Microfinance; Non profit; Mudaraba |
| JEL: | D14 |
| Date: | 2010–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27194&r=mfd |