nep-mfd New Economics Papers
on Microfinance
Issue of 2012‒05‒29
three papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Financial Regulation in the English-Speaking Caribbean: Is it Helping or Hindering Microfinance? By Robert C. Vogel; Gerald Schulz
  2. New indicators for the mobile banking nexus By Simplice A, Asongu
  3. Cultural Proximity and Loan Outcomes By Raymond Fisman; Daniel Paravisini; Vikrant Vig

  1. By: Robert C. Vogel; Gerald Schulz
    Abstract: This paper presents the results of an investigation requested by the Multilateral Investment Fund of the Inter-American Development Bank under its Caribbean Microfinance Capacity Building project (CARIB-CAP) to strengthen microfinance in the English-speaking Caribbean. With the financial support of the Compete Caribbean program, this report seeks specifically to analyze the extent to which the regulation of financial entities in the region is supporting or inhibiting the development of microfinance in the region. Among the issues considered are the case for regulation, the differences between prudential and non-prudential regulation, the differences in regulatory arrangements among countries in the region, and especially the impact of these regulations on the availability of microfinancial services and on the different types of financial institutions that provide these services.
    Keywords: Private Sector :: Microbusinesses & Microfinance, Financial Sector :: Financial Policy
    Date: 2011–11
  2. By: Simplice A, Asongu
    Abstract: Purpose: We make available new critical macroeconomic financial indicators to the research community. Nothing is more powerful than a phenomenon whose time has come. What is the macroeconomic empirical context of growing mobile banking? Perhaps one of the deepest empirical hollows in the financial development literature has been the equation of financial depth in the perspective of money supply to liquid liabilities. This equation has put on the margin, a burgeoning phenomenon whose time has come: mobile banking. Design/Methodology: We decompose financial depth into formal, semi-formal and informal sectors and then assess the incidence of mobile banking on each constituent. Thus the IFS (2008) definition of the financial system is extended to incorporate an informal financial sector in line with Asongu(2011). Three hypotheses based on eight propositions are tested using a plethora of endogeneity-robust and HAC standard errors estimation techniques. Findings: The informal financial sector (a previously missing component in the definition of money supply: M2) is positively affected by mobile banking, while the incidence of mobile banking is negative on formal and semi-formal financial intermediary development. The paper contributes at the same time to the macroeconomic literature on measuring financial development and responds to the growing field of economic development by means of informal financial sector promotion, microfinance and mobile banking. It suggests a practicable way to disentangle the effects of mobile banking on various financial sectors. Research implications: Since empirical research on the phenomenon has been hampered by lack of data, we make available macroeconomic financial indicators to the research community. The present paper is also in response to the numerous calls on the research gap in the literature that emphasize the need for research on mobile banking. The mobile-finance nexus is gaining momentum, yet relatively little scholarly research explores the incidence of these m-banking/m-payment (systems) on financial development. Practical implications: (1) There is a burgeoning role of informal finance in developing countries. (2) The incidence of the growing 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 guide monetary policy; since a great chunk of the monetary base (M0) in less developed countries is now captured by mobile banking. Originality/value: New financial indicators for mobile banking assessment based on insufficiencies in the financial development literature: liquid liabilities as applied to developing countries is misleading because a great chunk of the monetary base does not transit through the banking system but via informal networks like the growing phenomenon of mobile banking.
    Keywords: Banking; Mobile Phones; Shadow Economy; Financial Development; Africa
    JEL: O17 O33 E00 D60 G20
    Date: 2012–05–04
  3. By: Raymond Fisman; Daniel Paravisini; Vikrant Vig
    Abstract: We present evidence that shared codes, religious beliefs, ethnicity - cultural proximity - between lenders and borrowers improves the efficiency of credit allocation. We identify in-group preferential treatment using dyadic data on the religion and caste of bank officers and borrowers from a bank in India, and a rotation policy that induces exogenous matching between officers and borrowers. Cultural proximity increases lending on both intensive and extensive margins and improves repayment performance, even after the in-group officer is replaced by an out-group one. Further, cultural proximity increases loan dispersion and reduces loan to collateral ratios. Our results imply that cultural proximity mitigates informational problems that adversely affect lending, which in turn relaxes financial constraints and improves access to finance.
    JEL: D82 G21 J15
    Date: 2012–05

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