New Economics Papers
on Microfinance
Issue of 2013‒08‒31
four papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Microfinance Banks and Household Access to Finance By Brown, Martin; Guin, Benjamin; Kirschenmann, Karolin
  2. The Determinants of Microinsurance Demand By Eling, Martin; Pradhan, Shailee; Schmit, Joan T.
  3. Regulation in Microinsurance Markets: Principles, Practice, and Directions for Future Development By Biener, Christian; Eling, Martin; Schmit, Joan T.
  4. Essai sur le système financier: une analyse du marché du crédit en Afrique Subsaharienne By Thiombiano, Lardia Marcel

  1. By: Brown, Martin; Guin, Benjamin; Kirschenmann, Karolin
    Abstract: We examine how the expansion of the branch network of a microfinance bank between 2006 and 2010 in South-East Europe has affected the use of bank accounts by households in the region. Our analysis is based on survey data reporting the use of bank accounts, socioeconomic characteristics and geographic location of 8,000 households in four countries. We geocode the location of each household and match this data with branch location information for the major microfinance bank in the region, ProCredit Bank, as well as for a large retail bank in each country. We report three key results: First, in locations where ProCredit opened a new branch between 2006 and 2010 the share of households with a bank account increased more than in locations where it did not open a new branch. Second, a new ProCredit branch leads to a stronger increase in the use of bank accounts among low- and middle-income households than among high-income households. Third, we find that ProCredit not only opens branches in areas with high economic activity, but also in areas where average household incomes are low. Overall our results suggest that microfinance banks do expand the frontier of finance as compared to ordinary retail banks.
    Keywords: Access to finance, Microfinance, Bank-ownership, Mission drift.
    JEL: G21 L2 O16 P34
    Date: 2013–02
  2. By: Eling, Martin; Pradhan, Shailee; Schmit, Joan T.
    Abstract: The purpose of this article is to structure the extant knowledge on the determinants of microinsurance demand and to discuss unresolved questions that deserve future research. To achieve this outcome, we review the academic literature on microinsurance demand published between 2000 and early 2013. The review identifies 12 key factors affecting microinsurance demand: price, wealth, risk aversion, non-performance risk, trust and peer effects, religion, financial literacy, informal risk sharing, quality of service, risk exposure, age, and gender. We discuss the evidence of how each of these 12 factors influences demand, both within the microinsurance and the traditional insurance markets. A comparison with traditional markets shows an unexpected (negative) effect of risk aversion on microinsurance demand, with trust perhaps being the intervening factor. Other relevant results include the importance of liquidity (and/or access to credit), informal risk sharing, and peer effects on the decision to buy microinsurance. The influence of trust on insurance take-up and the unanticipated results for risk aversion are fertile areas for future research.
    Keywords: Microinsurance, insurance, demand, enrolment, participation, take-up.
    Date: 2013–06
  3. By: Biener, Christian; Eling, Martin; Schmit, Joan T.
    Abstract: Regulation of any market can either promote or impede its development, thus affecting social welfare. In this paper, we are concerned with the impact of regulation in microinsurance markets. We evaluate existing and potential regulatory mechanisms with regard to its underlying economic rationale, and offer recommendations intended to enhance support and minimize barriers for microinsurance market development. Specifically, we recommend avoiding incentives for regulatory arbitrage; responding to the characteristics of the microinsurance market, including licensing, capital, reinsurance, and distribution systems; enhancing the market through financial literacy initiatives; and providing support in the form of data collection and management training.
    Keywords: Developing countries, microinsurance, regulation.
    Date: 2013–01
  4. By: Thiombiano, Lardia Marcel
    Abstract: This paper aims to characterize the behavior of economic agents on Sub-Saharan Africa’s credit market in order to understand the financial exclusion of poor households. Through its theoretical approach, it gives a description of the functioning of the credit market. By considering the social interactions (social signal) as a starting point and the main determinant of the economic fact, it leads to three main results: (i) the credit supply is inversely proportional to interest rate, (ii) the need for social mobility (the pursuit of a better-being) is the main determinant of the credit demand, (iii) the financial market in Sub-Saharan Africa has three formal segments and one informal segment. Moreover, it demonstrates that in the credit market of Sub-Saharan Africa, the imbalance is the rule because only one of the four segment is in balance. Furthermore this paper notes the lack of social mobility for the poor when there is no external intervention.
    Keywords: credit market, poverty, social mobility, welfare
    JEL: G21 I31 O16
    Date: 2013

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