nep-mfd New Economics Papers
on Microfinance
Issue of 2014‒12‒03
four papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Cost Efficient Joint Liability Lending By Ralph-C Bayer
  2. Does Commercial Microfinance Belong to the Financial Sector? Lessons from the Stock Market By Szafarz, Ariane; Brière, Marie
  3. Competition, performance and portfolio quality in microfinance markets By Kumar Kar, Ashim; Bali Swain, Ranjula
  4. The Role of Financial Literacy and of Financial Education Interventions in Developing Countries By Margherita Calderone

  1. By: Ralph-C Bayer (School of Economics, University of Adelaide)
    Abstract: Traditional micro-lending schemes suffer from high transaction costs relative to the loan size, which renders many small loans uneconomical. This paper proposes an alternative lending protocol with lower transaction costs and shows that in theory repayment rates are not compromised. We then use laboratory experiments to confirm this finding. Finally we conclude that our lending protocol if implemented could improve social welfare by reducing transaction cost.
    Keywords: micro nance, group lending, group liability, joint liability.
    JEL: C70 C92 D71 D82 O12 O16
    Date: 2013–11
  2. By: Szafarz, Ariane; Brière, Marie
    Abstract: This paper is the first to draw a global picture of worldwide microfinance equity by taking full advantage of daily quoted prices. We revisit previous findings showing that investors should consider microfinance as a self-standing sector. Our results are threefold. First, microfinance has become less risky and more closely correlated with the financial sector. This convergence is associated with a decline in the proportion of women borrowers. Second, microfinance and finance shares have equivalent currency exposure. Last, introducing a self-standing microfinance sector presents few diversification benefits. This paper confirms that microfinance has changed dramatically during the last decade.
    Keywords: Microfinance; South Africa; Kenya; Indonesia; Bangladesh; Mexico;
    JEL: G11 G15 O16 C58 G21
    Date: 2014–10
  3. By: Kumar Kar, Ashim (Helsinki Center of Economic Research (HECER)); Bali Swain, Ranjula (Department of Economics)
    Abstract: In recent years growing competition in the microfinance industry has been censured for multiple borrowing, default crises, high interest rates and coercive recovery of loans. Using the Boone indicator as a measure for competition, our paper investigates the impact of competition on microfinance institutions’ (MFIs) outreach, financial performance and quality of loan portfolio. We deal with the potential endogeneity issues by employing the instrumental variable approach using the generalized methods of moments (GMM) estimation technique. Analysing the Microfinance Information Exchange data our empirical results show that increased competition in microfinance sector leads to a larger average loans and a decrease in the financial self-sustainability. The data also supports the view that increased competition in the microfinance industry leads to a decline in the loan portfolio quality.
    Keywords: microfinance institutions; competition; outreach; financial performance; capitalization; panel data IV estimation
    JEL: G21 G32
    Date: 2014–10–31
  4. By: Margherita Calderone
    Abstract: Financial literacy has received increased attention since the global financial crisis and the literature confirms that it is correlated with higher household well-being. In parallel, financial education programs have grown in popularity and an increasing number of countries are developing national financial education strategies and making more investments in related programs. However, the evidence from field experimental research linking financial education interventions and household financial outcomes in developing countries provides mixed results. New findings from recent experiments suggest that well designed and targeted training programs can indeed be successful in increasing formal savings and promoting responsible financial behaviors.
    Date: 2014

This nep-mfd issue is ©2014 by Aastha Pudasainee and Olivier Dagnelie. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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