nep-mfd New Economics Papers
on Microfinance
Issue of 2016‒04‒16
six papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Female leaders and financial inclusion: Evidence from microfinance institutions By R. Oystein Strøm; Bert D'Espallier; Roy Mersland
  2. Economic Consequences of Forced Displacement By Fiala, Nathan
  3. Is there a mission drift in microfinance? Some new empirical evidence from Uganda By Francis Awuku Darko
  4. Management Characteristics of Cambodian Microfinance Institutions: Operational Efficiency and Management Objectives By OKUDA, Hidenobu; SHI, Minjie
  5. Competencia en el mercado de microcréditos peruano, una medición utilizando el Indicador de Boone By Giovanna Aguilar
  6. Utility, Risk, and Demand for Incomplete Insurance: Lab Experiments with Guatemalan Cooperatives By McIntosh, Craig; Povel, Felix; Sadoulet, Elisabeth

  1. By: R. Oystein Strøm; Bert D'Espallier; Roy Mersland
    Abstract: This research advances the hypothesis that female leaders – chief executive officers (CEOs), chairs, and directors – of a microfinance institution (MFI) give more priority to the poorest families in loan provision than male leaders do. We differentiate between a depth and a width dimension of financial inclusion. The data set is a unique global panel of MFIs collected from MFI raters’ reports. Our sample is also unique in the sense that about one-third of all MFIs have a female CEO. The problem of endogeneity for the female leader is resolved by running Heckman’s two-step endogenous dummy variable estimation with an instrument for the female leader. We find evidence of greater depth financial inclusion (smaller average loans, more gender bias) with a female leader but not for width financial inclusion (credit client growth). Female leaders exhibit greater altruism and greater competition avoidance but not greater risk aversion than male peers.
    Keywords: Female leadership; financial access; microfinance institutions; cross-country panel data
    JEL: G34 M12 M14
    Date: 2016–03–21
  2. By: Fiala, Nathan (University of Connecticut)
    Abstract: Microenterprises are a major contributor to income and employment in developing countries. There is growing evidence though that they do not expand beyond their intitial start-up point. I present the results of a randomized experiment with microenterprise owners in Uganda designed to explore the constraints to this growth. Business owners were randomly selected to receive loans, cash grants, business skills training, or a combination of these programs. I find that men with access to loans and training report significantly higher profits. The loan-only intervention had some initial impact, but this does not last. There are no impacts from the grant intervention, and no effects for women from any of the interventions. While recent research has found little effect from microfinance, I argue this is because men are not included in the studies. The results from this experiment suggest that male owned businesses can expand from microfinance.
    Keywords: Economic development, microenterprises, microfinance, cash grants, entrepreneurship training, credit constraints
    JEL: O12 O16 C93 J16 L26 M53
    Date: 2014–09
  3. By: Francis Awuku Darko
    Abstract: This paper considers the possibility of mission drift in microfinance; a situation where Microfinance Institutions (MFIs) move away from targeting the poor and towards better-off clients. Using two different measures of poverty, the paper examines whether microfinance institutions in Uganda follow a developmental objective by expanding their access to poorer districts; and if the pattern observed varies across different types of MFIs. The analysis is conducted on 118 MFIs over the period 2009-2013; adopting a static count data model and dynamic regression approach. We find that MFIs in Uganda are more likely to target richer districts during earlier years; however, poorer districts tend to catch up over time. This finding suggests that MFIs may wish to signal an improved financial performance by first establishing branches in better-off districts and then only later reaching out to poorer districts, employing cross-subsidisation. We also show that Commercial Bank MFIs are more likely to increase their presence in poorer districts than other types of MFIs, suggesting that protection against regulation and greater access to capital markets may make commercial MFIs the most qualified institutions to expand outreach to the unbanked segment of the world’s poorer population.
