nep-mfd New Economics Papers
on Microfinance
Issue of 2013‒09‒26
five papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico By Karlan, Dean S.; Zinman, Jonathan
  2. Factors Influencing Portfolio Yield of Microfinance Institutions in Central Asia By Janda, Karel; Turbat, Batbayar
  3. Role of regulation in micro finance: jurisdictional analysis By Ojo, Marianne
  4. Macroeconomic factors influencing interest rates of microfinance institutions in Latin America By Janda, Karel; Zetek, Pavel
  5. On the existence of credit rationing and screening with loan size in competitive markets with imperfect information By Kraus, Daniel

  1. By: Karlan, Dean S.; Zinman, Jonathan
    Abstract: The long-run price elasticity of demand for credit is a key parameter for intertemporal modeling, policy levers, and lending practice. We use randomized interest rates, offered across 80 regions by Mexico’s largest microlender, to identify a 29-month dollars-borrowed elasticity of -1.9. This elasticity increases from -1.1 in year one to -2.9 in year three. The number of borrowers is also elastic. Credit bureau data does not show evidence of crowd-out. Competitors do not respond by reducing rates, perhaps because Compartamos’ profits are unchanged. The results are consistent with multiple equilibria in loan pricing.
    Keywords: interest rate elasticities; interest rate policy; interest rates; microcredit
    JEL: E43 G21 O11 O12
    Date: 2013–06
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:9503&r=mfd
  2. By: Janda, Karel; Turbat, Batbayar
    Abstract: We analyze the determinants of portfolio yield of microfinance institutions in Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Azerbaijan, Mongolia, Afghanistan, and China over the period 1998-2011. We confirm that targeting women borrowers improves the financial results of microfinance institutions whereas the effectiveness of group lending or advantages of rural lending, in contrast to the initial expectations, were not confirmed. We also consider the contributions of different governance forms of microfinance institutions and the macroeconomic factors potentially influencing the financial performance of microfinance institutions. As a part of this paper we also provide a self contained introduction to microfinance theory for a reader not familiar with microfinance
    Keywords: Microfinance; Central Asia; Earnings.
    JEL: D14 G21 O16 P34
    Date: 2013–09–06
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:49549&r=mfd
  3. By: Ojo, Marianne
    Abstract: This paper not only addresses how linkages, direct and facilitating linkages, can benefit microfinance institutions – and particularly in jurisdictions where the Savings Group Outreach involvement is particularly low, but also illustrates ways and means whereby group lending and other more recent innovative methods used by micro lenders to secure repayments, could increase the desired effects, efficiency and impact of microfinance in selected jurisdictions. In so doing, it addresses some of the existing and persisting problems of micro finance in rural areas. An innovative aspect of the paper is evidenced through its recommendation of the Micro-Savings Requirement Scheme - which offers numerous benefits – as will be highlighted in this paper.
    Keywords: microfinance; regulation; agency theory; Micro-Savings Requirement Scheme
    JEL: E2 E6 G2 G21 G23 G28 K2
    Date: 2013–09–18
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:49927&r=mfd
  4. By: Janda, Karel; Zetek, Pavel
    Abstract: Agricultural output in developing countries still represents a substantial part of GDP. This ratio has actually increased in some areas such as Latin America. As such, there is an increasing importance of microfinance institutions (MFIs) focusing on activities associated with agriculture and encouraging entrepreneurship in agriculture and in the rural communities in general. The contribution of microfinance institutions consists mainly in providing special-purpose loans, usually without collateral. However, questions exist as to the magnitude and adequate level of risk of providing micro-credit loans in relation to the interest rates being charged. We review two main approaches to setting interest rates in MFIs. One approach takes the view that interest rates should be set at a high level due to the excessive risk that these institutions undertake. The second approach is to convince the public of the possibility of reducing these rates through cost savings, increased efficiency, and sharing best practice, etc. Subsequently we econometrically analyse the impact of macroeconomic factors on microfinance interest rates in Latin America and the Caribbean. We show that these results depend on the chosen indicator of interest rate.
    Keywords: microfinance, interest rate, macroeconomic factors, agriculture
    JEL: E43 G21 O13
    Date: 2013–09–19
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:49973&r=mfd
  5. By: Kraus, Daniel
    Abstract: Although credit rationing has been a stylized fact since the groundbreaking papers by Stiglitz and Weiss (1981, hereinafter S-W) and Besanko and Thakor (1987a, hereinafter B-T), Arnold and Riley (2009) note that credit rationing is unlikely in the S-W model, and Clemenz (1993) shows that it does not exist in the B-T model. In this chapter, I explain why credit rationing, more specifically rationing of loan applicants, does exist in a competitive market with imperfect information, and occurs only for low-risk loan applicants. In cases of indivisible investment technologies, low-risk applicants are rationed. In cases of divisible investment technologies, rationing of loan size is restricted to rationing of loan applicants. In the event that the difference in the marginal return between the investment technologies is sufficiently small relative to the difference in their riskiness, rationing of loan size alone yields high opportunity costs; in addition, low-risk loan applicants are rationed in this case. --
    Keywords: Asymmetric Information,Financial Intermediation,Credit Rationing
    JEL: G21 D82
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:roswps:131&r=mfd

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