nep-mfd New Economics Papers
on Microfinance
Issue of 2013‒07‒05
five papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Entry regulation and formalization of microenterprises in developing countries By Bruhn, Miriam; McKenzie, David
  2. The impact of consulting services on small and medium enterprises: evidence from a randomized trial in Mexico By Bruhn, Miriam; Karlan, Dean; Schoar, Antoinette
  3. The Impact of Microinsurance on Consumption Smoothing and Asset Protection: Evidence from a Drought in Kenya By Janzen, Sarah A.; Carter, Michael R.
  4. Rural finance, development and livelihoods in China By Zhang, Heather Xiaoquan; Loubere, Nicholas
  5. Financial Inclusion and Rural Financial Services in China By Xiong, Xueping; Turvey, Calum G.; Li, Chongguang

  1. By: Bruhn, Miriam; McKenzie, David
    Abstract: The majority of microenterprises in most developing countries remain informal despite more than a decade of reforms aimed at making it easier and cheaper for them to formalize. This paper summarizes the evidence on the effects of entry reforms and related policy actions to promote firm formalization. Most of these policies result only in a modest increase in the number of formal firms, if at all. Less is known about the impact of other forms of business regulations on the performance of low-scale enterprises. Most informal firms appear not to benefit on net from formalizing, so ease of formalization alone will not lead to most of them formalizing. Increased enforcement of rules can increase formality. Although there is a fiscal benefit of doing this with larger informal firms, it is unclear whether there is a public rationale for trying to formalize subsistence enterprises.
    Keywords: Microfinance,Small Scale Enterprise,E-Business,Business in Development,Competitiveness and Competition Policy
    Date: 2013–06–01
  2. By: Bruhn, Miriam; Karlan, Dean; Schoar, Antoinette
    Abstract: Using a randomized evaluation with 432 Mexican small and medium enterprises, this paper shows that access to management consulting led to better firm performance: one-year results show positive effects on return-on-assets and total factor productivity. Owners also had large increases in"entrepreneurial spirit"(an entrepreneurs'managerial confidence index). Using Mexican social security data, the analysis finds a large increase in the number of employees and total wage bill several years after the program. The paper documents large heterogeneity in the specific managerial practices that improved as a result of the consulting, but there is no singular mechanism as a panacea for all firms.
    Keywords: Access to Finance,E-Business,Microfinance,Economic Theory&Research,Business in Development
    Date: 2013–06–01
  3. By: Janzen, Sarah A.; Carter, Michael R.
    Abstract: When natural disasters strike in developing countries, households are often forced to choose between preserving assets or consumption: either can result in permanent consequences. In this paper we ask: can insurance transfer risk in a way that reduces the need for households to rely on costly coping strategies that undermine their future productivity? Since 2010, pastoralists in northern Kenya have had access to a novel index-based drought insurance product. We analyze the impact of a drought-induced insurance payout on consumption smoothing and asset protection in this setting. Our results show that insured households are on average 36 percentage points less likely to anticipate drawing down assets, and 25 percentage points less likely to anticipate reducing meals upon receipt of a payout. Empirical evidence of a poverty trap in this setting suggests that these average impacts may mask a heterogeneous behavioral response and subsequent heterogeneous impacts of insurance. For this reason we use Hansen's (2000) threshold estimator to estimate a critical asset threshold around which optimal coping strategies bifurcate. Using this approach we nd that that households holding assets above a critical asset threshold, who are also most likely to sell assets, are 64 percentage points less likely to anticipate doing so when an insurance payout is available. Households holding assets below the estimated threshold, who are likely to destabilize consumption, are 43 percentage points less likely to anticipate doing so with insurance. Together, these results suggest that insurance can help households to protect assets during crises, without having the deleterious eect on human capital investments.
    Keywords: Agribusiness, Risk and Uncertainty,
    Date: 2013
  4. By: Zhang, Heather Xiaoquan; Loubere, Nicholas
    Abstract: Establishing an inclusive financial system with comprehensive and accessible services in rural areas is increasingly promoted as a crucial element for socio-economic development both in China and globally. Yet, in existing research on China's agricultural and rural development, relatively less attention has been paid to the ways in which changes in the provision of rural finance have impacted the livelihoods of individuals, families and communities from the perspectives of local people. This paper intends to contribute to our understanding of the relationship between rural finance and development by delineating a recent history of financial service extension to rural areas since the founding of the People's Republic of China in 1949. We analyse, in particular, the accelerated pace of the expansion and diversification of such services together with a deeper penetration of the so-called 'microfinance industry' in rural China since the mid-2000s. We analyse the major actors and dynamics involved, the strengths and weaknesses in current scholarship, and suggest ways forward in order to deepen our understanding of the relationship between rural finance, development and the livelihoods in China and beyond. --
    Keywords: rural financial services,financial extension and diversification,urban-rural integration,microcredit,livelihoods,China
    Date: 2013
  5. By: Xiong, Xueping; Turvey, Calum G.; Li, Chongguang
    Keywords: Agricultural Finance,
    Date: 2013

This nep-mfd issue is ©2013 by Olivier Dagnelie. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.