New Economics Papers
on Microfinance
Issue of 2011‒07‒02
four papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry By Daniel Traca
  2. Theory of social returns in portfolio choice with application to microfinance By Dorfleitner, Gregor; Leidl, Michaela; Reeder, Johannes
  3. Self-help groups and mutual assistance: Evidence from urban Kenya By Marcel Fafchamps; Eliana La Ferrara
  4. When is capital enough to get female enterprises growing ? evidence from a randomized experiment in Ghana By Fafchamps, Marcel; McKenzie, David; McKenzie, David; Quinn, Simon; Woodruff, Christopher

  1. By: Daniel Traca
    Abstract: The impact of subsidies on the efficiency of microfinance institutions (MFIs) is a key question in the field, given the large volume of subsidies received over the last twenty years. Using an original database of rating agencies, this paper gives empirical evidence on the impact of subsidy intensity on the efficiency of MFIs. After correcting for endogeneity bias, our results suggest that subsidies have contributed to raise efficiency, for the majority of MFIs in our sample. However, the evidence suggests also that there is a level beyond which increased subsidization taxes efficiency, at the margin. In our sample, 50% of MFIs receive levels of subsidization higher than that threshold.
    Keywords: microfinance
    Date: 2011–06–01
  2. By: Dorfleitner, Gregor; Leidl, Michaela; Reeder, Johannes
    Abstract: We complement standard portfolio theory à la Markowitz by adding a social dimension. We distinguish between two main setups, taking social returns as stochastic in the first, but as deterministic in the second. Two main features need to be introduced: Every asset must be assigned a (distribution of) social return(s) and the investor has to cherish social returns. The former comes with measurement problems, whereas the latter is mainly a problem of choice of a suitable utility representation. The focus of this paper is on the theoretical fundamentals and the practical implications of social returns. We apply each version of the theoretical model to a different realm. In the deterministic setup, we look at an investor who faces a small number of assets: the S&P Euro Index, the EuroMTS Global Index, and the responsAbility Global Microfinance Fund, in which we assign a social return only to the microfinance investment fund. In the second application with stochastic social returns, we propose a new measure of social returns in microfinance and address the question concerning how microfinance investment funds should allocate funds to microfinance institutions.
    JEL: G11 G21 G32 D64 D81
    Date: 2011
  3. By: Marcel Fafchamps; Eliana La Ferrara
    Abstract: This paper examines the incomes of individuals who have joined self-help groups in poor neighborhoods of Nairobi. Self-help groups are often advocated as a way of facilitating income pooling. We …nd that incomes are indeed more correlated among individuals in the same group than among individuals who belong to different groups. Using an original methodology, we test whether this correlation is due to self-selection of similar individuals into the same groups. We find that this correlation is not driven by positive assortative matching. If anything, selection works in the opposite direction: incomes from group activities would be more correlated if individuals were matched at random. These findings are consistent with the idea that self-help groups play a mutual assistance role.
    Date: 2011
  4. By: Fafchamps, Marcel; McKenzie, David; McKenzie, David; Quinn, Simon; Woodruff, Christopher
    Abstract: Standard models of investment predict that credit-constrained firms should grow rapidly when given additional capital, and that how this capital is provided should not affect decisions to invest in the business or consume the capital. The authors randomly gave cash and in-kind grants to male- and female-owned microenterprises in urban Ghana. Their findings cast doubt on the ability of capital alone to stimulate the growth of female microenterprises. First, while the average treatment effects of the in-kind grants are large and positive for both males and females, the gain in profits is almost zero for women with initial profits below the median, suggesting that capital alone is not enough to grow subsistence enterprises owned by women. Second, for women they strongly reject equality of the cash and in-kind grants; only in-kind grants lead to growth in business profits. The results for men also suggest a lower impact of cash, but differences between cash and in-kind grants are less robust. The difference in the effects of cash and in-kind grants is associated more with a lack of self-control than with external pressure. As a result, the manner in which funding is provided affects microenterprise growth.
    Keywords: Debt Markets,Economic Theory&Research,Investment and Investment Climate,Science Education,Scientific Research&Science Parks
    Date: 2011–06–01

This issue is ©2011 by Aastha Pudasainee and Olivier Dagnelie. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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