nep-mfd New Economics Papers
on Microfinance
Issue of 2016‒02‒29
seven papers chosen by
Olivier Dagnelie
Université de Caen

  1. The Price of Deposit Liquidity: Banks versus Microfinance Institutions By Carolina Laureti; Ariane Szafarz
  2. Weathering the storm: Ownership structure and performance of microfinance institutions in the wake of the global financial crisis By Mahinda Wijesiri
  3. Borrowers’ Participation in Group Borrowing By Tutlani, Ankur
  4. Towards a Sustainable Islamic Microfinance Model in Pakistan By Shaikh, Salman ahmed
  5. Financial Inclusiveness in Islamic Banking: Comparison of Ideals and Practices Based on Maqasid-e-Shari’ah By Shaikh, Salman Ahmed
  6. Using Waqf as Social Safety Net & Funding Public Infrastructure By Shaikh, Salman Ahmed
  7. What factors affect households’ decision to allocate credit for livestock production? Evidence from Ethiopia By Shiferaw, Kaleb; GEBEREMEDHIN, Berhanu; LEGESSE, DEREJE

  1. By: Carolina Laureti; Ariane Szafarz
    Abstract: Using data from Bangladesh, this paper finds that the liquidity premium—the difference between the interest paid on illiquid and liquid savings accounts—is higher in commercial banks than in microfinance institutions. One possible interpretation lies in the higher prevalence of time-inconsistency among the poor. The observed difference in liquidity premia could be due to poor time-inconsistent agents willing to forgo interest on illiquid savings accounts in order to discipline their future selves.
    Keywords: liquidity premium; present-bias; banks; microfinance; Bangladesh
    JEL: G21 D14 O16
    Date: 2016–02–04
    URL: http://d.repec.org/n?u=RePEc:sol:wpaper:2013/226270&r=mfd
  2. By: Mahinda Wijesiri (Indira Gandhi Institute of Development Research; Institute of Economic Growth)
    Abstract: This study investigates the effects of the 2008 global financial crisis on the performance of different microfinance ownership types. The analysis in this study relies on a novel methodological framework that provides consistent productivity measures in the presence of undesirable outputs, while taking into account the technological heterogeneity among different ownership types. The results show that banks and non-bank financial institutions (NBFIs) that performed better immediately before the crisis, suffered more during the crisis and early post-crisis periods. Cooperatives and non-governmental organizations (NGOs), on the other hand, were less affected by the crisis. Moreover, results indicate that the pattern of productivity growth of all ownership forms three years after the eruption of the crisis was remarkably similar to their productivity growth pattern in the very early phase of the pre-crisis period.
    Keywords: Microfinance; Ownership; Metafrontier; Malmquist-Luenberger; Productivity change; Global Financial Crisis
    JEL: C61 D24 G01 G21
    Date: 2016–01
    URL: http://d.repec.org/n?u=RePEc:ind:igiwpp:2016-002&r=mfd
  3. By: Tutlani, Ankur
    Abstract: Borrowers’ participation in MFI group lending credit market is not insured because of the alternative sources of credit available. The question arises what is the ideal MFI interest rate to ensure borrowers’ participation which at the same time being financially viable for MFI. The paper attempts to answer this question and analyzes the borrowers’ trade-off of borrowing from MFI or from moneylender (ML). Results show that borrowers may find comparative advantage in borrowing individually from ML as compared to borrowing in a group from MFI if the transaction cost burden is high and their credit requirement is low
    Keywords: Microfinance, Group lending, Informal finance, Transaction cost, Effective cost
    JEL: G21 O17
    Date: 2016–02–12
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:69506&r=mfd
  4. By: Shaikh, Salman ahmed
    Abstract: According to SDPI estimates, poverty rate in Pakistan has roughly returned to the mid-thirties level of the 90s era. Some 58.7 million Pakistanis are classified as poor while Microfinance beneficiaries are only 2.35 million people. The progress and penetration of Islamic Microfinance is even more insignificant in relation to the enormous underdevelopment challenges faced by Pakistan. In this paper, we document the progress of Islamic Microfinance in Pakistan and build the case for its importance for Pakistan and for the Islamic finance industry. We also document the various business models and institutional structures in vogue in offering Islamic Microfinance products and services. We also document the regulatory environment under which Islamic Microfinance products can be offered in Pakistan. We explain the two basic models of Islamic Microfinance using a mathematical representation. The paper highlights the reasons why Islamic Microfinance in particular and Microfinance in general is not growing as rapidly as it should have given the level of underdevelopment and poverty in the country. Lastly, we propose how standardized screening and complimentary operations of NGOs and commercial IMFIs together with fiscal and monetary support can make Islamic Microfinance sustainable and commercially viable.
