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on Microfinance |
| By: | Gine, Xavier; Mansuri, Ghazala |
| Abstract: | This paper identifies the relative importance of human and physical capital for entrepreneurship. A subset of rural microfinance clients were offered eight full time days of business training and the opportunity to participate in a loan lottery of up to Rs. 100,000 (USD 1,700), about seven times the average loan size. The study finds that business training increased business knowledge, reduced business failure, improved business practices and increased household expenditures by about $40 per year. It also improved financial and labor allocation decisions. These effects are concentrated among male clients, however. Women improve business knowledge but show no improvements in other outcomes. A cost-benefit analysis suggests that business training was not cost-effective for the microfinance institution, despite having a positive impact on clients. This may explain why so few microfinance institutions offer training. Access to the larger loan, in contrast, had little effect, indicating that existing loan size limits may already meet the demand for credit for these clients. |
| Keywords: | Access to Finance,Competitiveness and Competition Policy,Business in Development,Business Environment,E-Business |
| Date: | 2014–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6959&r=all |
| By: | Anastasia Cozarenco; Ariane Szafarz |
| Abstract: | In most developed countries, regulators have imposed loan ceilings to subsidized microfinance institutions (MFIs). Micro-entrepreneurs in need of above-ceiling loans are left with the co-financing option, which means securing the aboveceiling share of the loan with a regular bank, and getting a ceiling-high loan from the MFI. Co-financing is attractive to MFIs because it allows them to free-ride on the regular banks' screening process. Therefore, loan ceilings can have the perverse effect of facilitating the co-financing of large projects at the expense of micro-entrepreneurs who need below-ceiling loans only. This is the gist of our theoretical model. We test the predictions of this model by exploiting the natural experiment of a French MFI that became subject to the French EUR 10,000 loan ceiling in April 2009. Difference-in-differences probit estimations confirm that imposing loan ceilings to MFIs can have unexpected and socially harmful consequences. |
| Keywords: | Microcredit; regulation; developed countries; loan size; natural experiment |
| JEL: | G21 L51 G28 O52 L31 I38 C25 M13 |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/172183&r=all |
| By: | Villarreal, Francisco G. |
| Abstract: | The Mexican government has recently launched several initiatives aimed at increasing the use of formal financial services, under the implicit assumption that they allow households to smooth consumption and finance investment in human capital. This study seeks to determine what is the impact of the use of formal financial services, proxied by the use of credit cards, on the level and distribution of household consumption in Mexico. Using data from the 2010 household income and expenditure survey, an instrumental variables approach is used in the context of quantile regressions, to correct for the bias that stems from households' self-selection in the decision to use formal financial services. The results indicate that financial services increase consumption of those households that use them, and that this effect is strongest for households in the lowest quantiles, thus reducing inequality of consumption across households. |
| Keywords: | Financial Access, Household Inequality, Quantile Regression |
| JEL: | C21 D39 O16 |
| Date: | 2014–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:57075&r=all |