nep-mfd New Economics Papers
on Microfinance
Issue of 2012‒05‒15
six papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. The Universality of Microfinance Operations Model in Eastern Europe and Central Asia: Financial Sustainability vs. Poverty Outreach By Sheremenko, Ganna; Escalante, Cesar L.; Florkowski, Wojciech J.
  2. Microfinance for Agricultural Firms- Credit Access and Loan Repayment in Tanzania By Weber, Ron; Musshoff, Oliver
  3. Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level By Jessica Schicks
  4. How has mobile banking stimulated financial development in Africa? By Simplice A , Asongu
  5. Revisiting the effects of remittances on bank credit: a macro perspective By Richard P.C. Brown; Fabrizio Carmignani
  6. Simultaneous use of formal credit, informal loans and dissaving: Exploring the financial behavior of households in Argentina By Andrés Denes; Carlos Maya; Gastón Repetto; Nicolas Grosman

  1. By: Sheremenko, Ganna; Escalante, Cesar L.; Florkowski, Wojciech J.
    Abstract: This paper examines delinquency, profitability, and outreach determinants of microfinance institutions’ (MFIs) performance in Russia, the Caucasus, and Central Asia. The estimation is done using the Seemingly Unrelated Regression (SUR) technique. The estimation results suggest that the regions' MFIs are profit-driven but are expected to improve outreach in the long-run.
    Keywords: Microfinance institution, SUR, Financial sustainability, Delinquency, Profitability, Social outreach, Agricultural Finance, Financial Economics, International Development, G20, G21,
    Date: 2012
  2. By: Weber, Ron; Musshoff, Oliver
    Abstract: On the example of a commercial microfinance institution (MFI) in Tanzania this paper investigates first whether agricultural firms have a different probability to get a loan and whether their loans are differently volume rationed than loans to non-agricultural firms. Second, we analyze whether agricultural firms repay their loans with different delinquencies than non-agricultural firms. Our results reveal that agricultural firms face higher obstacles to get credit but as soon as they have access to credit, their loans are not differently volume rationed than those of non-agricultural firms. Furthermore, agricultural firms are less often delinquent when paying back their loans than non-agricultural firms. Our findings suggest that a higher risk exposition of agricultural firms does not necessarily lead to higher credit risk. They also show that the investigated MFI overestimates the credit risk of agricultural clients and, hence, should reconsider its risk assessment practice to be able to increase lending to the agricultural sector. In addition, our results might indicate that farmers qualify less often for a loan as they do not fit into the standard micro credit product.
    Keywords: Agricultural Finance, Access to Credit, Loan Repayment, Microfinance Institutions, Financial Economics, International Development, Risk and Uncertainty, G21, G32, Q14,
    Date: 2012–02–23
  3. By: Jessica Schicks
    Abstract: This paper analyses the over-indebtedness of microborrowers in Ghana. It defines over-indebtedness from a customer protection perspective and considers borrowers over-indebted if they continuously struggle with repayment and experience unacceptable sacrifices related to their debt. It finds that poorer microborrowers are more likely to be over-indebted. The risk of over-indebtedness further increases with the occurrence of adverse economic shocks to a borrower’s income or expenses. The likelihood of over-indebtedness is higher for borrowers with low returns on their investment and if borrowers use loans, at least in part, for non-productive purposes. It is higher for borrowers with a low, debt-specific financial literacy. General financial literacy has negative effects on over-indebtedness. We find no effect for mere numeracy. The paper also breaks down the relationship of the above factors to the specific sacrifices that borrowers make, to how frequently they repeat them and to how acceptable sacrifices are to borrowers.
    Keywords: Microfinance; Microcredit; Over-Indebtedness; Debt; Customer Protection; Sacrifices
    JEL: O16 O50 G21
    Date: 2012–05
  4. By: Simplice A , Asongu
    Abstract: In the first empirical assessment of the incidence of mobile banking on financial intermediary development in Africa, we use two definitions of the financial system: the traditional IFS (2008) and Asongu (2011) measures of financial sector importance. When the conception of a financial system is based only on banks and other financial institution (IFS, 2008), mobile banking has a negative incidence on traditional financial intermediary dynamics of depth, activity and size. However, when a previously missing informal-financial sector component is integrated into the definition (Asongu, 2011), mobile-banking has a positive incidence on informal financial intermediary development. Three major implications result from the findings. (1) There is a growing role of informal finance in developing countries. (2) The incidence of the burgeoning phenomenon of mobile-banking cannot be effectively assessed at a macroeconomic level by traditional financial development indicators. (3) It is a wake-up call for scholarly research on informal financial intermediary development indicators which will oriented monetary policy; since a great chunk of the monetary base(M0) in less developed countries is now captured by mobile-banking.
    Keywords: Banking; Mobile Phones; Shadow Economy; Financial Development; Africa
    JEL: O17 E00 O33 D60 G20
    Date: 2012–05–04
  5. By: Richard P.C. Brown (School of Economics, The University of Queensland); Fabrizio Carmignani (School of Economics, The University of Queensland)
    Abstract: We investigate the effect of remittances on bank credit in developing countries. Understanding this link is important in view of the growing relevance of remittances as a source of external finance and of the beneficial impact that financial intermediation is likely to have on economic growth. Using a simple theoretical formalization, we predict the relationship to be U-shaped. We test this prediction using panel data for a large group of developing and emerging economies over the period 1960-2009. The empirical results suggest that at initially low levels of remittances, an increase in remittances reduces the volume of credit extended by banks. However, at sufficiently high levels of remittances, the effect becomes positive. The turning point of the relationship occurs at a level of remittances of about 2.5% of GDP.
    Date: 2012
  6. By: Andrés Denes (Central Bank of Argentina); Carlos Maya (Central Bank of Argentina); Gastón Repetto (Central Bank of Argentina); Nicolas Grosman (Harvard Kennedy School of Government)
    Abstract: In order to promote public policies aimed at enhancing financial inclusion, the Central Bank of Argentina makes periodic efforts to study, measure and analyze the processes of access and use of financial services by households in Argentina. The main objective of this paper is to use the information gathered by INDEC´s Permanent Household Survey to explore the use of credit (from both formal and informal financial providers) and dissaving to understand the determinants of household financial behavior. Using multivariate probit models, we document the effects of different demographic and socio-economic variables on the estimated probability of adopting certain financial behaviors. These models can also be a statistically appropriate way to analyze the simultaneous determination of different observed actions in households´ financial management. Thus, controlling for a set of exogenous variables while adding explanatory variables as endogenous regressors, we show that the inclusion of the latter is both statistically relevant and useful in identifying the existence of substitutability between some financial behaviors and of complementarity among others.
    Keywords: financial services, financial behavior of families, EPH, multivariate probit
    JEL: C31 G20 R29
    Date: 2011–05

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