New Economics Papers
on Microfinance
Issue of 2011‒09‒05
five papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Microfinance investment vehicles in Sub-Saharan Africa: constraints and potentials By Moulin, Bertrand
  2. Articulations entre banques commerciales et institutions de microfinance en Afrique subsaharienne: cas du Cameroun By Moulin, Bertrand; Teuwa N., Hugues M.
  3. The Determinants of trade credit: Evidence from Indian manufacturing firms By Rajendra R. Vaidya
  4. Firm Investment & Credit Constraints in India, 1997 – 2006: A stochastic frontier approach By Sumon Bhaumik; Pranab Kumar Das; Subal C. Kumbhakar
  5. Microfinanzas en Comfama By Comfama

  1. By: Moulin, Bertrand
    Abstract: This paper sheds the light on the potential and constraints of possible interactions between Microfinance Investment Vehicles (MIVs) and the two main African Microfinance models namely the cooperative model, well developed in West Africa, and the commercial model, found in East Africa. We assess if both parties can gain from those interactions. We argue that given the significant funding needs of Microfinance institutions (MFIs) in that part of the world, in particular with regards to equity investments and capacity building, the African microfinance sector requires resources that can only be provided with the contest of private investors. In this respect, provided some conditions are met, for instance the presence in these vehicles of Development financial institutions (DFIs) that play the role of catalysts by initiating investments and taking risks that private investors would not dare taking; MIVs could be suitable for the financing of the rural and the micro-enterprises segments which are still seen as highly risky investments. Those segments require more volumes and longer term funding, but they have a great potential positive effect on Microfinance recipients and more generally on the economies they live in. In the MIVs’ perspective, due to excessive risks’ perception, the interest for the African microfinance still remains limited to date; however, the increasing demand for socially responsible investments and the needs for Microfinance investment portfolios’ diversification will push those vehicles to commit more and more for investments in that part of the world.
    Keywords: Microfinance; Microfinance investment vehicles; Sub-Saharan Africa
    JEL: G21
    Date: 2011
  2. By: Moulin, Bertrand; Teuwa N., Hugues M.
    Abstract: In this article, we evaluate, from the point of view of banks, the potential of articulations between commercial banks and microfinance institutions (MFIs) in Cameroun in terms of financing of the rural and the micro, small and medium enterprises (MSMEs). Furthermore, we seek to define the best form of partnership between the two types of institutions. The results obtained suggest that the articulations between banks and MFIs can potentially be beneficial to all stakeholders (banks, MFIs but also recipients). This study also highlights the fact that these articulations can be even more beneficial if national commercial banks, under the Cameroonian law in our case, participate rather than branches of foreign banking groups. Indeed, our research reveals that through these partnerships, from their cultural proximity and their propensity to take more risks, national commercial banks will more likely offer either directly or indirectly (through MFIs) more adapted financial products and services to both the rural and the MSMEs’ segments. The question of knowing if a better form of partnership between commercial banks and MFIs exists, results suggest that there is no better form of partnership as such; that the best form depends on the MFI’s development stage and that in any case this partnership should privilege a national commercial bank rather than a branch of a foreign bank. Even if the foreign banks’ contest might be necessary at a given stage of the process, the results make it also possible to consider a new model of interactions implying Microfinance investment vehicles and national commercial banks. This model would have the advantage to help mitigate risks that those vehicles perceive when deciding to directly invest in MFIs.
    Keywords: Banks; Microfinance institutions; Microfinance investment vehicles; Sub-Saharan Africa; Cameroon
    JEL: G2
    Date: 2011–02
  3. By: Rajendra R. Vaidya (Indira Gandhi Institute of Development Research)
    Abstract: Trade credit (accounts receivable and accounts payable) is both an important source and use of funds for manufacturing firms in India. This paper empirically investigates the determinants of trade credit in the Indian context. The empirical evidence presented suggests that strong evidence exists in support of an inventory management motive for the existence of trade credit. Highly profitable firms are found to both give and receive less trade credit. Firms with greater access to bank credit offer less trade credit to their customers. On the other hand, firms with higher bank loans receive more trade credit. Holdings of liquid assets have a positive influence on both accounts receivable and accounts payable.
    Keywords: Trade Credit
    JEL: G31 G32
    Date: 2011–07
  4. By: Sumon Bhaumik; Pranab Kumar Das; Subal C. Kumbhakar
    Abstract: We use the stochastic frontier approach to estimate the impact of firm characteristics on investment decisions of Indian firms during the 1997-2006 period. The use of the stochastic frontier approach allows us to define the (unobserved) optimum investment that is consistent with a firm‟s characteristics such as the Tobin‟s q during each firm-year, and then estimate the deviation from this unobserved optimum in the form of an (investment) efficiency score that varies between zero and one. This deviation is interpreted as the degree of credit constraint, and we are also able to estimate the impact of firm characteristics such as leverage and business group affiliation on the degree of credit constraint via their marginal effects. Our results suggest that the degree of credit constraint of an average firm increased over time during the sample period, despite significant reforms of the Indian banking sector by the turn of the century. We also find that the degree of credit constraint decreases with cash flow and assets, which is consistent with the available literature. Further, there is a threshold effect of leverage, and the degree of credit constraint is greater for highly leveraged firms. Finally, we find that the beneficial impact of business group affiliation on the degree of credit constraint decreases over time, and is eliminated by the end of the sample period.
    Keywords: Investment, Credit rationing, Imperfect information, Stochastic frontier analysis
    JEL: C23 C24 D82 D92 G31 G32
    Date: 2011–01–01
  5. By: Comfama
    Abstract: Comfama se ha caracterizado por realizar intervenciones sociales con el objetivo de reducir la exclusión en las distintas poblaciones que atiende en el departamento, de manera que las familias puedan tener acceso a productos y servicios que mejoren su calidad de vida. Dentro del portafolio de servicios que ofrece Comfama, el modelo de microfinanzas ha constituido la estrategia clave para expandir el acceso a mejores oportunidades de nuestros afiliados, especialmente a través de la colocación de microcréditos en áreas como salud, educación, compra y mejoramiento de vivienda, emprendimiento y empresarismo, entre otros.
    Date: 2010–11–16

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