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on Microfinance |
| By: | Berg, Claudia; Emran, M. Shahe; Shilpi, Forhad |
| Abstract: | Using two surveys from Bangladesh, this paper provides evidence on the effects of microfinance competition on village moneylender interest rates and households’ dependence on informal credit. The views among practitioners diverge sharply: proponents claim that MFI competition reduces both the moneylender interest rate and households’ reliance on informal credit, while the critics argue the opposite. Taking advantage of recent econometric approaches that address selection on unobservables without imposing the standard exclusion restrictions, we find that the MFI competition does not reduce moneylender interest rates, thus partially repudiating the proponents. The effects are heterogeneous; there is no perceptible effect at low levels of MFI coverage, but when MFI coverage is high enough, the moneylender interest rate increases significantly. In contrast, households’ dependence on informal credit tends to go down after becoming MFI member, which contradicts part of the critic’s argument. The evidence is consistent with a model where MFIs draw away better borrowers from the moneylender, and fixed costs are important in informal lending. |
| Keywords: | Microfinance, Moneylenders, Microcredit, Interest Rates, Informal Borrowing, Long-run Effects, Bangladesh, Identification through Heteroskedasticity |
| JEL: | C31 O12 O17 |
| Date: | 2013–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:49040&r=mfd |
| By: | Khandker, Shahidur R.; Faruqee, Rashid; Samad, Hussain A. |
| Abstract: | Microcredit programs in Bangladesh have experienced spectacular growth in recent years, with a growing number of borrowers availing credit from multiple microcredit agencies. There is a growing concern that if there are not sufficient returns to borrowing from microfinance institutions (MFIS), some borrowers might be taking loans that they will not be able to repay. A household may be considered over-indebted, for example, if its debt liability exceeds 40 percent of its income or assets. Using a long panel of household survey data from Bangladesh, the paper finds that some 26 percent of microcredit borrowers are over-indebted on this measure versus 22 percent of non-microcredit borrowers. Econometric analysis suggests that both MFI competition and multiple borrowing raise indebtedness. However, repeated borrowing, while it affects short-term liability adversely, does affect the long-term debt-asset ratio favorably. That is, repeated borrowing helps increase assets more than debt over time. Microcredit borrowers in Bangladesh are thus not necessarily over-indebted. But when borrowing is seen as protection against shocks such as floods even at the cost of being indebted, MFIs may offer micro-insurance schemes to safeguard borrowers against economic shocks. |
| Keywords: | Debt Markets,Bankruptcy and Resolution of Financial Distress,Currencies and Exchange Rates,Banks&Banking Reform,Emerging Markets |
| Date: | 2013–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6574&r=mfd |
| By: | Mr Sani Ibrahim, Saifullahi |
| Abstract: | Robust economic development is not possible without financial deepening more especially in rural community where vast majority of the populace of Less Developed Countries (LDCs) resides. This paper analyses the impact of rural financial development on economic growth of Nigeria. The study uses time series data covering 1980 to 2011 periods paving the way for the application of Johansen and Juselius model of cointegration to detect the long-run relation among the variables in question. Accordingly, Dynamic Ordinary Least Square (DOLS) method was applied to unveil relationship between rural financial development and economic growth. The cointegration test result reveals the presence of long run relation between rural financial development and economic growth of Nigeria. Moreover, the DOLS results found a significant positive relationship between rural financial development and the growth of Nigerian economy. It has been confirmed in this study that rural finance serves as an engine of growth in the country. It could therefore be concluded that enhancing productive credit especially in rural areas could free the disadvantaged entrepreneur and thus enable them to contribute immensely toward the growth of Nigerian economy. The study therefore recommends among other things, barriers to the productive credit allocation in rural community should be reduced to the barest minimum. |
| Keywords: | Rural development, credit allocation, financial development |
| JEL: | E44 O16 O55 |
| Date: | 2013–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46885&r=mfd |
| By: | Petra Valickova (Charles University, Prague); Tomas Havranek; Roman Horvath |
| Abstract: | We analyze 1334 estimates from 67 studies that examine the effect of financial development on economic growth. Taken together, the studies imply a positive and statistically significant effect, but individual estimates vary a lot. We find that both research design and heterogeneity in the underlying effect play a role in explaining the differences in results. Studies that do not address endogeneity tend to overstate the effect of finance on growth. While the effect seems to be weaker in poor countries, the effect decreases worldwide after the 1980s. Our results suggest that stock markets support faster economic growth than other financial intermediaries. We find no evidence of publication bias in the literature. |
| Keywords: | finance, development, growth, meta-analysis |
| JEL: | C83 G10 O40 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:ost:wpaper:331&r=mfd |