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on Microfinance |
| By: | Armendáriz, Beatriz; Szafarz, Ariane |
| Abstract: | This paper sheds light on a poorly understood phenomenon in microfinance which is often referred to as "mission drift": A tendency reviewd by numerous microfinance institutions to extend larger average loan sizes in the process of scaling-up. . We argue that this phenomenon is not driven by transaction cost minimization alone. Instead, poverty-oriented microfinance institutions could potentially deviate from their mission by extending larger loan sizes neither because of "progressive lending" nor because of "cross-subsidization" but because of the interplay between their own mission, the cost differentials between poor and unbanked wealthier clients, and region-specific clientele parameters. In a simple one-period framework we pin down the conditions under which mission drift can emerge. Our framework shows that there is a thin line between mission drift and cross-subsidization, which in turn makes it difficult for empirical researchers to establish whether a microfinance institution has deviated from its poverty-reduction mission. This paper also suggests that institutions operating in regions which host a relatively small number of very poor individuals might be misleadingly perceived as deviating from their social objectives. Because existing empirical studies cannot differentiate between mission drift and cross-subsidization, these studies can potentially mislead donors and socially responsible investors pertaining resource allocation across institutions offering financial services to the poor. The difficulty in separating cross-subsidization and mission drift is discussed in light of the contrasting experiences between microfinance institutions operating in Latin America and South Asia. |
| Keywords: | Microfinance; Loan Size; Mission Drift; Cross-subsidization |
| JEL: | O1 O16 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:31041&r=mfd |
| By: | Tinh Doan (University of Waikato); John Gibson (University of Waikato); Mark Holmes (University of Waikato) |
| Abstract: | There is debate about whether microfinance has positive impacts on education and health for borrowing households in developing countries. To provide evidence for this debate we use a new survey designed to meet the conditions for propensity score matching (PSM) and examine the impact of household credit on education and healthcare spending by the poor in peri-urban areas of Ho Chi Minh City, Vietnam. In addition to matching statistically identical non-borrowers with borrowers, our estimates also control for household pre-treatment income and assets, which may be associated with unobservable factors affecting both credit participation and the outcomes of interest. The PSM estimates of binary treatment effect show significant and positive impacts of borrowing on education and healthcare spending. However, multiple ordered treatment effect estimates reveal that only formal credit has significant and positive impacts on education and healthcare spending, while informal credit has insignificant impacts on the spending. |
| Keywords: | matching; education and healthcare spending; household credit; the poor; peri-urban; Vietnam |
| JEL: | C14 C21 H81 |
| Date: | 2011–05–23 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:11/06&r=mfd |
| By: | Klein, Michael; Mayer, Colin |
| Abstract: | Mobile banking is growing at a remarkable speed around the world. In the process it is creating considerable uncertainty about the appropriate regulatory response to this newly emerging service. This paper sets out a framework for considering the design of regulation of mobile banking. Since it lies at the interface between financial services and telecoms, mobile banking also raises competition policy and interoperability issues that are discussed in the paper. Finally, by unbundling payments services into its component parts, mobile banking provides important lessons for the design of financial regulation more generally in developed as well as developing economies. |
| Keywords: | Banks&Banking Reform,Access to Finance,Emerging Markets,Debt Markets,Technology Industry |
| Date: | 2011–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5664&r=mfd |