New Economics Papers
on Microfinance
Issue of 2013‒01‒07
five papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. The Social Dilemma of Microinsurance: A Framed Field Experiment on Free-Riding and Coordination By Wendy Janssens
  2. Business Training and Female Enterprise Start-up, Growth, and Dynamics: Experimental evidence from Sri Lanka By de Mel, Suresh; McKenzie, David; Woodruff, Christopher
  3. Learning from the experiments that never happened : lessons from trying to conduct randomized evaluations of matching grant programs in Africa By Campos, Francisco; Coville, Aidan; Fernandes, Ana M.; Goldstein, Markus; McKenzie, David
  4. L'utilisation du scoring de crédit et du scoring de pauvreté par les institutions de microfinance dans le monde By Vitalie Bumacov
  5. Investment Financing and Financial Development: Firm Level Evidence from Vietnam By Conor O'Toole; Carol Newman

  1. By: Wendy Janssens (VU University Amsterdam)
    Abstract: This paper analyzes free-riding and coordination problems in microinsurance. Our proposition is that the demand for insurance suffers from a social dilemma when formal insurance is introduced in existing risk-sharing networks. Less risk averse individuals offered welfare-improving insurance are tempted to free-ride on the enrollment of their network members while the more risk averse may fail to coordinate. This results in suboptimal demand. Group insurance binds both types to the social optimum. A framed laboratory experiment in Tanzania elicits demand for group versus individual insurance among microcredit clients who typically share risk through joint liability. The experiment demonstrates substantial free-riding but only limited coordination failures. These findings extend the literature on strategic decisions in the presence of a public good and provide a potential explanation for the low take-up of microinsurance.
    Keywords: Framed field experiment; micro health insurance; microfinance; risk-sharing; public good game
    JEL: D71 G21
    Date: 2012–12–18
  2. By: de Mel, Suresh (University of Peradeniya); McKenzie, David (World Bank); Woodruff, Christopher (University of Warwick)
    Abstract: We conduct a randomized experiment among women in urban Sri Lanka to measure the impact of the most commonly used business training course in developing countries, the Start-andImprove Your Business (SIYB) program. We work with two representative groups of women: a random sample of women operating subsistence enterprises and a random sample of women who are out of the labor force but interested in starting a business. We track impacts of two treatments – training only and training plus a cash grant – over two years with four follow-up surveys and find that the short- and medium-term impacts differ. For women already in business, training alone leads to some changes in business practices but has no impact on business profits, sales or capital stock. In contrast the combination of training and a grant leads to large and significant improvements in business profitability in the first eight months, but this impact dissipates in the second year. For women interested in starting enterprises, we find that business training speeds up entry but leads to no increase in net business ownership by our final survey round. Both profitability and business practices of the new entrants are increased by training, suggesting training may be more effective for new owners than for existing businesses. We also find that the two treatments have selection effects, leading to entrants being less analytically skilled and poorer.
    Keywords: Business training; female self-employment; randomized experiment; business startup; trajectory of treatment effects
    Date: 2012
  3. By: Campos, Francisco; Coville, Aidan; Fernandes, Ana M.; Goldstein, Markus; McKenzie, David
    Abstract: Matching grants are one of the most common policy instruments used by developing country governments to try to foster technological upgrading, innovation, exports, use of business development services and other activities leading to firm growth. However, since they involve subsidizing firms, the risk is that they could crowd out private investment, subsidizing activities that firms were planning to undertake anyway, or lead to pure private gains, rather than generating the public gains that justify government intervention. As a result, rigorous evaluation of the effects of such programs is important. The authors attempted to implement randomized experiments to evaluate the impact of seven matching grant programs offered in six African countries, but in each case were unable to complete an experimental evaluation. One critique of randomized experiments is publication bias, whereby only those experiments with"interesting"results get published. The hope is to mitigate this bias by learning from the experiments that never happened. This paper describes the three main proximate reasons for lack of implementation: continued project delays, politicians not willing to allow random assignment, and low program take-up; and then delves into the underlying causes of these occurring. Political economy, overly stringent eligibility criteria that do not take account of where value-added may be highest, a lack of attention to detail in"last mile"issues, incentives facing project implementation staff, and the way impact evaluations are funded, and all help explain the failure of randomization. Lessons are drawn from these experiences for both the implementation and the possible evaluation of future projects.
    Keywords: Microfinance,Banks&Banking Reform,Access to Finance,ICT Policy and Strategies,E-Business
    Date: 2012–12–01
  4. By: Vitalie Bumacov (Chaire Banque Populaire en Microfinance du Groupe ESC Dijon Bourgogne - Commencez à saisir le nom d'un établissement)
    Abstract: Dans ce papier nous présentons les résultats d'une enquête réalisée auprès des institutions de microfinance des pays en développement pour mesurer le niveau d'utilisation du scoring de crédit et du scoring de pauvreté dans ces institutions. Cette étude a révélé que 30,1% des institutions utilisent le scoring de crédit et 35,4% utilisent le scoring de pauvreté. 24,8% des institutions de microfinance utilisent et le scoring de pauvreté et le scoring de crédit. Nous nous attendions à observer des pourcentages moindres. Seulement 8,8% des institutions de microfinance ont déclaré ne pas utiliser le scoring de crédit et ne pas avoir l'intention d'utiliser la technique dans le futur et 15% ont déclaré ne pas utiliser le scoring de pauvreté et ne pas en avoir l'intention. Pour les institutions de microfinance qui n'utilisent pas encore le scoring de crédit mais ont l'intention d'utiliser la technique à court ou à long terme, l'empêchement le plus important est le manque de la base de données nécessaire pour extraire les éléments empiriques. Le manque de budget ou les prix trop élevés des conseillers dans la matière sont la deuxième cause du retardement de la mise en place des outils de scoring de crédit. La troisième cause est le manque d'experts et de ressources humaines pour le développement des outils de crédit scoring et leur mise en place. Le niveau d'utilisation du scoring de crédit en microfinance indique l'apparition d'une industrie, dont la demande a besoin d'une augmentation de l'offre pour abaisser ses prix. Un travail de sensibilisation sera aussi nécessaire car 27,4% des IMF ont une fausse perception de ce qu'est le scoring de crédit.
    Keywords: scoring, microcrédit, pauvreté, risque de crédit, microfinance
    Date: 2012–12–10
  5. By: Conor O'Toole (Department of Economics, Trinity College Dublin; Department of Agricultural Economics and Farm Surveys, Teagasc; Economic Analysis Division, Economic and Social Research Institute, Ireland); Carol Newman (Department of Economics and Institute for International Integration Studies, Trinity College Dublin)
    Abstract: We explore whether financial development reduces external investment financing constraints for firms. Within-country provincial measures of financial development are linked to investment usingdata from the Vietnamese enterprise survey (VES). We focus on three main aspects of financialdevelopment: financial sector depth, state interventionism in finance, and the degree of marketdriven financing in the economy. We find that financial development reduces investment financing constraints. Constraints are decreasing in credit to the private sector, increasing in the use of finance by state-owned enterprises and decreasing in the degree to which finance is allocated on commercial market terms.
    Keywords: Financial development, Financing constraints, Investment
    JEL: G31 G32 O16
    Date: 2012–10

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