nep-mfd New Economics Papers
on Microfinance
Issue of 2016‒04‒30
nine papers chosen by
Olivier Dagnelie
Université de Caen

  1. Does pre-defined flexibility come with teh cost of higher credit risk? Evidence from agricultural micro lending in Madagascar By Weber, Ron; Musshoff, Oliver
  2. Does weather matter? How rainfall shocks affect credit risk in agricultural micro-finance By Pelka, Niels; Weber, Ron; Musshoff, Oliver
  3. Microcredit Programs, Poverty and Vulnerability in Rural Iran By Tayebi, Zahra; Onel, Gulcan
  4. A pathway to financial inclusion: mobile money and individual Savings in Uganda By Lwanga, Musa; Adong, Annet
  5. When Can Financial Education Affect Savings Behavior? Evidence From A Randomized Experiment Among Low Income Clients of Branchless Banking in India By Calderone, Margherita; Fiala, Nathan; Mulaj, Florentina; Sadhu, Santadarshan; Sarr, Leopold
  6. Effect of financial literacy on willingness to pay for micro-insurance by commercial market business operators in Ghana By Yeboah, Augustine Kwadwo; Obeng, Camara Kwasi
  7. Role of Access to Credit in Rice Production in Sub Saharan Africa: The Case of Mwea Irrigation Scheme in Kenya By Njeru, Timothy; Mano, Yukichi; Otsuka, Keijiro
  8. Farmers' Coping Strategies against an Aggregate Shock: Evidence from the 2008 Sichuan Earthquake By Jin, Ling; Chen, Kevin Z.; Yu, Bingxin; Filipski, Mateusz
  9. Competencia y calidad de cartera en el mercado microfinanciero peruano, 2003-2013 By Giovanna Aguilar Andía; Ellen Mayorca Huaman

