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on Microfinance |
| By: | Greg Fischer; Maitreesh Ghatak |
| Abstract: | This paper analyzes the theoretical underpinnings of high-frequency repayment, afeature in nearly all microfinance contracts that has been largely overlooked bytheorists. The pervasive belief among practitioners that frequent repayment is criticalin achieving high repayment rates is puzzling. Classically rational individualsshould benefit from more flexible repayment schedules, and less frequent repaymentshould increase neither default nor delinquency. This paper proposes a simpleexplanation based on present bias. For such individuals, more frequent repaymentcan increase the maximum incentive compatible loan size. However, the welfareeffects are ambiguous. More frequent repayment can lead to over-borrowing,reducing welfare as it increases loan sizes.4 |
| Keywords: | Microfinance, Repayment Frequency, Present-Bias |
| JEL: | O12 O16 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stieop:021&r=mfd |
| By: | Greg Fischer |
| Abstract: | Few microfinance-funded businesses grow beyond subsistence entrepreneurship.This paper considers one possible explanation: that the structure of existingmicrofinance contracts may discourage risky but high-expected return investments.To explore this possibility, I develop a theory that unifies models of investmentchoice, informal risk sharing, and formal financial contracts. I then test thepredictions of this theory using a series of experiments with clients of a largemicrofinance institution in India. The experiments confirm the theoreticalpredictions that joint liability creates two inefficiencies. First, borrowers free-ride ontheir partners, making risky investments without compensating partners for thisrisk. Second, the addition of peer-monitoring overcompensates, leading to sharpreductions in risk-taking and profitability. Equity-like financing, in which partnersshare both the benefits and risks of more profitable projects, overcomes both of theseinefficiencies and merits further testing in the field. |
| Keywords: | investment choice, informal insurance, risk sharing, contract design, microfinance,experiment. |
| JEL: | O12 D81 C91 C92 G21 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stieop:023&r=mfd |
| By: | Kumbhar, Vijay |
| Abstract: | With the help of modern information communication technology, m-banking as a new type of banking services carrier can provide efficient and effective financial services for unbanked and rural peoples in India. Increased cellular service users in rural Indian provide wide opportunity to expand m-banking service in India. However, in spite of opportunities there are numbers of problems and threats in m-banking system. Their major shortcomings are network coverage, security, low cost effectiveness, inconvenience in using mobile handset, IT literacy etc. The outcome of the paper is a defined set of customer requirements to m-banking services in India and an explanation of major failure reasons along with opportunities for their improvement. |
| Keywords: | M-banking; Unbanked; Financial Inclusion |
| JEL: | G29 G20 |
| Date: | 2011–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:28724&r=mfd |
| By: | Carol Newman (Institute for International Integration Studies, Trinity College Dublin); Finn Tarp (Department of Economics, University of Copenhagen); Katleen Van Den Broeck (Department of Economics, University of Copenhagen) |
| Abstract: | We explore the extent to which social capital can play a role in imparting information about the returns to saving where potential knowledge gaps and mistrust exists. Using data from Vietnam we find strong evidence to support the hypothesis that information transmitted via reputable social organizations increases the proportion of liquid assets held in the form of deposits that yield a return. Our results imply that targeting information on the benefits of deposit saving through formal networks or groups would be effective in increasing the number of households that save at grassroots level. |
| Keywords: | Household Savings, Social Capital, Information Failure, Risk Aversion |
| JEL: | D14 D71 D83 D91 O12 O16 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:iis:dispap:iiisdp351&r=mfd |