nep-mfd New Economics Papers
on Microfinance
Issue of 2014‒05‒09
four papers chosen by
Olivier Dagnelie
University of Namur

  1. How flexible repayment schedules affect credit risk in agricultural microfinance By Weber, Ron; Mußhoff, Oliver; Petrick, Martin
  2. The more the better? How collateral levels affect credit risk in agricultural microfinance By Müller, Kirsten; Musshoff, Oliver; Weber, Ron
  3. Are Financial and Social Efficiency Mutually Exclusive? A Case Study of Vietnamese Microfinance Institutions By Maxime Lebovics; Niels Hermes; Marek Hudon
  4. The Impact of Public Spending on the Performance of Microfinance Institutions By Janda, Karel; Zetek, Pavel

  1. By: Weber, Ron; Mußhoff, Oliver; Petrick, Martin
    Abstract: Using a unique dataset of a commercial microfinance institution in Madagascar, this paper investigates how the provision of microfinance loans with (in)flexible repayment schedules affects loan delinquencies of agricultural borrowers. Flexible repayment schedules allow a redistribution of principal payments during periods with low agricultural returns to periods when agricultural returns are high. We develop a theoretical framework and apply and estimate an econometric model for the loan repayment behavior of agricultural microborrowers with seasonal and non-seasonal production types. Our results reveal that delinquencies of non-seasonal farmers and seasonal farmers with inflexible repayment schedules are not significantly different from those of non-farmers. Furthermore, we find that seasonal farmers with flexible repayment schedules show significantly higher delinquencies than non-farmers in low delinquency categories, but we also find that this effect disappears in the highest delinquency category. --
    Keywords: Agricultural Credit,Borrowing,Financial Risk,Loan Repayment,Microfinance,Seasonality
    JEL: G21 G32 Q14
    Date: 2014
  2. By: Müller, Kirsten; Musshoff, Oliver; Weber, Ron
    Abstract: Financial institutions still neglect to address agricultural clients. The main reasons for that are their perception that farmers bear higher risks than non-farmers and that their loan products are inadequate to accommodate the needs of agricultural entrepreneurs. As a result, many farmers still lack access to external finance. The aim of this paper is to investigate determinants of credit risk for agricultural loans disbursed by a Microfinance Institution (MFI) in Azerbaijan. In this context special attention is paid to repayment flexibility and the role of collaterals. MFIs are among the first financial institutions recently focusing on farmers with new loan products. We find that farmers are less risky than non-farmers, which is surprising because the opposite is widely believed. We furthermore find that the level of collateral has a negative influence on credit risk. Beyond that, we find that repayment flexibility increases credit risk. --
    Keywords: microfinance,collaterals,Tobit Model,credit risk,small-scale farmer
    JEL: Q12 Q14
    Date: 2014
  3. By: Maxime Lebovics; Niels Hermes; Marek Hudon
    Abstract: A major debate in microfinance focuses on the existence of a trade-off between the financial sustainability of microfinance institutions (MFIs) and their outreach to poor clients. This paper adds to this debate by analyzing whether financial and social efficiency are mutually exclusive in a context of implicit subsidies by the state and international donors. We use data from a sample of 28 Vietnamese MFIs and apply Data Envelopment Analysis (DEA) to identify the existence of a trade-off. Our analysis shows that for Vietnamese MFIs financial and social efficiency are not related. We interpret this as evidence for the fact that there is no support to believe that there is such a trade-off. Subsidies, based on which most Vietnamese MFIs currently operate, helps them to show high financial efficiency, while at the same time being able to attain their social goals. Nevertheless, this model may not be sustainable in the long-term.
    Date: 2014–05–05
  4. By: Janda, Karel; Zetek, Pavel
    Abstract: This paper investigates the role of public expenditures and general government debt in microfinance performance. Our panel regression applied to the data of microfinance institutions (MFIs) in Latin America and the Caribbean confirms the high significance of public finance for the growth of MFIs, especially for the size of their total assets and for their yield on gross loan portfolio. Moreover, the results indicate that MFIs, operating in the country with higher growth of GDP, are characterized by higher rate of social efficiency. The positive influence on microfinance is besides public finance also associated with a growth of rural population or an economy openness of the given country.
    Keywords: public finance, government expenditure, microfinance, microcredit, poverty
    JEL: E62 G21 O11
    Date: 2014–05–03

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