nep-mfd New Economics Papers
on Microfinance
Issue of 2011‒05‒24
six papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Indirect Effects of Microfinance: A Field Experiment on Formal Savings Expansion and Informal Safety Nets of the Ultra-Poor By Flory, Jeffrey A.
  2. Delivery Mechanisms and Impact of Training through Microfinance By Bali Swain, Ranjula; Varghese, Adel
  3. Subjectivity in Credit Allocation to Micro-Entrepreneurs: Evidence from Brazil By Isabelle Agier; Ariane Szafarz
  4. Farmersâ Choice and Informal Credit Markets in China By Yuan, Yan; Hu, Youxin; Gao, Ping
  5. The impact of Access to Crdit and Training o Technological Adoption: A Case of the Rice Sector inTanzania By Nakano, Yuko; Kajisa, Kei
  6. Risk Rationing in China Rural Credit Markets By Khantachavana, Sivalai V.; Turvey, Calum G.; Kong, Rong

  1. By: Flory, Jeffrey A.
    Abstract: Despite widespread interest in microfinance as a poverty-reduction tool, the indirect effects on the very poor of expanding formal financial services remain largely unexplored. This study examines evidence from a large field experiment which helps fill this gap. It also contributes to an important emerging literature on the indirect impacts of policy interventions in developing countries, often (incompletely) evaluated solely on the basis of how they impact participants and beneficiaries. In developing regions, households vulnerable to extreme poverty often benefit from long-standing safety nets based on cash gifts and other transfers from relatives and friends, which help them smooth consumption across food-deficits and household shocks. To date, little is known about how these pre-existing practices are affected as community members begin adopting newly available formal financial services, and there remains much unexplored in the interaction of formal financial markets with informal safety nets. This paper addresses that gap by examining how formal savings expansion affects inter-household wealth transfers, with a particular emphasis on receipts by the most vulnerable. Using a rich panel dataset I collected in Central Malawi that includes over 2,000 households, I find that experimentally boosting local savings uptake in rural areas leads to a strong positive effect on assistance receipts by non service-users during peak periods of hunger. The difference is strongest among the most vulnerable households. That is, the entrance of formal savings appears to complement local informal support systems for the highly vulnerable through an indirect mechanism, channeling greater wealth to such households during periods of food-deficits. The positive impacts of formal savings expansion on non service-users suggests that formal savings may have substantially greater benefits than would be suggested by focusing exclusively on the impacts experienced by the service-users themselves.
    Keywords: Microfinance, formal savings, indirect effects, safety nets, poverty, food security, Agricultural Finance, Community/Rural/Urban Development, Financial Economics, Food Security and Poverty, Health Economics and Policy, Institutional and Behavioral Economics, International Development, O17, O16, O12, I30, I38, I10,
    Date: 2011–05–03
  2. By: Bali Swain, Ranjula (Department of Economics); Varghese, Adel (Department of Economics,)
    Abstract: We evaluate the effect of delivery mechanisms for training provided by facilitators of self help groups (SHGs). Indian SHGs are unique in that they are mainly NGOformed microfinance groups but later funded by commercial banks. We correct for both membership and training endogeneity. Training impacts assets but not income. Underlying conditions that benefit training include better infrastructure (as in paved roads), linkage model type, and training organizer.
    Keywords: Asia; India; microfinance; impact studies; training; Self Help Groups
    JEL: G21 I32 O12
    Date: 2011–05–05
  3. By: Isabelle Agier; Ariane Szafarz
    Abstract: This paper estimates the impact of loan officers' subjectivity on microcredit granting by exploiting an exceptionally detailed database from a Brazilian microfinance institution. Loan officers collect field data, meet with applicants, and make recommendations to the credit committee that in turn has the final say on both loan approval and loan size. The loan officers' subjectivity is captured through the lens of disparate treatment based on gender. Indeed, our estimations show that an unfair gender gap is observed in loan size, and that this gap is almost exclusively attributable to the loan officers. We interpret this finding as evidence that, despite monitoring and wage incentivization, microcredit officers keep letting their subjective preferences interfere with loan granting. We conclude by suggesting alternative means to curb subjectivity in credit allocation to micro-entrepreneurs.
    Keywords: Subjectivity Loan Size; Microcredit; Gender; Loan Officer; Entrepreneurs
    JEL: O16 D82 J33 L31
    Date: 2011–05
  4. By: Yuan, Yan; Hu, Youxin; Gao, Ping
    Abstract: Informal credit markets are very active in many developing countries including China. Informal financial associations have become a major channel of borrowing. Using data from the 2006 Rural Household Survey, this paper investigates farmersâ borrowings from both formal and informal sources with higher/lower interest, by looking into both demand and supply of loan. Consistent with the theory and previous studies, age follows an inverted U-shaped pattern in its relationship with the probability of borrowing from informal loan with higher interest. Our study shows that the impact of age disappears for the formal loan participation. In addition, high income and saving imply lower credit constraints. Moreover, household and county characteristics and financial conditions have a large and varying influence on farmersâ borrowing behavior.
    Keywords: informal credit, financial constraints, China, Agricultural Finance, Community/Rural/Urban Development, International Development, Q12, C5, G21,
    Date: 2011
  5. By: Nakano, Yuko; Kajisa, Kei
    Abstract: Using an extensive household-level data set collected in Tanzania, this paper investigates the determinants of the technological adoption of rice cultivation and of paddy yield. We especially focus on the impact of credit and training on the adoption of modern technologies. Based on empirical results, we argue that modern inputs and improved practices of rice cultivation enhance the increase in paddy yield. We also argue that the impact of credit and training on the adoption of modern technologies can differ for different technologies. If the adoption of a specific technology does not require a large amount of cash, knowledge given by training is sufficient to enhance adoption. On the other hand, those who can access credit or self-finance can adopt technologies, which require cash on hand.
    Keywords: Technological Adoption, Green Revolution, Sub-Saharan Africa, Crop Production/Industries, International Development, Productivity Analysis, Research and Development/Tech Change/Emerging Technologies, O12, O13, Q16, Q18,
    Date: 2011–05
  6. By: Khantachavana, Sivalai V.; Turvey, Calum G.; Kong, Rong
    Abstract: The purpose of this paper is to provide a specific test of Boucher, Carter et al. (2008) framework on risk rationing. The data were collected through a survey of 730 farm households in Shaanxi province conducted in November 2010. We compare factor associated with risk rationed, quantity rationed and price rationed farmers. Seemingly unrelated regressions are performed using risk rationing, quantity rationing and price rationing measure as the dependent variable and measures of demography, wealth, income, year of farming and risk aversion as independent variables. We apply seemingly unrelated regression, cluster analysis and cross tabulation in the study. According to a seemingly unrelated regression, we find existing risk rationing is due to risk-based behavior by borrowers. A cross tabulation results support the proposition by Boucher, Carter et al showing the financial wealthy is risk rationed and relatively land-poor is risk rationed. This paper is believed to be among the first empirical validation of the risk rationing theory.
    Keywords: Risk rationing, credit market, china, Marketing, Risk and Uncertainty,
    Date: 2011

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