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on Microfinance |
| By: | Catalina Martinez (Center for Finance and Development, The Graduate Institute, Geneva; Center for Microfinance, Department of Banking and Finance, University of Zurich); Annette Krauss (Center for Microfinance, Department of Banking and Finance, University of Zurich) |
| Abstract: | Microfinance has played a key role in including the poor in financial markets. This paper uses microfinance data to approximate financial inclusion in the poorer segments of the population and proposes a quantile regression approach to study the development of microfinance markets. Our approach accounts for the dynamic and heterogeneous impacts that key drivers may have across different stages of market development. It also allows us to go beyond correlations and gets us closer to identifying causal relationships. Our key findings indicate that: i) Microfinance markets are more responsive to the needs of the bottom of the pyramid than to potential growth opportunities. ii) Enabling institutions that provide credit information become increasingly important with higher market complexity. iii) Formal financial development is a complement of microfinance development. iv) Technologies can help to overcome market entry barriers, and to enable a higher inclusion in markets with a high degree of complexity. Our results could help policymakers and investors better understand and influence financial inclusion at the bottom of the pyramid across different stages of market development. |
| Keywords: | financial inclusion, microfinance, market penetration, quantile regression |
| JEL: | G21 O16 L16 |
| Date: | 2015–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:gii:cfdwpa:cfdwp07-2015&r=mfd |
| By: | Simon Cornée (CREM, UMR CNRS 6211, University of Rennes 1 and CERMi, France); Gervais Thenet (CREM, UMR CNRS 6211, University of Rennes 1, IGR-IAE, France) |
| Abstract: | In this paper, we first measure in various ways the efficiency of 61 Bolivian and Peruvian microfinance institutions (MFIs) via a Data Envelopment Analysis approach. Our results show the MFIs under scrutiny achieve a high level of financial efficiency and low scores of social efficiency. We then regress the efficiency scores on a series of factors capturing MFIs’ features. We report that governance, lending methodology, age and operational area are key drivers of social efficiency. However, these factors only have little influence on financial and global efficiency scores. |
| Keywords: | Microfinance, Efficiency, Financial Performance, Social Performance, Data Envelopment Analysis |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:201516&r=mfd |
| By: | Catalina Martinez (Center for Finance and Development, The Graduate Institute, Geneva; Center for Microfinance, Department of Banking and Finance, University of Zurich) |
| Abstract: | This paper proposes novel identification techniques to examine the trade-offs that microfinance institutions face between increasing their profits and their social impact. It uses a quantile regression approach to examine how these trade-offs evolve as institutions become more commercialized. The identification strategy is based on an instrumental variable approach, and also leverages the heteroskedasticity in the sample. The findings indicate that increasing outreach to women, a common proxy for social impact, has a positive effect on the financial performance of all institutions across different stages of commercialization. This suggests that there is no trade-off between doing well and doing good. However, the price differential that microfinance institutions can maintain with respect to their competitors becomes more important for them as they become more commercialized. If this price differential is not explained by a better quality of the services provided, this result questions whether microfinance institutions that have reached a high level of commercialization can still do well and do good. The results are robust to potential sample selection biases, and are consistent for different measures of financial performance. |
| Keywords: | microfinance, gender, quantile regression, instrumental variable |
| JEL: | L21 L33 G21 |
| Date: | 2015–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:gii:cfdwpa:cfdwp06-2015&r=mfd |
| By: | BOUSALAM, Issam; HAMZAOUI, Moustapha |
| Abstract: | On the arrival of the new banking law in Morocco, in august 2015, conventional banks and their foreign rivals will finally have the possibility to create their subsidiaries dedicated to microcredit, participative finance and payment, and hence, supply the market with new Islamic financial solutions for money saving and financing. In order to drain the substantial households savings escaping to classic banks, and consequently, gain ground among these latter, we think that those new Islamic finance operators should target, in almost equal proportions, people with no access to formal financing and those with religious convictions about interest rate prohibition in Islam. For this purpose, we conceptualized an innovative bank based model of Rotating Savings and Credit Associations that allows its members to invest their savings by means of the bank, and raise freeinterest rate loans with no application and management fees. In fact, The conception of this model relied on the results of a survey questionnaire we administered among 725 subjects from different social categories in Morocco to comprehend the inherent features of this informal practice (RoSCA) locally called "Daret". The first part of the answers gave us a basic data we used, by means of the two-way ANOVA (Analysis of the variance), to determine which social characteristics interact together to motivate a person to join a RoSCA. As for the second part of the answers, it gave us insights into the functioning of traditional RoSCAs in Morocco and their members preferences and perceptions on different scales. After all, we based on these findings to conceptualize the model taking into account both equity between members and sustainability of the operation. Additionally, unlike the traditional types of RoSCAs that rely on confidence and social links between members, this bank-based investing RoSCA allows people with no prior cognition to be gathered. This by introducing the bank as a guarantor and withdrawing, temporarily, a deposit for default risk to estimate by means of a risk-rating matrix we proposed. The model is, also, found to be more attractive regarding its real economy promotion through investment, risk sharing process, and integration of financially excluded households. |
| Keywords: | RoSCA; Two-way ANOVA; Islamic finance; Default risk; Morocco. |
| JEL: | G2 G23 O16 O17 |
| Date: | 2015–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:67510&r=mfd |