nep-mfd New Economics Papers
on Microfinance
Issue of 2014‒02‒08
two papers chosen by
Olivier Dagnelie
University of Namur

  1. Social service delivery and access to financial innovation. The impact of Oportunidades’ electronic payment system in Mexico By Masino, Serena; Niño-Zarazúa, Miguel
  2. Vertical Linkage between Formal and Informal Credit Markets, Corruption and Credit Subsidy policy: A Note By Chaudhuri, Sarbajit; Ghosh Dastidar, Krishnendu

  1. By: Masino, Serena; Niño-Zarazúa, Miguel
    Abstract: This paper follows a quasi-experimental research design to assess the impact of the electronic payment system of Mexico’s Oportunidades programme. The switch from cash payments to electronic payments delivered via a bank account is found to have implications in terms of reallocation between saving portfolio choices, transaction costs, and coping strategies. The study shows that, following the intervention, participation in informal saving arrangements was reduced, the frequency of remittance reception increased and, when hit by idiosyncratic shocks, beneficiaries of bank accounts were more likely to use savings rather than contracting loans or reducing consumption to cope with the events. The study also reveals impact heterogeneity between rural and urban areas, with important implications for policy and replicability of similar financial innovations in other developing country contexts.
    Keywords: financial inclusion; social service delivery; Oportunidades; conditional cash transfers; quasi-experimental design; Mexico
    JEL: D04 D14 G21 O12
    Date: 2014–02–05
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:53430&r=mfd
  2. By: Chaudhuri, Sarbajit; Ghosh Dastidar, Krishnendu
    Abstract: We develop a model of vertical linkage between the formal and informal credit markets which highlights the presence of corruption in the distribution of formal credit. The existing moneylender, the bank official and the new moneylenders move sequentially and the existing moneylender acts as a Stackelberg leader and unilaterally decides on the informal interest rate. The analysis distinguishes between two different ways of designing a credit subsidy policy. If a credit subsidy policy is undertaken through an increase in the supply of institutional credit, it is likely to increase the competitiveness in the informal credit market and lower the informal sector interest rate under reasonable parametric restrictions. Any change in the formal sector interest rate has no effect. However, an anticorruption measure (increase in penalty) unambiguously lowers the interest rate in the informal credit market. Finally, we examine the effects of alternative policies on the incomes of different economic agents in our model.
    Keywords: Formal/informal credit markets, informal interest rate; corruption; credit subsidy policy, anticorruption measures
    JEL: O1 O16 O17
    Date: 2014–01–01
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:53344&r=mfd

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