nep-mfd New Economics Papers
on Microfinance
Issue of 2011‒06‒11
six papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. The State of Microfinance in India: Emergence, Delivery Models and Issues By Vikas Batra; Sumanjeet
  2. Crisis in Nicaraguan Microfinance: Between the Scylla of Business for Profit and the Charybdis of Clientelism By Bastiaensen, Johan; Marchetti, Peter
  3. Do migrants’ deposits reduce microfinance institutions’ liquidity risk? By Ritha Sukadi Mata
  4. Le processus de rationalisation industrielle et professionnelle ainsi que la diversification des produits dans une institution de micro-finance française : le cas de l'ADIE By Gaëlle Martin
  5. On harnessing the potential of financial inclusion By Peter Dittus; Michael Klein
  6. Informal Insurance with Endogenous Group Size By Stéphanie Weynants

  1. By: Vikas Batra (Amity University, Noida, India); Sumanjeet (University of Delhi, India)
    Abstract: In the recent time microfinance has received increased attention among the researchers and financial service providers, as a good alternative in the rural credit market. Various studies revealed that microfinance is a powerful instrument for poverty alleviation, enabling the poor to accumulate the assets, boost their incomes, and reduce their economic vulnerability. There are various opinions about the micro credit demand in India. M-CRIL, a leading micro-credit rating agency provides a conservative estimate for the annual demand at Rs. 480 billion based on 60-70 million poor families with an average household credit demand of Rs. 8,000 (less than $160). In the growing market, to meet this huge demand we require the systems and approaches with comprehensive financial inclusiveness. Within this context, the Self-Help Groups (SHGs) movement in India and particularly the SGSY, SHG-Bank Linkage Programme (SBLP) of the National Bank of Rural and Agriculture Development (NABARD), various MFIs and community based organizations present the rich experience. The present paper explores the role of and performance of various delivery models of microfinance in India. Further the paper explores some issues like outreach, impact, efficiency, sustainability and financial inclusions.
    Date: 2011–04
  2. By: Bastiaensen, Johan; Marchetti, Peter
    Abstract: From the being a poster child of microfinance development, Nicaragua became one of the nightmares for the industry. The negative influence on the countries' repayment culture of the Non-Payment Movement, ambiguously related to the new Sandinista government, is typically blamed for the crisis. A closer analysis, however, reveals that features of the mainstream microfinance policies in Nicaragua are possibly more to blame for the crisis than the political turmoil, which opportunistically seems to have taken advantage of the underlying problems. Overfunding of regulated MFI-banks and promotion of excessive competition, in particular of these banks with the non-regulated MFIs, led to reckless lending and created over-indebtedness. Gradual professionalization and conventionalization also led to the erosion of social embeddedness –once at the core of the Microfinance revolution- and left MFI weak in the face of political challenges. And the obsession with profitability and 'finance only' implied higher interest rates and left many poorer clients with little or negative impact, lending credibility to the accusation of usury. While the Non-Payment Movement could be understood as a Polanyian countermovement to the problems created by market development, its ultimate political objectives however seem to offer only dubious perspectives for future inclusive economic development.
    Date: 2011–05
  3. By: Ritha Sukadi Mata
    Abstract: This paper is devoted to the analysis of liquidity risk in microfinance. Using a re-sampling method, we estimate withdrawal rate distributions for migrants’ and locals’ deposits, using an original database of 7,828 deposit contracts issued between 2002 and 2008 by 12 village banks belonging to a major Malian rural microfinance network (PASECA-Kayes). Results show that migrants tend more than locals to default on their deposit contracts. The deposits at risk are also higher when considering migrants’ time deposits compared to locals’ deposits. The liquidity risk associated to migrants’ deposits is then higher compared to locals’ deposits. The article gives an insight on the opportunity migrants’ money (including remittances) could represent for the microfinance industry as a source of stable medium- and long-term funds.
