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on Microfinance |
| By: | Jean-Marie Baland; Rohini Somanathan; Zaki Wahhaj |
| Abstract: | In recent years, microfinance institutions have expanded into group lending with individual liability, leaving out the joint liability clause which was an important feature in earlier lending contracts. Recent experimental evidence indicates that group lending may yield benefits, specifically lowering default rates, even in the absence of joint liability. In this paper, we develop a theoretical model where the public nature of group meetings means that borrowers have incentives to repay a group loan to safeguard their reputation. We show that the introduction of group loans with individual liability will cause sorting between joint liability and individual liability group loans. Specifically, borrowers who attach more importance to their reputation will select into individual liability loans, causing default rates and interest rates to rise for joint liability loans. The introduction of group loans with individual liability can even make joint liability loans infeasible in equilibrium. |
| Keywords: | Microfinance; Group Lending; Joint Liability; Social Sanctions; Reputation |
| JEL: | G21 O12 O16 D8 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:1415&r=mfd |
| By: | Elzahi , Abd Elrahman (The Islamic Research and Teaching Institute (IRTI)); Ali, Saaid (The Islamic Research and Teaching Institute (IRTI)) |
| Abstract: | The current situation of high unemployment and the widening whole of the disadvantages people in Muslims countries have spot light the need of proper access to the microfinance Currently poor and low income people in Muslim countries has little access to either conventional or Islamic microfinance. This article is an attempt to investigate to what extend Islamic microfinance can best help in alleviating poverty in Muslim communities. The results showed that the conventional microfinance concentrates on the low-income group and thus financial and socially excluded the destitute people from microcredit and other related activities such as saving and skills improvement. Further more the resluts indictes that Islamic microfinance is moving beyond conventional counterpart to provide effective social and financial inclusion simultaneously through its Islamic social tools such as Sadaqah, waqf and Zakah, that to be given directly to the extremely poor in cash or in kind to satisfy their basic needs before granting them microcredit. These results might give good an implication to those who provide microfiance in these countries to improve the social and fiancial inclusions of the disadavantages people by adopting Islamic microcredit. |
| Keywords: | Islamic micro financing; Zakat; Waqf; Social inclusion; financial inclusion |
| Date: | 2015–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:ris:irtiwp:1435_011&r=mfd |
| By: | ZOUARI, Zeineb; NABI, Mahmoud Sami |
| Abstract: | The role of Microfinance in alleviating poverty and enhancing social development is increasing. However, Microfinance Institutions (MFIs) suffer from two important problems which undermine their growth. The first one is inherent to their exposure to information asymmetry (adverse selection and moral hazard). The second one is related to the higher cost of debt enforcement especially in the developing countries where they are generally operating. The problem of costly monitoring is also faced by Islamic Microfinance Institutions (IMFIs) and becomes more important in the case of Profit and Loss Sharing contracts. This paper provides a literature survey about the best practices of the MFIs in term of monitoring, discusses their relevance to the IMFIs, and explores the development of specific regulatory and institutional mechanisms to enhance the performance of different schemes of Islamic micro lending programs. It comes up with a number of policy recommendations (for policy makers and managers of the microfinance institutions) detailing the directions of enhancing the regulatory and institutional environment for the sustainable growth of the Islamic microfinance industry in the OIC countries. |
| Keywords: | Islamic microfinance; information asymmetry; monitoring costs; regulation and supervision |
| Date: | 2015–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:ris:irtipp:1435_002&r=mfd |
| By: | Ismail, Abdul Ghafar (The Islamic Research and Teaching Institute (IRTI)); Possumah, Bayu Taufiq (The Islamic Research and Teaching Institute (IRTI)) |
| Abstract: | One of the leading and contemporarily become prominent issue in the finance institutions is the capital structure. Islamic microfinance institutions as one of instrument to solve the poverty problem have risen to the forefront as invaluable institutions in the development process. Since capital constraints have precluded the expansion of microfinance programs and microfinance institutions have had various degrees of performance and sustainability, the question of how best to finance these organizations is a key issue. This paper attempt to explore how changes and variety source of fund in capital structure could improve Islamic microfinance institutions efficiency and financial performance. |
