nep-mfd New Economics Papers
on Microfinance
Issue of 2015‒04‒19
ten papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Mobile Money, Trade Credit and Economic Development : Theory and Evidence By Beck, T.H.L.; Pamuk, H.; Uras, R.B.; Ramrattan, R.
  2. Friendship at Work: Can Peer Effects Catalyze Female Entrepreneurship? By Erica Field; Seema Jayachandran; Rohini Pande; Natalia Rigol
  3. Aspire By Marcel Fafchamps; Simon Quinn
  4. The Impact of Financial Education for Youth in Ghana By Dean Karlan; James Berry; Menno Pradhan
  5. Soap Operas for Female Micro Entrepreneur Training By Eduardo Nakasone; Maximo Torero
  6. Weather insurance savings accounts By Stein,Daniel Kevin; Tobacman,Jeremy
  7. Quality Healthcare and Health Insurance Retention: Evidence from a Randomized Experiment in the Kolkata Slums By Delavallade, Clara
  8. Managing Risk with Insurance and Savings: Experimental Evidence for Male and Female Farm Managers in the Sahel By Delavallade, Clara; Dizon, Felipe; Hill, Ruth; Petraud, Jean Paul
  9. Sustainable Institutions or Sustainable Poverty Targeting: The Case of Microfinance By Khan, Wajid; Sun, Shaorong; Khan, Ikramullah
  10. The role of Islamic Microfinance in Poverty Alleviation: Lessons from Bangladesh Experience By Dhaoui, Elwardi

  1. By: Beck, T.H.L. (Tilburg University, Center For Economic Research); Pamuk, H. (Tilburg University, Center For Economic Research); Uras, R.B. (Tilburg University, Center For Economic Research); Ramrattan, R.
    Abstract: Using a novel enterprise survey from Kenya (FinAccess Business), we document a strong positive association between the use of mobile money as a method to pay suppliers and access to trade credit. We develop a dynamic general equilibrium model with heterogeneous entrepreneurs, imperfect credit markets and the risk of theft to account for this empirical pattern. Mobile money<br/>dominates at money as a medium of exchange in its capacity to avoid theft, but it comes with higher transaction costs. The interaction between risk of theft and limited access to trade credit generates demand for mobile money as a payment method with suppliers and the use of mobile money in turn raises the value of a credit relationship and hence the willingness to apply for trade credit. Calibrating the stationary equilibrium to match a set of moments that we observe in FinAccess Business and quantifying the importance of the endogenous interactions between mobile money and trade credit on entrepreneurial performance and macroeconomic development, wefind that the availability of the mobile money technology increases the macroeconomic output<br/>of the entrepreneurial sector by 0.33-0.47%.
    Keywords: money; trade-credit; m-pesa; allocations
    JEL: D14 G21 O12 O16
    Date: 2015
  2. By: Erica Field; Seema Jayachandran; Rohini Pande; Natalia Rigol
    Abstract: Does the lack of peers contribute to the observed gender gap in entrepreneurial success, and is the constraint stronger for women facing more restrictive social norms? We offered two days of business counseling to a random sample of customers of India’s largest women’s bank. A random subsample was invited to attend with a friend. The intervention had a significant immediate impact on participants’ business activity, but only if they were trained in the presence of a friend. Four months later, those trained with a friend were more likely to have taken out business loans, were less likely to be housewives, and reported increased business activity and higher household income. The positive impacts of training with a friend were stronger among women from religious or caste groups with social norms that restrict female mobility.
    JEL: O0
    Date: 2015–04
  3. By: Marcel Fafchamps; Simon Quinn
    Abstract: We gave US$1,000 cash prizes to winners of a business plan competition in Africa. The competition, entitled ‘Aspire’, was intended to attract young individuals aspiring to become entrepreneurs. Participants were ranked by committees of judges composed of established entrepreneurs. Each committee selected one winner among twelve candidates; that winner was awarded a prize of US$1,000 to spend at his or her discretion. Six months after the competition, we compare winners with the two runners-up in each committee: winners are about 33 percentage points more likely to be self-employed. We estimate an average effect on monthly profits of about US$150: an annual profit of 80% on initial investment. Our findings imply that access to start-up capital constitutes a sizable barrier to entry into entrepreneurship for the kind of young motivated individual most likely to succeed in business.
