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on Microfinance |
| By: | Marcel Fafchamps; Simon Quinn; Uzma Afzal; Giovanna d'Adda; Farah Said |
| Abstract: | Standard models often predict that people should either demand to save or demand to borrow, but not both. We hypothesise instead that saving and borrowing among microfinance clients are substitutes, satisfying the same underlying demand: for a regular schedule of deposits and a lump-sum withdrawal. We test this using a framed field experiment among women participating in group lending arrangements in rural Pakistan. The experiment - inspired by the rotating structure of a ROSCA - involves randomly offering credit products and savings products to the same subject pool. We find high demand both for credit products and for savings products, with the same individuals often accepting both a credit product and a savings product over the three experiment waves. This behavior can be rationalised by a model in which individuals prefer lump-sum payments (for example, to finance a lumpy investment), and in which individuals struggle to hold savings over time. We complement our experimental estimates with a structural analysis, in which different 'types' of participants face different kinds of constraints. Our structural framework rationalises the behaviour of 75% of participants; of these 'rationalised' participants, we estimate that two-thirds have high demand for lump-sum payments coupled with savings difficulties. These results imply that the distinction between microlending and microsaving may be largely illusory; participants value a mechanism for regular deposits and lump-sum payments, whether that is structured in the credit or the debt domain. |
| Date: | 2015–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:wps/2014-32&r=mfd |
| By: | Paolo Casini; Lore Vandewalle; Zaki Wahhaj |
| Abstract: | Self-help groups (SHGs) are the most common form of microfinance in India. We provide evidence that SHGs, composed of women only, undertake collective actions for the provision of public goods. Using a theoretical model, we show that an elected official, whose aim is to maximise re-election chances, would exert higher effort in providing public goods when private citizens undertake collective action and coordinate their voluntary contributions towards the same goods. This effect occurs although government and private contributions are assumed to be perfect substitutes. Using first-hand data on SHGs in India, we test the predictions of the model and show that, in response to collective action by SHGs, local authorities tackle a larger variety of public issues, and are more likely to tackle issues of interest to SHGs. |
| JEL: | D70 G21 H42 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:1503&r=mfd |
| By: | Thorsten Beck; Haki Pamuk; Burak R Uras |
| Abstract: | What is the relationship between entrepreneurial saving practices and reinvestment? We develop a model of entrepreneurial finance and show that entrepreneurial reinvestment decisions depend on the efficiency of saving practices. Utilizing a novel micro & small enterprise survey from Tanzania we test the empirical implications of this theory. We find (1) saving for business purposes and earnings reinvestment are positively related; (2) the practice of saving in a deposit account of a formal financial institution is more likely to facilitate a reinvestment compared to the practice of keeping savings within the household. We also show that the negative impact of saving within-the-household on investment is more pronounced for family members with inherently low intra-household bargaining power - such as females and non-head household members. Our work contributes to the recent debate on the implications of saving instruments in developing countries, and suggests informal saving practices as potential barriers to microenterprise performance. |
| Keywords: | Micro- and small enterprises, savings, reinvestment, Tanzania |
| JEL: | D14 G21 O12 O16 |
| Date: | 2014–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:wps/2014-15&r=mfd |