    Keywords: Liquidity risk; Deposits withdrawals; Migrants; Microfinance
    JEL: G21 G32 O16
    Date: 2011–05
  4. By: Gaëlle Martin (LEST - Laboratoire d'économie et de sociologie du travail - CNRS : UMR6123 - Université de Provence - Aix-Marseille I - Université de la Méditerranée - Aix-Marseille II, Faculté des Sciences Économiques et de Gestion - Aix-Marseille II - Université de la Méditerranée - Aix-Marseille II)
    Abstract: Le constat de départ de ce travail de recherche reposait sur la coexistence au sein de l'ADIE d'une rationalisation industrielle et professionnelle. Après avoir caractérisé les tensions et enjeux du secteur de la microfinance, nous nous sommes intéressés à la question de l'innovation au sein de cette organisation. En distinguant d'une part les acteurs de l'innovation, et d'autre part le type d'innovation. Concernant la typologie, nous avons réalisé une revue de la littérature dans le champ de l'innovation des services, l'approche intégrée nous est apparut la plus pertinente dans notre cas. Ces différents éléments nous ont conduit à formuler deux hypothèses de travail qui nous ont guidées dans la suite de notre analyse. En détaillant l'histoire de l'ADIE, il est apparu que l'innovation s'est trouvée au coeur du processus de développement de l'organisation, que ce soit à l'origine avec la phase expérimentale de définition de l'activité, ou dans les phases de rationalisation, notamment avec la mise en place de la réforme COSAC en 2006 et le chantier EQUILIBRE l'année dernière. En parallèle de ces différentes phases, l'association a instigué l'essor de nombreux projets pilotes et expérimentations, notamment ces dernières années. Ces projets ont structuré d'une certaine manière l'organisation, en externe par la diversification de l'activité et, en interne, du fait du modèle d'organisation inhérent au groupe-projet, à savoir le modèle adhocratique (Mintzberg, 1990). L'innovation apparaît donc comme un outil de cohésion comme ce fut le cas avec Créajeunes où l'ensemble des acteurs impliqués dans le projet, que ce soit les salariés, bénévoles ou créateurs ont coopéré à l'élaboration de cet outil. Toutefois, l'innovation apparaît également comme source de tensions du fait des transformations organisationnelles qu'elle engendre.
    Keywords: micro-finance, innovation, innovation des services, ressources humaines, changement organisationnel, création d'entreprise, association
    Date: 2010–09–01
  5. By: Peter Dittus; Michael Klein
    Abstract: The development of information and communications technology is opening up the opportunity for providing essential financial services to most people. Indeed, many mobile money or branchless banking schemes are currently spreading across the world. However, these schemes can only be sustainable if they are built on a commercially viable business model. In this respect, the verdict is still out. The paper describes one commercially viable initiative in more detail, M-PESA in Kenya, and analyses in detail the transactions involved. It argues that in order to harness the potential of financial inclusion it is vital to permit experimentation with different business models. Required therefore is regulation that enables such experimentation by calibrating it to the type of service offered, and is tightened if and when such schemes become bigger with the potential to impact the financial stability: risk-proportionate regulation by service type.
    Keywords: financial intermediaries, payments, regulation
    Date: 2011–05
  6. By: Stéphanie Weynants (Earth and Life Institute, Université Catholique de Louvain)
    Abstract: We present a theory of endogenous formation of insurance groups which combines heterogeneity on agents? risk aversion under asymmetric information and lack of enforceability of contracts. Income sharing inside the group is decided by majority voting and the size of the group adjusts to this decision through participation constraints. At equilibrium, all group members agree on the same imperfect level of income sharing, which yields a constrained-e¢ cient equilibrium. Comparative statics on the risk faced by the community provide interesting results. A mean preserving spread of income implies more income sharing and a larger group size. New members, and possibly even old members may be better o¤, while non-members are worse-o¤. These results have relevant policy implications.
    Date: 2011–05

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