nep-mfd New Economics Papers
on Microfinance
Issue of 2011‒08‒09
five papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Commitments to save : a field experiment in rural Malawi By Brune, Lasse; Gine, Xavier; Goldberg, Jessica; Yang, Dean
  2. Why Don't the Poor Save More? Evidence from Health Savings Experiments By Pascaline Dupas; Jonathan Robinson
  3. Mobile banking and financial inclusion: The regulatory lessons By Klein, Michael; Mayer, Colin
  4. Of Religion and Redemption: Evidence from Default on Islamic Loans By Baele, Lieven; Farooq, Moazzam; Ongena, Steven
  5. Development in the Midst of Drought: Evaluating an Agricultural Extension and Credit Program in Nicaragua. By Mullally, Conner

  1. By: Brune, Lasse; Gine, Xavier; Goldberg, Jessica; Yang, Dean
    Abstract: This paper reports the results of a field experiment that randomly assigned smallholder cash crop farmers formal savings accounts. In collaboration with a microfinance institution in Malawi, the authors tested two primary treatments, offering either: 1)"ordinary"accounts, or 2) both ordinary and"commitment"accounts. Commitment accounts allowed customers to restrict access to their own funds until a future date of their choosing. A control group was not offered any account but was tracked alongside the treatment groups. Only the commitment treatment had statistically significant effects on subsequent outcomes. The effects were positive and large on deposits and withdrawals immediately prior to the next planting season, agricultural input use in that planting, crop sales from the subsequent harvest, and household expenditures in the period after harvest. Across the set of key outcomes, the commitment savings treatment had larger effects than the ordinary savings treatment. Additional evidence suggests that the positive impacts of commitment derive from keeping funds from being shared with one's social network.
    Keywords: Economic Theory&Research,Emerging Markets,Banks&Banking Reform,Debt Markets,Rural Poverty Reduction
    Date: 2011–08–01
  2. By: Pascaline Dupas; Jonathan Robinson
    Abstract: Using data from a field experiment in Kenya, we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health, reduce vulnerability to health shocks, and help people meet their savings goals. The two main barriers that keep people from saving on their own appear to be transfers to others and “unplanned expenditures” on luxury items. Providing people with a designated safe place to keep money was sufficient to overcome these barriers for the majority of individuals, through a mental accounting effect. Adding an earmarking feature reduced savings for the average individual due to the associated liquidity cost and did not help present-biased people save more. For such individuals, stronger incentives to start and continue making deposits are necessary to overcome self-control problems.
    JEL: D14 D91 O16
    Date: 2011–07
  3. 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: Banking,Regulation,Microfinance,Payments System,Mobile Money
    JEL: G21 G28
    Date: 2011
  4. By: Baele, Lieven; Farooq, Moazzam; Ongena, Steven
    Abstract: Do religious beliefs affect real economic decisions? We investigate this fundamental question by comparing default rates on conventional and Islamic loans using a comprehensive monthly dataset from Pakistan that follows more than 150,000 loans over the period 2006:04 to 2008:12. We find robust evidence that the default rate on Islamic loans is less than half the default rate on conventional loans. The evidence comes from a variety of specifications that contain pertinent combinations of time-varying borrower, loan contract and bank characteristics, and time, borrower, bank and borrower*bank fixed effects. For the same borrower taking both conventional and Islamic loans from the same bank, the hazard rate on Islamic loans drops to one fifth the hazard rate on conventional loans. Islamic loans are less likely to default during Ramadan and in big cities if the share of votes to religious-political parties increases, suggesting that religion--either through individual piousness or network effects--may play a role in determining loan default.
    Keywords: Duration Analysis; Islamic Loans; Loan Default; Religion
    JEL: A13 G21 G32 G33 Z12
    Date: 2011–08
  5. By: Mullally, Conner
    Abstract: This essay is an evaluation of year one of the Rural Business Development (RBD) program for small rice farmers in León, Nicaragua. The RBD program is administered by the Millennium Challenge Corporation, and is designed to deliver agricultural extension advice and affordable credit in the form of inputs to farm households. This essay estimates the average impact of the program on rice yields and revenues utilizing inverse propensity score weighting combined with linear regression. In conducting statistical inference, it also accounts for the fact that agricultural outcomes are likely correlated over space in a small area such as the one studied here. The results suggest that the program had no impact on average, likely due to the presence of a severe drought during the 2008 â 2009 rice growing season, but that poorer households may have done better than their wealthier counterparts. This does not account for program costs, which when factored in would likely make the overall net benefit of the program negative. There may very well be long term benefits to exploiting extension advice and better access to credit created by the RBD program, and the it appears to have shielded poorer farmers somewhat from the impact of the drought. But the results highlight the danger of introducing programs aimed at raising productivity and incomes in areas subject to system unanticipated shocks. Incorporating risk management techniques or insurance against systemic risk into extension programs may improve welfare and encourage broader participation in agricultural productivity programs going forward.
    Keywords: Development, program evaluation, agricultural extension., International Development,
    Date: 2011–07

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