nep-mfd New Economics Papers
on Microfinance
Issue of 2016‒01‒29
four papers chosen by
Olivier Dagnelie
Université de Caen

  1. Self-Selection into Credit Markets: Evidence from Agriculture in Mali - Working Paper 377 By Lori Beaman, Dean Karlan, Bram Thuysbaert, and Christopher Udry
  2. Regulation of Microfinance Institutions in Developing countries: an incentives theory approach By Mathurin FOUNANOU; Zaka RATSIMALAHELO
  3. A meta-analysis examining the nature of trade-offs in microfinance By Patrick Reichert
  4. Microfinance and ecosystems conservation How green microfinance interacts with Socio- Ecological systems Lessons from Proyecto CAMBio in Nicaragua and Guatemala By Davide Forcella; Guja Lucheschi

  1. By: Lori Beaman, Dean Karlan, Bram Thuysbaert, and Christopher Udry
    Abstract: We partnered with a micro-lender in Mali to randomize credit offers at the village level. Then, in no-loan control villages, we gave cash grants to randomly selected households. These grants led to higher agricultural investments and profits, thus showing that liquidity constraints bind with respect to agricultural investment. In loan-villages, we gave grants to a random subset of farmers who (endogenously) did not borrow. These farmers have lower – in fact zero – marginal returns to the grants. Thus we find important heterogeneity in returns to investment and strong evidence that farmers with higher marginal returns to investment self-select into lending programs.
    Keywords: credit markets; agriculture; returns to capital
    JEL: D21 D92 O12 O16 Q12 Q14
    Date: 2014–09
  2. By: Mathurin FOUNANOU (University Gaston Berger de Saint-Louis); Zaka RATSIMALAHELO (Université de Bourgogne Franche-Comté, CRESE)
    Abstract: We analyze the optimal policy of regulation of microfinance institutions in developing countries, where investment funds are insured by the government and customer deposits. We used a mixed model, combining adverse selection and moral hazard to characterize a class of optimal incentive schemes applied in presence of government funds and in non-government funded. We also analyse the effects of prudential regulation of deposits on the profitability of MFI and social welfare, and we compare prudential and non-prudential regulation. The incentive scheme that we propose can be regarded as a "smart subsidy" mechanism that contributes to the economic and social development.
    Keywords: Microfinance, adverse selection, moral hazard, incentive mechanisms, regulation, smart subsidy.
    JEL: G10 G21 G28
    Date: 2016–03
  3. By: Patrick Reichert
    Abstract: Increasingly, microfinance institutions must balance both social and financial objectives, the so-called double bottom line. A growing number of studies have investigated the ability of MFIs to achieve both objectives simultaneously. From an initial sample of 3,299 articles, I synthesize 274 empirical findings from 61 studies to perform a meta-analysis on the relationship between financial and social performance. Findings suggest that studies using the Mix Market database are less likely to confirm trade-offs while articles that use efficiency indicators, employ an economic frontier methodology or are published in development journals are more likely to confirm evidence of performance trade-offs.
    Keywords: Microfinance; Performance; Outreach; Efficiency; Meta-analysis
    JEL: C12 G21 L25 L31
    Date: 2016–01–14
  4. By: Davide Forcella; Guja Lucheschi
    Abstract: Environmental degradation is the result of complex human-environmentdynamics, often sustained by socio-economic inequalities. Recently microfinancehas been proposed to be an interesting tool to support environmental protectionstrategies that aim at once to foster rural development and promote ecosystemsconservation or adaptation to climate change.In this paper we provide one of the first analysis of the link betweenmicrofinance and ecosystems conservation. We base our analysis on theassessment of the first large-scale microfinance programme for biodiversityconservation: Proyecto CAMBio. Our empirical analysis exploits a unique set ofsecondary and primary data collected by the authors in Nicaragua andGuatemala. We introduce a theoretical framework and a practical methodology toassess such programme, and we apply it to our case studies. Even if withdifferent peculiarities, the two cases studied show that microfinance forecosystems conservation has good potentialities to introduce environmentalelements in the rural activities of small farmers and in the products provided bymicrofinance institutions, and it is an interesting path to pursue. However, theyalso underline that choices and actions of rural households and local financialintermediary institutions are strongly influenced by habits and local dominantdevelopment pathways, which are among the main causes of socio-economicinequalities and environmental degradation. Green Microfinance per se does notseem to be able to revert such dangerous dynamics while, interacting with themwithout a proactive strategy, it risks to have no effect or eventually support thecauses of environmental degradation.We then call for a renewed proactive role of green microfinance for ecosystemsthat, articulating with local actors and territorial dynamics, should aim not onlyat providing a green product to individual farmers, but instead support newalliances and collective, socially informed, actions to redirect the habits thatsupport environmental degradation towards environmentally friendly and socioeconomicinclusive rural development.
    Keywords: Microfinance; Green Microfinance; Rural Development; Payments for Environmental Services; Agricultural microfinance; Central America; Proyecto CAMBio
    JEL: Q57 Q01 O13 O15 Q12 Q14 Q15 Q23 G21
    Date: 2016–01–21

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