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on Microfinance |
| By: | Daniel Mueller (University of Basel) |
| Abstract: | <p style="margin-bottom:0cm; margin-bottom:.0001pt; text-align: justify; line-height:normal; text-autospace:none"><span style="font-size:10.0pt; font-family:"Arial","sans-serif"">This paper analyses the welfare effects of microfinance and inflation in developing countries. Therefore, we introduce a moral hazard problem into a monetary search model with money and credit. We show how access to basic financial services affects households' decisions to borrow, to save and to hold money balances. The group lending mechanism of the microfinance institution induces peer monitoring, which in turn enables entrepreneurship. Our main result is that there exists an inflation threshold beyond which entrepreneurship collapses. We show that inflation affects the impact of microfinance on social welfare in a nonlinear way. The positive effect of microfinance is largest for moderate rates of inflation and drops substantially for inflation rates above the threshold.</span></p> <p style="margin-bottom:0cm; margin-bottom:.0001pt; text-align: justify; line-height:normal; text-autospace:none"><span style="font-size:10.0pt; font-family:"Arial","sans-serif""> </spa n> |
| Keywords: | Microfinance, Moral Hazard, Group Lending, Peer Monitoring and Monetary Policy |
| JEL: | D82 E44 G21 O16 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:bsl:wpaper:2013/06&r=mfd |
| By: | Leonardo Becchetti (University of Rome ÒTor VergataÓ); Stefano Castriota (University of Rome ÒTor VergataÓ); Pierluigi Conzo (University of Naples "Federico II" &CSEF) |
| Abstract: | The poor in developing countries are the most exposed to natural catastrophes and microfinance organizations may potentially ease their economic recovery. Yet, no evidence on MFIs strategies after natural disasters exists. We aim to fill this gap with a database which merges bank records of loans, issued before and after the 2004 Tsunami by a Sri Lankan MFI recapitalized by Western donors, with detailed survey data on the corresponding borrowers. Evidence of effective post-calamity intervention is supported since the defaults in the post-Tsunami years (2004-2006) do not imply smaller loans in the period following the recovery (2007-2011) while Tsunami damages increase their size. Furthermore, a cross-subsidization mechanism is in place: clients with a long successful credit history (and also those not damaged by the calamity) pay higher interest rates. All these features helped damaged people to recover and repay both new and previous loans. However, we also document an abnormal and significant increase in default rates of non victims suggesting the existence of contagion and/or strategic default problems. For this reason we suggest reconversion of donor aid into financial support to compulsory micro insurance schemes for borrowers. |
| Keywords: | Tsunami, disaster recovery, microfinance, strategic default, contagion, microinsurance |
| JEL: | G21 G32 G33 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:ent:wpaper:wp43&r=mfd |
| By: | Oriana Bandiera; Robin Burgess; Narayan Das; Selim Gulesci; Imran Rasul; Munshi Sulaiman |
| Abstract: | The world's poorest people lack capital and skills and toil for others in occupations that others shun. Using a large-scale and long-term randomized control trial in Bangladesh this paper demonstrates that sizable transfers of assets and skills enable the poorest women to shift out of agricultural labor and into running small businesses. This shift, which persists and strengthens after assistance is withdrawn, leads to a 38% increase in earnings. Inculcating basic entrepreneurship, where severely disadvantaged women take on occupations which were the preserve of non-poor women, is shown to be a powerful means of transforming the economic lives of the poor. |
| Keywords: | asset transfers, capital constraints, vocational training, occupationalchoice, structural change, poverty. |
| JEL: | O12 I30 D50 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stieop:43&r=mfd |