    Keywords: Microfinance, Microcredit, Islamic Microfinance, Islamic Banking, Islamic Finance, Poverty
    JEL: I31 L38 O10
    Date: 2014–05–06
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:68748&r=mfd
  5. By: Shaikh, Salman Ahmed
    Abstract: In this study, we attempt to document the progress in Islamic banking industry of Pakistan towards fostering an egalitarian and equitable financial intermediation. We use a set of quantitative indicators to objectively asses the performance of Islamic banks towards fostering a participative, inclusive, cost effective and real sector oriented financial intermediation. We highlight that currently, the performance of Islamic banks on these fronts leaves much to be desired. We highlight that the low finance to deposit ratio and high average cost of financing is inconsistent with Maqasid-e-Shari‟ah. We also identify various categories of poor people who need finance for their health, education and small business working capital needs, but they cannot be served by Islamic banks by using the available product structures. We give a geographical presence of Islamic banks which shows that they are mainly based in big urban cities. We argue that most of the Islamic banking debt based products are close, but relatively expensive substitutes. Finally, we discuss that the distinctive and preferable imperfect substitute product structures like equity based financing contracts are not acceptable to the major part of the real sector industries as well as to the Islamic banking stakeholders, i.e. depositors and shareholders in their current form.
    Keywords: Islamic Banking, Islamic Finance, Financial Inclusion, Microfinance
    JEL: G21 G28
    Date: 2015–11–17
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:68745&r=mfd
  6. By: Shaikh, Salman Ahmed
    Abstract: This study explores the economic potential of the institution of Waqf in funding necessary social and public infrastructure and to act as a permanent social safety net. In section 2, we explain the motives behind charitable giving in the real world. We discuss the factors identified in the empirical literature and experiments. We also explain the need for reinforcing incentives in order to increase the scale of charitable giving as a personal choice in a non-economic pure altruist sense. In section 3, we discuss the reinforcing incentives for charitable giving in Islamic worldview. In section 4, we explain the importance of the institution of Waqf in overall Islamic redistribution framework. We explain how the institution of Zakat, Waqf and inheritance laws together act as redistribution devices and social safety nets in an Islamic economy. Finally, in section 5, we discuss the application of Waqf in contemporary policy framework.
    Keywords: , Charity, Warm Glow, Welfare, Social Mobility, Microfinance, Poverty
    JEL: I22 I38 O17
    Date: 2015–08–27
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:68751&r=mfd
  7. By: Shiferaw, Kaleb; GEBEREMEDHIN, Berhanu; LEGESSE, DEREJE
    Abstract: Access to credit is often viewed as a key to transform semi-subsistence smallholders into market oriented producers. However only few studies have examined factors that affect farmers’ decision to allocate credit on farm activities in general and livestock production in particular. A trivariate probit model with double selection is employed to identify factors that affect farmers’ decision to allocate credit on livestock production using data collected from smallholder farmers in Ethiopia. After controlling for two sample selection bias – taking credit in the production season and decision to allocate credit on farm activities – land ownership and access to a livestock centered extension service are found to have a significant (p
    Keywords: livestock production, credit access, credit allocation, household decision, double sample selection
    JEL: C34 D13 Q12 Q14 Q16
    Date: 2015
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:69344&r=mfd

This nep-mfd issue is ©2016 by 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.
General information on the NEP project can be found at http://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.