    JEL: L26 O12 O16
    Date: 2015–04
  4. By: Dean Karlan (Economic Growth Center, Yale University); James Berry (Cornell University); Menno Pradhan (VU University Amsterdam)
    Abstract: We evaluate, using a randomized trial, two school-based financial literacy education programs in government-run primary and junior high schools in Ghana. One program integrated financial and social education, whereas the second program only offered financial education. Both programs included a voluntary after-school savings club that provided students with a locked money box. After nine months, both programs had significant impacts on savings behavior relative to the control group, mostly because children moved savings from home to school. We observed few other impacts. We do find that financial education, when not accompanied by social education, led children to work more compared to the control group, whereas no such effect is found for the integrated curriculum; however, the difference between the two treatment effects on child labor is not statistically significant.
    Keywords: financial literacy, youth finance, savings
    JEL: D14 J22 J24 O12
    Date: 2015–04
  5. By: Eduardo Nakasone; Maximo Torero
    Abstract: This paper analyzes the impact of the Strengthening Women Entrepreneurship in Peru (SWEP) program. SWEP trained female micro entrepreneurs in business management practices (such as accounting and marketing). The training, which was provided in 4- to 5-hour sessions, used soap operas and practical exercises specifically designed for the program. A field experiment was conducted among a group of micro entrepreneurs based in two Peruvian cities (Lima and Piura) to investigate whether SWEP had a positive impact on its beneficiaries. The results show that the program positively affected the adoption of business practices taught by the program. In particular, those who received the training were 4 to 6 percentage points more likely to assign themselves a fixed salary (rather than taking cash from their businesses based on personal needs) and 6 to 11 percentage points more likely to keep better records of potential business contacts. Some positive impacts were found on the adoption of bookkeeping practices (4 to 6 percentage points), although this result is not significant across all of the specifications. Although these changes in adoption rates were large compared with their baseline levels, they were rather small in absolute terms. Therefore, the study did not find any impact on average business performance, household expenditures, or women's empowerment in the household. Qualitative information suggests that micro entrepreneurs were satisfied with the training, but considered that many of the practices taught by the program were difficult to follow because of time constraints.
    Keywords: Women, Workforce & Employment, Entrepreneurship, Microbusinesses & Microfinance, business practices, micro entrepreneur, business training, business performance, household outcomes, business training, entrepreneurship, women, peru
    Date: 2014–12
  6. By: Stein,Daniel Kevin; Tobacman,Jeremy
    Abstract: Better insurance against rainfall risk could improve the security of hundreds of millions of agricultural households around the world. However, customers have shown little demand for stand-alone insurance products. This paper theoretically and experimentally analyzes an innovative financial product called a Weather Insurance Savings Account (WISA), which combines savings and rainfall insurance. The paper uses a standard model of intertemporal insurance demand to study how customers'demand for a WISA varies with the amount of insurance offered. A laboratory experiment is then used to elicit participants'valuations of pure insurance, pure savings, and intermediate WISA types. Contrary to the standard model, within-subjects comparisons show that many participants prefer both pure insurance and pure savings to any interior mixture of the two, suggesting that market demand for a WISA is likely to be low. Additional experimental and observational evidence distinguishes between several alternative explanations. One possibility that survives the additional tests is diminishing sensitivity to losses, as in prospect theory.
    Keywords: Debt Markets,Financial Intermediation,Insurance&Risk Mitigation,Hazard Risk Management,Emerging Markets
    Date: 2015–04–08
  7. By: Delavallade, Clara (SALDRU, School of Economics, University of Cape Town and IFPRI)
    Abstract: Health care in developing countries is often unreliable and of poor quality, reducing incentives to use quality health services. Using data from a field experiment in India, I show that providing initial quality care improves the demand for quality health care by raising intended health insurance renewal and subsequent use of quality services. Randomly offering insurance policyholders a free consultation with a qualified doctor has a twofold effect: receiving this additional benefit raises willingness to pay to renew health insurance by 56 percent, exposed individuals are 11 percentage points more likely to consult a qualified practitioner when ill after the consultation.
