nep-mfd New Economics Papers
on Microfinance
Issue of 2015‒03‒22
five papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Money Management and Entrepreneurial Training in Microfinance: Impact on Beneficiaries and Institutions By Emanuele Rusinà; Lucia dalla Pellegrina; Giorgio di Maio; Paolo Landoni
  2. Micro-Finance and Credit Access in the Agricultural Sector of Nicaragua By Ana C Rostran Molina; Anindya Banerjee; Federico Lampis
  3. What Do We Know about Microfinance at Macro Glance? By Alimukhamedova, Nargiza; Hanousek, Jan
  4. Recent advances in finance for inclusive development: a survey By Simplice Asongu; De Moor Lieven
  5. Saving by Default: Evidence from a Field Experiment in Rural India By Lore Vandewalle; Vincent Somville

  1. By: Emanuele Rusinà; Lucia dalla Pellegrina; Giorgio di Maio; Paolo Landoni
    Abstract: Most Microfinance institutions (MFIs) worldwide focus their efforts in relieving the poor from financial constraints through micro-loans. This research focuses on integrating a money management and entrepreneurial training plan to a lending program in a non-profit MFI in Kolkata, India. The paper’s main purpose is to measure the marginal impact of training on the beneficiaries through a randomized control trial. Positive and significant effects are found on both institutional outcomes (number of missing or delayed repayments, average weekly savings) and financial management skills of the clients (ability to separate personal and business money, to track revenues and expenses, to calculate profits). Initiative and self-confidence measures also increase, while business outcomes and entrepreneurial skills of the participants exhibit no significant changes. The effects appear stronger on those for whom the training was compulsory, and for those who expressed more interest in the course before the beginning of the program. A formal set-up and incentives linked with the completion of the training are therefore advised when considering similar interventions.
    Keywords: Microfinance, training programs, money management, entrepreneurship, difference-in-differences
    JEL: G21 O15 L31 I25
    Date: 2015–03
  2. By: Ana C Rostran Molina; Anindya Banerjee; Federico Lampis
    Abstract: The primary goal of this paper is to examine credit access of farmers in Nicaragua. We identify the primary factors determining their probability of securing a loan. We are also concerned with understanding the impact on agricultural sector of the large number of micro-finance institutions (MFIs) operating in the country. Multiple correspondence analysis is used and several logit models are estimated. The results indicate that poor farmers face serious problems regarding financing, despite the extended presence of MFIs. In particular, uncertainty in property rights and low levels of education are severe constraints when farmers try to secure financing.
    Keywords: Micro-finance, farmers credit access, Logit models
    JEL: G21 O13 O16 C35
    Date: 2015–02
  3. By: Alimukhamedova, Nargiza; Hanousek, Jan
    Abstract: The majority of microfinance impact studies focus on finding their effect on a specific group of beneficiaries, in contrast we aim to identify the impact on whole economies (economic growth, and financial sector development and reductions in income inequalities), which is an important policy concern, not previously addressed. To address heterogeneity across countries, we group countries into three broad clusters delineated by a set of macro-institutional determinants. We find long-term evidence of a significant ability of microfinance to affect broader economies. Moreover, the impact and dynamics differ substantially by macro-institutional environment; the microfinance effect is more pronounced in weaker environments.
    Keywords: development; economic growth; income inequality; Microfinance
    JEL: C5 G2 O1 O4
    Date: 2015–03
  4. By: Simplice Asongu (Yaoundé/Cameroun); De Moor Lieven (Vrije Universiteit Brussel, Belgium)
    Abstract: The policy debate has been shifting from the finance-growth nexus to the finance-inequality relationship. In the transition from Millennium Development Goals (MDGs) to Sustainable Development Goals (SDGs), there has been an urgent policy challenge of putting some structure on recent advances in finance for more inclusiveness. The overarching question tackled in this paper is: to what degree has financial development contributed to providing opportunities of human development for those in the low-income strata and by what mechanisms? We survey about 170 recently published papers to provide recent advances in finance for inclusive development. The analytical approach consists of first, situating issues of exclusive growth in the context of the literature and then reviewing recent financial inclusion growth strategies. Developed and developing countries are separately engaged in some currents to account for heterogeneity in financial development benefits. Retained financial innovations are structured along three themes, notably: the rural/urban divide, women empowerment and human capital in terms of skills & training. The financial instruments are articulated with case studies, innovations and investment strategies with particular emphasis, inter alia on: informal finance, microfinance, mobile banking, crowdfunding , Islamic finance, remittances, Payment for Environmental Services (PES) and the Diaspora Investment in Agriculture (DIA) initiative.
    Keywords: Finance; Inclusive Growth; Economic Development
    JEL: G20 I10 I20 I30 O10
    Date: 2015–03
  5. By: Lore Vandewalle (Graduate Institute of International and Development Studies - Department of International Economics); Vincent Somville (Chr. Michelsen Institute)
    Abstract: A growing share of the world population is getting access to a formal bank account. This allows a move from cash to account based payments. Grounding our hypothesis in behavioral economics, we conjecture that being paid on an account instead of in cash can play a major role in encouraging savings. When paid on the account, the money is saved by default, while - as long as payments are done in cash - the money is ready to be spent. We test our hypothesis in rural India, with villagers who either had an account, or were asked to open one. They received weekly payments of Rs 150 for about 10 consecutive weeks. We randomly allocated them to being paid on the account (treated) or in cash (control). We find that the treatment increases the account balance by about 110 percent, and that the effect is long lasting. The control villagers do not save more in other assets, but increase their expenditures on regular consumption items. We exclude two alternative mechanisms that could explain the result. First, using lab in the field games, we show that the treatment does not enhance the trust in or empathy towards the banker. Second, we provide evidence against the treated having developed an active savings habit on the account: they behave like the control, when we switch from account to cash payments.
    Keywords: Savings, Finance, Behavioral Economics
    JEL: D14 C93 D03 G21 O16
    Date: 2015–03–18

This nep-mfd issue is ©2015 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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