New Economics Papers
on Microfinance
Issue of 2013‒08‒16
two papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Group lending with heterogeneous types: By Gan, Li; Hernandez, Manuel A.; Liu, Yanyan
  2. Improving Access to Banking: Evidence from Kenya By Franklin Allen; Elena Carletti; Robert Cull; Jun “Qj” Qian; Lemma Senbet; Patricio Valenzuela

  1. By: Gan, Li; Hernandez, Manuel A.; Liu, Yanyan
    Abstract: Group lending has been widely adopted in the past thirty years by many microfinance institutions as a means to mitigate information asymmetries when delivering credit to the poor. This paper proposes an empirical method to address the potential omitted-variable problem resulting from unobserved group types when modeling the repayment behavior of group members.
    Keywords: group lending, heterogenous types, repayment, social behaviour, Credit, loan repayment, Modeling,
    Date: 2013
  2. By: Franklin Allen; Elena Carletti; Robert Cull; Jun “Qj” Qian; Lemma Senbet; Patricio Valenzuela
    Abstract: Using household surveys and bank penetration data at the district-level in 2006 and 2009, this paper examines the impact of Equity Bank—a leading private commercial bank focusing on microfinance—on the access to banking in Kenya. Unlike other commercial banks in Kenya, Equity Bank pursues distinct branching strategies that target underserved areas and less privileged households. Equity Bank presence has a positive and significant impact on households' use of bank accounts and bank credit, especially for Kenyans with low income, no salaried job and less education, and those that do not own their own home. The findings are robust to using the district-level proportion of people speaking a minority language as an instrument for Equity Bank presence. It appears that Equity Bank's business model—providing financial services to population segments typically ignored by traditional commercial banks and generating sustainable profits in the process—can be a solution to the financial access problem that has hindered the development of inclusive financial sectors in many African countries.
    Date: 2013

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