nep-mfd New Economics Papers
on Microfinance
Issue of 2011‒06‒18
three papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Household Credit to the Poor and its Impact on Child Schooling in Peri-urban Areas, Vietnam By Tinh Doan; John Gibson; Mark Holmes
  2. Adverse selection and moral hazard among the poor: evidence from a randomized experiment By Spenkch, Jörg L.
  3. Migrants' Remittances and financial Development: Macro- and Micro-level Evidence of a Perverse Relationship By Richard P C Brown; Fabrizio Carmignani; Ghada Fayad

  1. By: Tinh Doan (Ministry of Economic Development); John Gibson (University of Waikato); Mark Holmes (University of Waikato)
    Abstract: This paper uses a novelty dataset of poor households in peri-urban areas in Vietnam to estimate impacts of small loans on child schooling. The Probit and Negative Binomial model estimates roughly indicate no strong evidence of the effect, especially of informal credit. Formal credit is likely to have positive impacts on child schooling, but its effect is not strong enough to be conclusive. The paper suggests that to obtain the target of sustainable poverty reduction, easing access to formal credit sources as well as exempting tuition and other school fees are necessary to keep poor children at schools longer.
    Keywords: school enrolment; education gap; probit; negative binomial model;the poor; child schooling; peri-urban; Vietnam
    JEL: C14 C21 H81
    Date: 2011–06–13
  2. By: Spenkch, Jörg L.
    Abstract: Not only does economic theory predict high-risk individuals to be more likely to purchase insurance, but insurance coverage is also thought to crowd out precautionary activities. In spite of stark theoretical predictions, there is conflicting empirical evidence on adverse selection, and evidence on ex ante moral hazard is very scarce. Using data from the Seguro Popular Experiment in Mexico, this paper documents patterns of adverse selection into health insurance as well as the existence of non-negligible ex ante moral hazard. More specifically, the findings indicate that (i) agents in poor self-assessed health prior to the intervention have, all else equal, a higher propensity to take up insurance; and (ii) insurance coverage reduces the demand for self-protection in the form of preventive care. Curiously, however, individuals do not sort based on objective measures of their health.
    Keywords: health insurance; adverse selection; moral hazard
    JEL: I11 D82 I10
    Date: 2011–05
  3. By: Richard P C Brown; Fabrizio Carmignani; Ghada Fayad
    Abstract: Financial development and financial literacy in developing countries are commonly identified as important conditions for attaining higher rates of investment and economic growth. It has also been argued that migrants’ remittances stimulate financial development in the receiving economy, contributing indirectly to economic growth. Past research has been based almost exclusively on the macro-level relationship between remittances and financial depth. To explore this relationship further, we combine macroeconomic analysis using a cross-country panel dataset with micro-level analysis of households’ uses of financial sector services. From the macroeconomic analysis we find evidence of a negative relationship between remittances and financial deepening in developing countries, once we control for the countries’ legal origin. At the microeconomic level we use household survey data from a recent study of migrants’ remittances in two transition economies, resource rich and relatively more financially developed Azerbaijan, and Kyrgyzstan, to test the relationship between remittances and financial literacy among remittance-receiving households. While we find some supportive evidence, albeit weak, for Kyrgyzstan, in Azerbaijan, the relatively more financially-developed economy, we uncover a strong perverse relationship. Remittances appear to deter the use of formal banking services. Possible reasons are explored and areas for further investigation identified.
    Keywords: remittances, financial development, financial literacy, Azerbaijan, Kyrgyzstan
    JEL: F22 O16 O53
    Date: 2011

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