    Keywords: access to and demand for quality healthcare, micro health insurance retention, willingness to pay, trust, poverty, India
    JEL: I13 I15 O15
    Date: 2015
  8. By: Delavallade, Clara (SALDRU, School of Economics, University of Cape Town and IFPRI); Dizon, Felipe (University of California Davis); Hill, Ruth (The World Bank); Petraud, Jean Paul (IMPAQ International)
    Abstract: Although there is fast-growing policy interest in offering financial products to help rural households manage risk, the literature is still scant as to which products are the most effective. This paper uses a randomized field experiment in Senegal and Burkina Faso to compare male and female farmers who are offered index-based agricultural insurance with those who are offered a variety of savings instruments. The paper finds that female farm managers were less likely to purchase agricultural insurance and more likely to invest in savings for emergencies, even controlling for access to informal insurance and differences in crop choice. It is hypothesized that this finding results from the fact that, although men and women are equally exposed to yield risk, women face additional sources of lifecycle risk—particularly health risks associated with fertility and childcare—that men do not. In essence, the basis risk associated with agricultural insurance products is higher for women. Purchasing insurance increased input spending and use more than savings. Those who purchased more insurance realized higher average yields and were better able to manage food insecurity and shocks. This finding suggests that gender differences in demand for financial products can have an impact on productivity, resilience, and welfare.
    Keywords: risk, insurance, savings, gender
    JEL: O12
    Date: 2015
  9. By: Khan, Wajid; Sun, Shaorong; Khan, Ikramullah
    Abstract: Microcredit, being the most unique form of antipoverty intervention in terms of its methodology and outreach, has generated considerable amount of disagreements in recent times. While there may be more serious disagreements surrounding microcredit, this article addresses whether or not microcredit has the potential to alleviate poverty, and whether or not the conclusion derived to the first issue is sensitive to interest rate variations. Connecting the already established principles of economics, we show that there is every reason to believe that microcredit has the potential to change the fortunes of the poor communities. However, we also show that this change in fortune can be in any direction, depending on how costly the financial services of the microfinance institutions are felt by the poor.
    Keywords: Poverty, Microfinance Institutions, Optimization, Income/Price Policy
    JEL: C61 E64 G21 I30
    Date: 2015–04–11
  10. By: Dhaoui, Elwardi
    Abstract: In the People’s Republic of Bangladesh, the poverty has been a main challenge since the last decades and its alleviation is one of the country’s strategic goals to achieve MDGs by 2015 to fight poverty and improve the standards of living of underprivileged population. Micro and SME financing have been playing important role in poverty reduction by creation a gainful employment opportunities. The Islamic banks and the Islamic windows of conventional banks in Bangladesh should pursue vigorous promotion of Islamic micro and medium scale enterprise (SME) finance, in step with the country's concerted efforts for faster poverty eradication with deeper, wider financial inclusion. This paper determined the role of the Islamic microfinance in poverty alleviation efforts in Bangladesh and how this role can be enhanced. It was intended to establish and recommend Islamic microfinance and its principles that could raise poverty reduction and economic development in the country. Especially, this paper tries to answer the following questions: Can Islamic microfinance help alleviate poverty? Should Islamic finance “innovation” include innovative ways to alleviate poverty? Because an institution is “Islamic” does this mean it has a particular obligation to invest in economic or community development? How does the concept of Islamic microfinance operate to serve the goal of poverty alleviation in Bangladesh? For this purpose, this paper tries to give some possible reflections that help us to develop the analytical tool that may help us to improving the way towards the amplification of the analysis paradigm.
    Keywords: KEYWORDS: Microfinance, Islamic Microfinance, Poverty, Shari’ah & IMs, Bangladesh.
    JEL: G0 G2 G21
    Date: 2015–03–20

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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