| Keywords: | Capital Structure; leverage ratio; Islamic Microfinance; Performance |
| Date: | 2015–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:ris:irtiwp:1435_012&r=mfd |
| By: | Mohamed Ali, Khalifa (The Islamic Research and Teaching Institute (IRTI)) |
| Abstract: | The objective of this paper is to present theoretical proposals for institutional structure in the context of Islamic Microfinance by first comparing Conventional and Islamic microfinance institutions and then by highlighting some of the pioneering work of conventional microfinance models that paved the way for Islamic Microfinance. In this paper, we review the literature of microfinance models that simultaneously deals with several facets of poverty by combining Waqf and Zakah principles together or individually. There are three models examined in this paper i.e Waqf-Based Islamic Microfinance Institutions, a Model of Zakah and Awqaf-based MF Organizations and an Integrated Awqaf and Zakah Model of Microfinance. Both Zakah and Waqf mechanisms are considered for Islamic microfinance not only because of their frameworks that are in accordance to the Shariah but they are the original concepts provided in Islam that serve people in need i.e the poor. In tandem with the doctrine of microfinance, Zakah and Waqf are seen as tools best suited to assist the poor who require financing and ultimately could be effective for poverty reduction. The paper derives recommendation for integrating microfinance models into the overall economic policy. |
| Keywords: | Waqf and Zakah; Islamic Microfinance; Regulatory systems |
| Date: | 2015–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:ris:irtiwp:1435_019&r=mfd |
| By: | Jensen, Nathaniel; Barrett, Christopher B.; Mude, Andrew |
| Abstract: | Cash transfers and index insurance have become popular interventions by development agencies worldwide. But they operate in radically different ways. In principle, these could offer complementary or substitute means of improving households’ well-being, both through direct payments and through induced behavioral change. Surprisingly, little is known about these programs’ comparative impacts on participant behavior or well-being, nor about their prospective interactions. This paper exploits four years of household panel data from northern Kenya, where the government launched a Hunger Safety Net Program (HSNP) offering cash transfers just prior to the commercial launch of an index-based livestock insurance (IBLI) product. By exploiting the known selection mechanism behind HSNP participation and the randomization of IBLI extension education and premium discounts, we are able to make novel comparisons of the causal impacts of each type of program among the same population at the same time, which spans a catastrophic drought. We find that both programs benefit participants, but there is no evidence of positive synergies between the two programs. HSNP participation increases the likelihood that a household maintains mobility, an important pastoral production strategy, and improves child health, as indicated by a mid-upper arm circumference (MUAC). IBLI coverage increases expenditures on livestock health services, milk production, MUAC, and income per adult equivalent. Standardizing the estimated benefits by total program costs reveals that the two programs perform comparably, while from a marginal cost perspective the IBLI program has impacts per unit of expenditure at least an order of magnitude greater than HSNP. |
| Keywords: | HSNP, IBLI, pastoralism, social protection, safety nets |
| JEL: | D60 I38 O22 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61372&r=mfd |
| By: | Laetitia Chaix (University of Nice Sophia Antipolis, France; GREDEG CNRS); Dominique Torre (University of Nice Sophia Antipolis, France; GREDEG CNRS) |
| Abstract: | This paper analyzes the capacity of mobile-payment solutions to improve financial inclusion in developing countries. It elaborates from rural East African countries experiences where mobile payment services have developed rapidly. With a simple dynamic model which rationalizes traders' adoption process of distant mobile payment services, we analyze the role of telephonic operators in financial inclusion. We point out the interest of a diversified supply of m-payment services, including simplified solutions proposed by operators alone, in complement of more advanced services involving financial partners. We explain how such a diversified supply, including a ‘frugal’ innovative component, can be more efficient to improve financial inclusion than the only elaborated solutions provided cooperatively by operators and banks cooperatively. |
| Keywords: | Mobile-payment services, Financial inclusion, Developing countries, Switching costs, Frugal innovations |
| JEL: | E42 O33 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2015-01&r=mfd |