New Economics Papers
on Microfinance
Issue of 2012‒04‒23
three papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Measuring financial inclusion : the Global Findex Database By Demirguc-Kunt, Asli; Klapper, Leora
  2. Un nouvel indice du développement financier By Rafael Cezar
  3. The Demand for, and Consequences of, Formalization among Informal Firms in Sri Lanka By de Mel, Suresh; McKenzie, David; Woodruff, Christopher

  1. By: Demirguc-Kunt, Asli; Klapper, Leora
    Abstract: This paper provides the first analysis of the Global Financial Inclusion (Global Findex) Database, a new set of indicators that measure how adults in 148 economies save, borrow, make payments, and manage risk. The data show that 50 percent of adults worldwide have an account at a formal financial institution, though account penetration varies widely across regions, income groups and individual characteristics. In addition, 22 percent of adults report having saved at a formal financial institution in the past 12 months, and 9 percent report having taken out a new loan from a bank, credit union or microfinance institution in the past year. Although half of adults around the world remain unbanked, at least 35 percent of them report barriers to account use that might be addressed by public policy. Among the most commonly reported barriers are high cost, physical distance, and lack of proper documentation, though there are significant differences across regions and individual characteristics.
    Keywords: Access to Finance,Emerging Markets,Banks&Banking Reform,Economic Theory&Research,E-Business
    Date: 2012–04–01
  2. By: Rafael Cezar (LEDa, UMR DIAL-Université Paris-Dauphine)
    Abstract: (english) The article constructs a new financial composite index that is sensitive to the level of financial development. The principal component analysis methodology is used to condensate the information contained in seven measures of the effectiveness in which a financial system performs resource allocation. In addition to traditional indicators, such as private credit and financial depth, the article also uses indicators of the quality of available information, regulatory environment and legal system, so that the new financial index allows a better comprehension and measurement of financial systems. The results show that OECD countries head the ranking, while Sub-Saharan African’s countries have the less developed financial systems. _________________________________ (français) Cet article construit un nouvel indice financier composite, sensible au niveau de développement des systèmes financiers. La technique de l’analyse de la composante principale a été employée pour la condensation de l’information de sept indicateurs de l’efficience de l’allocation des ressources. En plus des indicateurs traditionnels tels que la mesure du crédit privé et de la profondeur financière, l’article utilise également des indicateurs de la qualité de l’information disponible, de la réglementation et du système juridique pour la construction de l’indice composite, de sorte que le nouvel indice financier permette une meilleure mesure des systèmes financiers. Les résultats ne présentent pas beaucoup de surprises : les pays de l’OCDE sont en tête du classement tandis que les pays de l’Afrique Subsaharienne possèdent les systèmes les moins développés.
    Keywords: ACP, indice de développement financier et institutionnel.
    JEL: C43 O16 G20
    Date: 2012–04
  3. By: de Mel, Suresh (University of Peradeniya); McKenzie, David (World Bank); Woodruff, Christopher (University of Warwick)
    Abstract: The majority of firms in most developing countries are informal. We conducted a field experiment in Sri Lanka which provided incentives for informal firms to formalize. Offering only information about the registration process and reimbursement for direct registration costs had no impact on formalization. Adding payments equivalent to one-half to one month's profits for the median firm leads to registration of around one-fifth of firms. A larger payment equivalent to two month's median profits induces half of the firms to register. Among the firms not registering after being offered this larger incentive, many faced issues related to ownership of land. Three follow-up surveys at 15 to 31 months after the intervention measure the impact formalizing has on these firms. Although mean profits increase, this appears largely due to the experiences of a few firms which grew rapidly, with most firms experiencing no increase in income as a result of formalizing. We also find little evidence for most of the channels through which formalization is hypothesized to benefit firms, although formalized firms do advertise more. Finally, formalizing is found to result in a large increase in trust in the state.
    Keywords: informality, small enterprises, entrepreneurship
    JEL: O17 O12 C93 D21 L26
    Date: 2012–03

This issue is ©2012 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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