nep-mfd New Economics Papers
on Microfinance
Issue of 2011‒10‒22
five papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. From a supply gap to a demand gap? The risk and consequences of over-indebting the underbanked By Jessica Schicks
  2. An Economic policy and legal analysis of the Micro Finance Institutions (Development & Regulation) Bill, 2011 By Shubho Roy; Renuka Sane; Susan Thomas
  3. Social Protection, Efficiency and Growth By Stefan Dercon
  4. Funeral insurance By Erlend Berg
  5. Microfranchising: Fostering the Economic Empowerment of the BOP By Inter-American Development Bank (IDB)

  1. By: Jessica Schicks
    Abstract: In the past, the microfinance industry focused mainly on growth and outreach. Addressing financial exclusion implied a huge supply gap. Recent over-indebtedness crises in several countries have shown that this gap can turn into over-supply. The industry urgently requires research to understand the magnitude and consequences of this shift. This chapter reveals the broad spectrum of consequences over-indebtedness can have on borrowers and other stakeholders, mainly MFIs. It emphasizes that over-indebtedness consequences reach far beyond the risk management concerns that MFIs and investors have on top of their mind. In a second step the chapter reviews the existing empirical research on microfinance over-indebtedness and examines how prevalent over-indebtedness is in microfinance markets today. It highlights the evidence for over-indebtedness in crisis markets and non-crisis markets, especially when markets mature. Only if the extent of the problem is known and its effects are properly understood, can the microfinance industry develop appropriate measures against over-indebtedness and adapt to the challenge of oversupply.
    Keywords: Microfinance; Microcredit; Supply Gap; Demand Gap; Over-Indebtedness; Customer Protection
    JEL: O16 O50 G21
    Date: 2011–10
    URL: http://d.repec.org/n?u=RePEc:sol:wpaper:2013/99192&r=mfd
  2. By: Shubho Roy (Indira Gandhi Institute of Development Research); Renuka Sane (Indira Gandhi Institute of Development Research); Susan Thomas (Indira Gandhi Institute of Development Research)
    Abstract: In response to the Second Micro Finance Crisis in Andhra Pradesh, which took place in October 2010, the Ministry of Finance has pro- posed a new Micro Finance Institutions (Development & Regulation) Bill. This paper undertakes a detailed analysis of the draft Bill in terms of both economic policy and law. This analysis reveals many weak links, including: a lack of clarity on the objectives of the Bill; an insufficient focus on protection of the rights of the micro-borrower; lack of clarity about the definition of thrift; the loss of accountability that comes with multiple regulatory agencies; concerns about the rule of law; and constitutional issues about powers of the Centre versus the State Government.
    Keywords: microfinance, regulation, crisis resolution, consumer credit, consumer protection, regulatory objectives
    JEL: G20 G21 G28 K12 K23
    Date: 2011–10
    URL: http://d.repec.org/n?u=RePEc:ind:igiwpp:2011-025&r=mfd
  3. By: Stefan Dercon
    Abstract: Social protection can play an important role in poverty reduction and making growth inclusive of the poor. At times, it is also argued that social proection can directly contribute to growth and economic efficiency. The paper revisits the evidence on the cost of social protection to reduce poverty, and its contribution to efficiencey and growth. As social protection may overcome market failures in credit and insurance, the paper also considers the role of alternatives, such as micro-credit and micro-insurance. The evidence on social transfers (in cash or in kind, conditional or not) suggests that while they have substantial poverty and euity impacts, their efficiency and growth impact is unlikely to be high-not dissimilar to the limited growth impacts of microcredit. The implication is that the main motivation for the social trabsfers must lie in their equity or poverty impacts. The evidence on contigent transfers, made in response to shocks such as illness, drought or unemployment, as in social insurance, is that their contribution to resolving market failures may be higher, leading to potentially more substantial gains, especially where children are targeted. Given the problems with developing market-based solutions via micro-insurance, there is a strong case for social protection initiatives in this area from an efficiency point of view, to complemnet contributions-based social insurance and micro-insurance inititaives. Conditions in conditional cash transfers can also be used to enhance efficiencey gains, for example if conditions target activities or investments with clear soical externalities. the paper ends with three areas where tyhere could be potentiall high growth impacts: social protecion focusing on children, especially before the age of five; social protection meausres to make migration smoother and cities more attractive places to live for low skilled workers, possibly via urban workforce schemes focusing on urban community asset building; and social protection targeted at adolescents and young adults, including transfers conditional on training focused on urban labour market transitions. in all these cases standard cash transfers may be too blunt to have high impacts, suggesting the need for more context-specific 'smarter' social protection schemes.
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:csa:wpaper:2011-17&r=mfd
  4. By: Erlend Berg
    Abstract: Funeral insurance has existed at least since antiquity, and it remains popular in many parts of Africa today. Yet the study of funeral insurance as a distinct form of insurance has hitherto been neglected. This paper presents a model in which funeral insurance combines regular life insurance with a restriction on how the payout is spent. The model predicts that there is an intermediate range of income and wealth where funeral insurance is demanded. The prediction is tested on a nationally representative sample of black South African households, a setting where both life and funeral insurance are widely available. The model also gives conditions under which funeral insurance is not demanded at any level of income and wealth. This may explain why funeral insurance is less popular in developed countries, even among the relatively poor.
    JEL: D81 G22 O12
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:csa:wpaper:2011-16&r=mfd
  5. By: Inter-American Development Bank (IDB)
    Abstract: This document discusses the basics on microfranchising. It reviews the concept and key elements, lessons learned from other regions, including the Grameen Bank. Finally, an agenda for the development of FOMIN microfranchising support is presented.
    Keywords: Private Sector :: Microbusinesses & Microfinance, Social Development :: Poverty, microfinance, microcredit, microfranchising, franchising
    Date: 2011–09
    URL: http://d.repec.org/n?u=RePEc:idb:brikps:46098&r=mfd

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