    Keywords: microfinance, poverty, mission drift, count data model
    JEL: G21 I32 C25
    Date: 2016–03
  4. By: OKUDA, Hidenobu; SHI, Minjie
    Abstract: It is difficult to decide how to measure the efficiency of microfinance institutions' management. This is because, different from other profit maximizing financial institutions, an essential management characteristic of microfinance institutions involves working toward greater access for the poor. This paper seeks to describe the characteristics and efficiency of the management of microfinance institutions in Cambodia, in terms of microfinance institutions' specific objective of expanding access to the poor, by using the analytical methodology described in the work of Guti駻rez-Nieto et al. (2007), with respect to microfinance institutions in Latin America. The analysis was conducted in two steps: in Step 1, the operating efficiency indices of major microfinance institutions were measured, by conducting a Data Envelopment Analysis (DEA) using data from the National Bank of Cambodia's annual publications. Next, in Step 2, a principal component analysis was conducted using the efficiency indices measured in Step 1, and the management characteristics of each microfinance institution were analyzed. According to the results of our analyses, although great diversity exists among microfinance institutions in Cambodia, (1) large-scale microfinance institutions exhibit higher overall efficiency, (2) approximately one-third of microfinance institutions are oriented towards access for the poor, and (3) access-oriented institutions also exhibiting high overall efficiency comprised less than one-fifth of all microfinance institutions. These results suggest a need for policy that promotes expanding the scale of microfinance institutions, while simultaneously maintaining their orientation toward access for the poor.
    Keywords: Cambodia, Microfinance Institutions, DEA, Principle Component Analysis
    Date: 2016–03–31
  5. By: Giovanna Aguilar (Departamento de Economía de la PUCP del Perú)
    Abstract: Este estudio se analiza la competencia en el mercado microcrediticio peruano vinculándola con la eficiencia de las firmas involucradas y su participación en el mercado. El análisis se realiza para el periodo 2003 – 2009 utilizándose el Indicador de Boone, una medida más robusta de la competencia frente a otras medidas convencionales (IHH, Índice de Lerner). El análisis distingue los créditos otorgados a microempresas de los otros tipos de créditos (consumo, comercial e hipotecario), los que son tratados como un solo producto crediticio llamado créditos “otros”. Asimismo, en cada uno de los mercados de estos productos crediticios se identifican, siguiendo el criterio del valor del crédito promedio, subsegmentos de mercado y los tipos de operadores microfinancieros que en ellos compiten. Los resultados muestran que la competencia se ha intensificado en el mercado de créditos a microempresas, a pesar de observarse una mayor concentración en este mercado. Sin embargo, la competencia entre cajas rurales, financieras y EDPYMES es mayor que la existente entre cajas municipales y bancos especializados. En el mercado de créditos “otros” la competencia se ha intensificado entre cajas municipales y rurales mas no así, entre bancos y financieras. JEL Classification-JEL:
    Keywords: competencia , Indicador de Boone , Microfinanzas
    Date: 2016
  6. By: McIntosh, Craig; Povel, Felix; Sadoulet, Elisabeth
    Abstract: We play a series of incentivized laboratory games with risk-exposed cooperative- based coffee farmers in Guatemala to understand the demand for index-based rainfall insurance. We show that insurance demand goes up as increasingly severe risk makes insurance payouts more partial (payouts are smaller than losses), but demand is ad- versely effected by more complex risk structures in which payouts are probabilistic (it is possible that a shock occurs with no payout). We use numerical techniques to esti- mate a flexible utility function for each player and consequently can put exact dollar values on the magnitude of the behavioral response triggered by probabilistic insur- ance. Exploiting the group structure of the cooperative, we investigate the possibility of using group loss adjustment to smooth idiosyncratic risk. Our results suggest that consumers value probabilistic insurance using a prospect-style utility function that is concave both in probabilities and in income, and that group insurance mechanisms are unlikely to solve the issues of low demand that have bedeviled index insurance markets.
    Keywords: Social and Behavioral Sciences, Risk, Index Insurance, Utility Estimation
    Date: 2015–01–01

This nep-mfd issue is ©2016 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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