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on Microfinance |
| By: | Pascaline Dupas; Sarah Green; Anthony Keats; Jonathan Robinson |
| Abstract: | Most people in rural Africa do not have bank accounts. In this paper, we combine experimental and survey evidence from Western Kenya to document some of the supply and demand factors behind such low levels of financial inclusion. Our experiment had two parts. In the first part, we waived the fixed cost of opening a basic savings account at a local bank for a random subset of individuals who were initially unbanked. While 63% of people opened an account, only 18% actively used it. Survey evidence suggests that the main reasons people did not begin saving in their bank accounts are that: (1) they do not trust the bank, (2) service is unreliable, and (3) withdrawal fees are prohibitively expensive. In the second part of the experiment, we provided information on local credit options and lowered the eligibility requirements for an initial small loan. Within the following 6 months, only 3% of people initiated the loan application process. Survey evidence suggests that people do not borrow because they do not want to risk losing their collateral. These results suggest that, while simply expanding access to banking services (for instance by lowering account opening fees) will benefit a minority, broader success may be unobtainable unless the quality of services is simultaneously improved. There are also challenges on the demand side, however. More work needs to be done to understand what savings and credit products are best suited for the majority of rural households. |
| JEL: | D14 G21 O16 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17851&r=mfd |
| By: | Katsushi S. Imai (Economics, School of Social Sciences, University of Manchester, UK & Research Institute for Economics and Business Administration, Kobe University, Japan); Raghav Gaiha (Faculty of Management Studies, University of Delhi, India); Ganesh Thapa (International Fund for Agricultural Development, Italy); Samuel Kobina Annim (ELancashire Business School, University of Central Lancashire, UK & Department of Economics, University of Cape Coast, Ghana); Aditi Gupta (Yes Bank, Mumbai) |
| Abstract: | This study investigates the effect of both institutional factors and the macro economy on the financial performance of MFIs. Drawing upon the Microfinance Information Exchange data and cross-country data on macro economy, finance and institutions, we use three stage least squares and Hausman-Taylor to take account of endogeneity. We find that institutional factors affect MFIs’ financial performance, in particular, profitability, operating expense, and portfolio quality. Also, GDP and share of domestic credit to GDP have positive impacts on MFIs’ financial performance. Hence policies to raise country-level institutional qualities are required for making the activities of MFIs sustainable. |
| Keywords: | Microfinance, Financial Performance, Macro economy and Institutions |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2012-04&r=mfd |
| By: | Guillermo Baquero (ESMT European School of Management and Technology); Malika Hamadi (Luxembourg School of Finance (LSF)); Andréas Heinen (THEMA, Université de Cergy-Pontoise) |
| Abstract: | Length: 57 pages |
| Keywords: | bank competition, microfinance, microcredit, microbank, loan rates, information dispersion, PAR, portfolio quality |
| JEL: | D4 G21 L1 O1 |
| Date: | 2012–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:esm:wpaper:esmt-12-02&r=mfd |
| By: | Aggarwal, Shilpa; Klapper, Leora; Singer, Dorothe |
| Abstract: | This paper evaluates how microfinance performed in providing business financing in 27 Sub-Saharan African countries. It uses data from the 2009 and 2010 Gallup World Poll, a nationally-representative survey of at least 1,000 individuals per country, conducted in up to 157 countries per year. The data, supported by rigorous statistical evidence in related literature on the use of microcredit around the world, demonstrate that economic gains from microcredit have been more modest than what was once believed. On the other hand, the analysis suggests that the poor save in order to start new businesses and that the introduction of formal products for small savings can be a key financial innovation. The authors also analyze the challenges the poor face in setting money aside to save, and discuss what policymakers can do to promote savings. |
| Keywords: | Access to Finance,Banks&Banking Reform,Debt Markets,Financial Intermediation,Emerging Markets |
| Date: | 2012–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5975&r=mfd |
| By: | Barigozzi, Francesca (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Tedeschi, Piero (Associazione Italiana per la Cultura della Cooperazione e del Non Profit) |
| Abstract: | This paper investigates banks’ corporate social responsibility. Two different competitive credit markets do exist: one for standard projects and one for ethical ones. Ethical projects have also a social profitability, but a lower (positive) expected revenue with respect to standard ones. Ethical projects are financed by ethical banks and undertaken by motivated borrowers. These borrowers obtain additional benefit (a social responsibility premium) from accomplishing ethical projects when trading with ethical banks. If the expected profitability of ethical project is sufficiently close to that of standard ones and/or the social responsibility premium of motivated borrowers is sufficiently high, the market for ethical projects is active and the credit market is fully segmented. This result holds true irrespective of the information structure: only moral hazard on the borrower side, moral hazard and screening on the borrower side, moral hazard on the borrower side and screening on the lender side. The optimal contract in our set-up is always a debt contract. However, its precise form and welfare properties depend on the information structure. |
| Keywords: | corporate social responsibility; ethical banks; motivated borrowers; microfinance |
| JEL: | D86 G21 G30 |
| Date: | 2012–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:ris:aiccon:2012_099&r=mfd |
| By: | Mina Baliamoune-Lutz; Zuzana Brixiová; Léonce Ndikumana |
| Abstract: | Limited access of entrepreneurs to credit constrains the creation and growth of private firms. In Africa, access to credit is particularly limited for small and medium enterprises (SMEs) due to unclear property rights and the lack of assets that can be used as collateral. This paper presents a model where firm creation and growth hinge on matching potential entrepreneurs with productive technologies, while firm growth depends on acquired capital. The shortage of collateral creates a binding credit constraint on borrowing by SMEs and hence private sector growth and employment, even though the banking sectors have ample liquidity, as is the case in many African countries. The model is tested using a sample of 20 African countries over the period 2005-09. The empirical results suggest that policies aimed at easing the binding credit constraints (e.g., the depth of credit information and the strength of legal rights pertaining to collateral and bankruptcy) would stimulate productive entrepreneurship and private sector employment in Africa. |
| Keywords: | credit constraints; productive entrepreneurship; employment, policies |
| JEL: | G21 L26 D24 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:23-2011&r=mfd |