nep-mfd New Economics Papers
on Microfinance
Issue of 2015‒06‒05
four papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Repaying Microcredit Loans: A Natural Experiment on Liability Structure By Mahreen Mahmud
  2. Does microfinance have an impact? Three quantitative approaches in rural areas of Bangladesh and Andhra Pradesh, India By González Carreras, Francisco Jose
  3. The Debt Puzzle in Dhaka’s Slums: Do Poor People Co-hold for Liquidity Needs? By Carolina Laureti
  4. Building a High Quality Infrastructure of Microfinancing and Credit Cooperation for Effective Development By Mamuta, Mikhail; Sorokina, O; Tyan, V; Popova, N

  1. By: Mahreen Mahmud
    Abstract: Microcredit loans were traditionally extended to groups of people. However, there is no clear evidence that joint liability does lead to better borrower performance and recent years have seen a shift towards individual liability lending. Utilizing the exogenous shift from individual to joint liability lending by a microfinance organization in Pakistan, we find evidence of significant improvement in borrower discipline. Borrowers are about 0.6 times as likely to miss a payment in any given month under joint liability relative to individual liability. We also use the exogenous variation in number of months borrowers had till the expiry of their individual liability loans at the time of the shift to study the kind of groups they formed. More time that borrowers had, the more likely they were to form groups with people they knew from before and met weekly. The time that borrower had to form group also correlated positively with borrower discipline.
    Keywords: Microfinance; Group lending; Joint liability
    JEL: D71 D82 G21
    Date: 2015–05
  2. By: González Carreras, Francisco Jose
    Abstract: Microfinance has attracted, since its inception at the end of the seventies, the attention of many people and institutions, both at academic and donor levels. However, evidence is mixed so far and no definitive conclusion has yet emerged with respect to the positive effects of microfinance, in part because of the great differences among the different microfinance schemes but also because of methodological issues. This work aims to add some further evidence to the impact debate, with three studies in two different rural areas from Bangladesh and India. The first study is based on the second round of a survey in Bangladesh undertaken by the World Bank. A Propensity Score Matching approach was chosen to study the impact of borrowing on household income and expenditures per capita. In this case positive impact can only be seen in extraordinary expenditures, in particular in house extensions and investments in houses and land, but not in current expenditures or food expenditures. The second and third studies analyse a dataset collected in five districts of Andhra Pradesh, India. The former tries to answer the question of whether borrowing from Self-Help groups (SHGs) has any effect on income and income per capita at household level. Pooled ordinary least squares and difference in differences approaches are used to that end. A significant impact is found in this study on income and income per capita. In the last empirical work the main interest is focused on the distributional impact, on the understanding that anti-poverty measures should be focused on households at the bottom tail of income and income per capita distributions. Its analysis is based on quantile regression, with cross sectional and panel data approaches. Distributional impact shows, however, that the poorest might not be benefitting from these interventions as much as better-off or not-so-poor households
  3. By: Carolina Laureti
    Abstract: We observe the usage of the flexible savings-and-loan accounts offered by SafeSave, a microfinance institution serving poor slum dwellers in Dhaka, Bangladesh. We find that 59% of the clients borrow at high interest rates and simultaneously hold low-yield liquid savings. Our main finding is that this apparent behavioural anomaly cannot be attributed to liquidity needs. In contrast, we show that co-holders are more likely to be workers subject to low-income risk. An alternative explanation is that co-holders take up costly loans they do not need to escape forced solidarity vis-à-vis family members and friends.
    Keywords: Liquidity; uncertainty; precautionary savings; microfinance; Bangladesh
    JEL: D14 G21 O12
    Date: 2015–05–26
  4. By: Mamuta, Mikhail (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Sorokina, O (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Tyan, V (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Popova, N (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: The main objective of the conducted research is to determine the existing approaches to credit reporting in the microfinance sector in the world and in Russia, and to develop proposals for the development and improvement of credit reporting in Russia as part of the construction of quality infrastructure of the microfinance and credit cooperation markets for its effective development. As part of the work we compared the Russian approach to credit reporting in the microfinance sector with the basic guidelines for the development of credit reporting proposed by the world experts and with existing approaches to credit reporting in the microfinance sector in the world.
    Keywords: microfinance, credit cooperation, microloan, microfinance institution, microfinance organization, credit cooperative, non-bank financial institution, credit register, credit history
    Date: 2015–05

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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