nep-mfd New Economics Papers
on Microfinance
Issue of 2016‒04‒23
two papers chosen by
Olivier Dagnelie
Université de Caen

  1. Social Capital and the Repayment of Microfinance Group Lending By Luminita Postelnicu
  2. Opportunity versus necessity : understanding the heterogeneity of female micro-entrepreneurs By Calderon,Gabriela; Iacovone,Leonardo; Juarez,Laura

  1. By: Luminita Postelnicu
    Abstract: Microfinance Performance and Social Capital: A Cross-country AnalysisThis paper investigates the relationship between the extent to which social capital formation is facilitated within different societies, and the financial and social performance of MFIs. We carry out a cross-country analysis on a dataset containing 100 countries. We identify different social dimensions that we use as proxies for how easy social capital can be developed in different countries, and we hypothesize that microfinance is more successful, both in terms of their financial and social aims, in societies that are more conducive to the development of social capital. Our empirical results support our hypothesis.
    Abstract: Defining Social Collateral in Microfinance Group Lending: Microfinance group lending with joint liability allows asset-poor individuals to replace physical collateral by social collateral. This paper provides a theoretical framework to evaluate the impact of social collateral pledged by group borrowers on group lending repayment. We take into account the external ties of group borrowers, i.e. the social ties linking borrowers to non-borrowers from their community, whereas previous work in this field has looked solely at internal ties (i.e. ties between group members). Our model stresses the impact of network configuration on the amount of social capital pledged as collateral. It shows why the group lending methodology works better in rural areas than in urban areas, namely because rural social networks are typically denser than urban ones, which results in higher social collateral.
    Abstract: The Economic Value of Social Capital:Empirical studies on the importance of social capital for poor households show divergent outcomes. This divergence may stem from the lack of a conceptual framework for capturing the social capital dimensions that deliver economic value to individuals. This paper defines individual social capital from an economic perspective and proposes a measurement based on the two dimensions of individual social capital that bring economic value to individuals: (1) informal risk insurance arrangements and (2) information advantages that arise from personal social networks. Using this measurement, I present a numerical application to argue that differing network configurations drive asymmetry of social interactions among individuals.
    Abstract: Social Capital and the Repayment of Microfinance Group Lending: A Case Study of Pro Mujer Mexico:In this paper, we investigate how social networks of group borrowers come into play in joint liability group lending. We use a large, original dataset with 802 mapped social networks of borrowers from Pro Mujer Mexico. We are the first to examine external ties, that is, social ties with individuals outside the borrowing group. We have two main findings. First, borrowers with stronger informal risk insurance arrangements are in better economic shape and have a higher capacity to pay than borrowers with weaker informal risk insurance arrangements. Second, borrowers who pledge valuable ties as social collateral have fewer repayment problems. We postulate that borrowers receive effective help from their ties in cases of need.
    Keywords: microfinance; social collateral; social capital; group lending; social capital measurement
    Date: 2016–01–20
  2. By: Calderon,Gabriela; Iacovone,Leonardo; Juarez,Laura
    Abstract: Entrepreneurs that voluntarily choose to start a business because they are able to identify a good business opportunity and act on it -- opportunity entrepreneurs -- might be different along various dimensions from those who are forced to become entrepreneurs because of lack of other alternatives -- necessity entrepreneurs. To provide evidence on these differences, this paper exploits a unique data set covering a wide array of characteristics, including cognitive skills, non-cognitive skills and managerial practices, for a large sample of female entrepreneurs in Mexico. Descriptive results show that on average opportunity entrepreneurs have better performance and higher skills than necessity entrepreneurs. A discriminant analysis reveals that discrimination is difficult to achieve based on these observables, which suggests the existence of unobservables driving both the decision to become an opportunity entrepreneur and performance. Thus, an instrumental variables estimation is conducted, using state economic growth in the year the business was set up as an instrument for opportunity, to confirm that opportunity entrepreneurs have higher performance and better management practices.
    Keywords: Business in Development,E-Business,Business Environment,Microfinance,Competitiveness and Competition Policy
    Date: 2016–04–13

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.
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