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on Microfinance |
| By: | Carolina Laureti; Ariane Szafarz |
| Abstract: | This paper starts from a puzzle. On the one hand, the literature documents that a large proportion of poor people are ready to forgo interest on rigid – or commitment – savings accounts to discipline their future selves. On the other, our stylized facts from Bangladesh show that microfinance institutions pay a premium on commitment savings with respect to flexible savings. To address this puzzle, we build an equilibrium model in which a monopolistic bank offers flexible and commitment savings accounts to both rational and time-inconsistent agents. Two factors concur to explain why the bank may find it optimal to pay a commitment premium even though time-inconsistent savers do not necessarily demand one. First, the bank needs commitment accounts to meet its reserve requirements. Second, it cannot segment its clientele ex ante, and rational savers demand compensation for commitment. Last, we discuss the consequences of our findings from a regulatory perspective. |
| Keywords: | Savings; banks; microfinance; commitment; flexibility; present-bias; hyperbolic discounting; Bangladesh |
| JEL: | D82 D91 G21 O12 |
| Date: | 2012–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/134499&r=mfd |
| By: | Annim, Samuel Kobina (University of Central Lancashire); Arun, Thankom (University of Central Lancashire); Kostov, Philip (University of Central Lancashire) |
| Abstract: | This study investigates the effect of financial perception and behaviour on; (a) general accounts and services, (b) investment/savings and (c) insurance/assurance Using FinScope dataset from South Africa over the period 2003 to 2009,ordered probit, generalized ordered probit and pseudo panel micro-econometric techniques have been employed. Results based on all three estimations support the hypothesis that financial perception has a greater effect on the decision to access and use general accounts and services. The cross section and pooled models confirm the hypothesis that the effect of financial behaviour is greater than financial perception when making decisions on the take-up and use of investment financial services. It is also observed that the degree of responsiveness of financial perception on access to, and use of financial services decreases as the depth of usage deepens from basic to advance levels of financial products. In a policy context, targeting demand-side factors to increase access to and use of financial services should be financial type and level specific. Furthermore, the approach should be based on an understanding of the experiences of borrowers. |
| Keywords: | financial, perception, behaviour, general accounts, investment, insurance, South Africa |
| JEL: | O16 O17 O55 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7042&r=mfd |
| By: | Leif Atle Beisland; Roy Mersland; R. Oystein Strøm |
| Abstract: | This study uses a unique, hand-collected sample of microfinance institutions from 73 countries that typically are not investigated in accounting research to analyze the relationships between audit quality and governance mechanisms. We examine two measures of audit quality, namely, the use of Big Four auditors and the presence of internal auditors who report to the boards of these institutions. The empirical analysis of this study reveals that these two quality metrics are highly related, although we also demonstrate that these metrics capture distinctive aspects of audit quality. In particular, the presence of internal auditors is related to other indicators of stricter governance, whereas the use of Big Four auditors is generally unrelated to other control mechanisms. This study illustrates that there is no single association between audit quality and governance; instead, the relationships between these two characteristics are dependent on the specific mechanism that is investigated. However, for situations in which a significant relationship between audit quality and governance does exist, the sign of this relationship is always positive. Thus, our data support the complementarity view of these two traits that is espoused by prior research. We find no support for the contention that these control mechanisms function as substitutes. |
| Date: | 2012–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/134186&r=mfd |
| By: | Gabriel de Abreu Madeira |
| Abstract: | Abstract: This paper employs mechanism design to study how imperfect legal enforcement impacts simultaneously on the availability (or scale) of credit for investment purposes and interest rates. The analysis combines two standard ingredients of the development and contract literatures: limited commitment, which encapsulates the idea that contract enforcement is imperfect, and asymmetric information about cash flows, which justify debt contracts and default under some circumstances. Costly use of courts may be optimal, which contrasts with results from most limited commitment models, where punishments are just threats, never applied in optimal arrangements. Numerical solutions for several parametric specifications, allowing for heterogeneity on initial wealth are provided. In all such solutions, wealthier individuals borrow with lower interest rates and run higher scale enterprises, which is consistent with stylized facts. The reliability of courts has a consistently positive effect on the scale of projects. However its effect on interest rates is subtler and depends essentially on the degree of curvature of the production function. |
| Keywords: | Limited Commitment, Credit Constraints, Legal Enforcement, Mechanism Design. |
| JEL: | D02 D82 L26 O12 O16 |
| Date: | 2012–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2012wpecon31&r=mfd |
| By: | Allen, Franklin; Demirguc-Kunt, Asli; Klapper, Leora; Peria, Maria Soledad Martinez |
| Abstract: | Financial inclusion -- defined here as the use of formal accounts -- can bring many welfare benefits to individuals. Yet we know very little about the factors underpinning financial inclusion across individuals and countries. Using data for 123 countries and over 124,000 individuals, this paper tries to understand the individual and country characteristics associated with the use of formal accounts and what policies are effective among those most likely to be excluded: the poor and rural residents. The authors find that greater ownership and use of accounts is associated with a better enabling environment for accessing financial services, such as lower account costs and greater proximity to financial intermediaries. Policies targeted to promote inclusion -- such as requiring banks to offer basic or low-fee accounts, exempting some depositors from onerous documentation requirements, allowing correspondent banking, and using bank accounts to make government payments -- are especially effective among those most likely to be excluded. Finally, the authors study the factors associated with perceived barriers to account ownership among those who are financially excluded and find that these individuals report lower barriers in countries with lower costs of accounts and greater penetration of financial service providers. Overall, the results suggest that policies to reduce barriers to financial inclusion may expand the pool of eligible account users and encourage existing account holders to use their accounts to save and with greater frequency. |
| Keywords: | Access to Finance,Banks&Banking Reform,Emerging Markets,Debt Markets,Economic Theory&Research |
| Date: | 2012–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6290&r=mfd |