  1. By: Weber, Ron; Musshoff, Oliver
    Abstract: Using a unique dataset from a commercial microfinance institution in Madagascar, this paper investigates how the provision of microfinance loans with (in)flexible repayment schedules affects loan delinquencies of agricultural borrowers. We estimate different repayment functions to compare loan delinquencies of agricultural and non-agricultural borrowers and apply a quasi-experimental approach to investigate whether introducing flexible repayment schedules affects loan delinquencies of seasonal agricultural borrowers. In this attempt, three different delinquency categories reflecting different levels of credit risk are assessed. Our results reveal that loan delinquencies of non-seasonal agricultural borrowers without grace periods are not significantly different from those of non-farmers. Furthermore, we find that seasonal agricultural borrowers with grace periods show significantly higher delinquencies than non-farmers. Within the group of agricultural borrowers we find that introducing grace periods increases delinquency levels only in the lowest delinquency category, while we find no significant effect in the higher delinquency categories.
    Keywords: Agribusiness, Financial Economics, International Development,
    Date: 2015
  2. By: Pelka, Niels; Weber, Ron; Musshoff, Oliver
    Abstract: Small-scale farmers in developing countries are undersupplied with capital. Although microfinance institutions have become well established in developing countries, they have not significantly ex-tended their services to farmers. It is generally believed that this is partly due to the riskiness of lending to farmers. This paper combines original data from a Madagascan microfinance institution with weather data to estimate the effect of rainfall on the repayment performance of loans granted to farmers. Results estimated by linear probability models and a sequential logit model show that excessive rain in the harvest period increases the credit risk of loans granted to farmers
    Keywords: Agricultural Finance, Environmental Economics and Policy,
    Date: 2015
  3. By: Tayebi, Zahra; Onel, Gulcan
    Abstract: The main purpose of this paper is to study if two major microcredit programs, namely Women Microcredit Funds (WMF) and Self-Help Groups (SHG), in Southern Iran reach rural poor and vulnerable households. We use primary panel data that consist of monthly consumption and income information for 280 households. The results showed that although both programs are successful at reaching poor, evidence on propensity of vulnerable households joining programs is relatively limited. Furthermore, results indicate that vulnerable households are more likely to join SHG, while poor households mostly choose to join WMF program.
    Keywords: Microcredit Programs, Poverty, Vulnerability, Iran, Community/Rural/Urban Development, International Development,
    Date: 2016
  4. By: Lwanga, Musa; Adong, Annet
    Abstract: This study provides a micro perspective on the impact that mobile money services have on an individual’s saving behavior using 2013 Uganda FinScope data. The results show that although saving through mobile phones is not a common practice in Uganda, being a registered mobile money user increases the likelihood of saving with mobile money. Using mobile money to save is more prevalent in urban areas and in the central region than in other regions. This can be explained by several factors. First, rural dwellers on average tend to have lower incomes and thus have a lower propensity to save compared with their urban counterparts. Second, poor infrastructure in rural areas in terms of the lack of electricity and poor telecommunication network coverage may limit the use of mobile phones and consequently the use of mobile money as a saving mechanism. Overall, the use of mobile money as a saving mechanism is still very low, which could be partly explained by legal limitations that do not incorporate mobile finance services into mobile money. The absence of interest payments on mobile money savings may also act as a disincentive to save through this mechanism. Given the emerging mobile banking services, there is need to create greater awareness and to enhance synergies between telecoms companies and commercial banks.
    Keywords: Mobile Money, Financial Inclusion, Savings, Uganda, Community/Rural/Urban Development, Consumer/Household Economics, Demand and Price Analysis, Financial Economics, Institutional and Behavioral Economics, Political Economy, Public Economics, Risk and Uncertainty,
    Date: 2016–03
  5. By: Calderone, Margherita (University of Leuven); Fiala, Nathan (University of Connecticut); Mulaj, Florentina (The World Bank); Sadhu, Santadarshan (IFMR Research Foundation); Sarr, Leopold (The World Bank)
    Abstract: Financial literacy programs are popular, despite recent research showing no significant changes to savings behavior. We experimentally test the impact of financial literacy training on clients of a branchless banking program that offers doorstep access to banking to low income households. The intervention had significant impacts: savings in the treatment group increased by 29% ($27) within a period of one year. The increase in savings is due in part to decreases in expenditures on temptation goods. These results suggest that financial education interventions, when paired with banking experience, can be successful in changing savings outcomes.
    Keywords: Financial literacy training, branchless banking, financial education intervention
    Date: 2014–09
  6. By: Yeboah, Augustine Kwadwo; Obeng, Camara Kwasi
    Abstract: This study investigated the effect of financial literacy on willingness to pay for micro-insurance among informal commercial market business operators in Ghana. Heckman’s Two-Step Estimation Technique is used to examine data on 612 informal commercial market business operators from selected major urban market centres in Ghana. The results indicate that financial literacy increases the amount willing to pay for micro-insurance. Other determinants of willingness to pay for micro-insurance include marital status, dependents, savings, trust, premium payment mode and income. The study recommends that microfinance institutions should strengthen financial education to increase the uptake of micro-insurance.
    Keywords: Financial literacy; Willingness to pay; Microfinance; Micro-insurance; commercial market business operators, Ghana
    JEL: G0
    Date: 2016
  7. By: Njeru, Timothy; Mano, Yukichi; Otsuka, Keijiro
    Abstract: This study investigates the possibility of boosting rice production in Sub-Saharan Africa with a special focus on the role of access to credit in rice farming in the large-scale Mwea Irrigation Scheme in Kenya. Using household level survey data, we find that the use of fertilizer and paddy yield per hectare are not significantly different among borrowers from the cooperative society, borrowers from rice traders, and non-borrowers. However, borrowers from rice traders receive lower incomes and profits compared to non-borrowers largely due to the higher interest charged. Considering that such farmers who borrow from rice traders are generally poorer in financial, physical, and human capital, and would have even made lower income and profit without rice trader credit, we suggest policies to facilitate further development of credit markets for both efficiency and equity of rice production in Mwea.
    Keywords: Crop Production/Industries, International Development,
    Date: 2015
  8. By: Jin, Ling; Chen, Kevin Z.; Yu, Bingxin; Filipski, Mateusz
    Abstract: While rural households in developing countries deploy a series of risk coping strategies to insulate against shocks, their effectiveness relies heavily on the nature of the shocks. Using unique datasets collected before and after the disastrous 2008 Sichuan earthquake, this paper examines the effectiveness of various coping strategies employed by the affected rural households. The rural household survey identifies a number of coping strategies including depleting savings, government aid, subsidized bank loans, informal credit, private transfer, selling assets, and saving money by letting children drop out of school. Difference-in-differences (DID) estimation results show that, in response to the earthquake, rural households also adjust their income generating strategies through crop diversification and pursuing nonagricultural selfemployment, and increased working time by male household members.
    Keywords: Aggregate Shock, Coping Strategy, Income Diversification, Labor Supply, Agricultural Finance, Farm Management, Labor and Human Capital, Q12, Q54,
    Date: 2015
  9. By: Giovanna Aguilar Andía (Departamento de Economía de la PUCP del Perú); Ellen Mayorca Huaman (Departamento de Economía de la PUCP del Perú)
    Abstract: El objetivo de este estudio es analizar la relación que existe entre la competencia y la calidad de cartera en el sector microfinanciero peruano en el periodo 2003-2013. Como indicador de competencia se emplea el poder de mercado estimado por el Índice de Lerner y como indicador de calidad de cartera se utiliza la tasa de morosidad. El análisis segmenta el mercado microfinanciero en tres grupos de instituciones microfinancieras (IMFs), considerando el volumen promedio de sus colocaciones, de manera que, en el primer grupo se ubican las entidades con un mayor volumen promedio de colocaciones, en el segundo grupo se encuentran las entidades con un volumen medio de colocaciones y finalmente, en el tercer grupo se ubican las entidades con menor volumen promedio de colocaciones. Esta segmentación refleja la heterogeneidad de tamaño que existe entre estas entidades. Los resultados muestran un Índice de Lerner decreciente, para el primer y el tercer grupo, evidenciando una mayor competencia. En el segundo grupo, el comportamiento del Índice de Lerner muestra una tendencia creciente en los últimos meses del periodo estudiado, reflejando una menor competencia. Por otro lado, se evidencia una relación inversa entre el Índice de Lerner y la morosidad en los tres grupos, lo que implica que el aumento de competencia en el mercado microfinanciero ha generado un deterioro en la calidad de cartera crediticia. Este resultado se obtiene controlando el comportamiento de otras variables como son: el ciclo económico, la expansión de los créditos, la eficiencia y la rentabilidad de las instituciones, además del efecto de la crisis financiera internacional del 2008. JEL Classification-JEL:
    Keywords: calidad de cartera , competencia , Índice de Lerner , microcrédito , Microfinanzas , morosidad
    Date: 2016

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