nep-mfd New Economics Papers
on Microfinance
Issue of 2016‒07‒02
three papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Does microfinance affect economic growth? Evidence from Bangladesh based on ARDL approach By Sultan, Yousuf; Masih, Mansur
  2. Transformation of Rural Bangladesh: Role of Infrastructure and Financial Institutions By Khandker, Shahidur R.; Samad, Hussain A.
  3. On the Role of Community Management in Correcting Market Failures of Rural Developing Areas: Evidence from a Randomized Field Experiment of COGES Project in Burkina Faso By Sawada, Yasuyuki; Aida, Takeshi; Griffen, Andrew; Kazianga, Harounan; Kozuka, Eiji; Nogushi, Haruko; Todo, Yasuyuki

  1. By: Sultan, Yousuf; Masih, Mansur
    Abstract: Microfinance, a tool for providing improved access to finance (i.e. deposits, loans, payment services, money transfers and insurance etc.) to the unbanked population of a country, may have impact on domestic economic growth according to some literature. However, according to others, microcredits are just means to exploit the poor, by charging higher interest rates and cost of loans, thus making the poor poorer and the rich richer. The present study intends to empirically test the theoretical relationship between microfinance and the economic growth. It examines whether there is any cointegration among microfinance, growth and other macroeconomic variables. And if there is any, whether there is a lead-lag relationship between microfinance and growth, and which leads the other. The study is carried out using a time series technique ‘Auto-Regressive Distributive Lag (ARDL)’, based on annual data from years 1983-2013. It is the first attempt, in our knowledge, to test micromacro relationship based on annual time series data from Bangladesh, the founding country of microfinance. Our findings tend to indicate that: (i) There is significant impact of microfinance on domestic growth (GDP). (ii) Growth also has strong relationship with microfinance. This implies that there is bi-directional relationship between microfinance and growth and that microfinance is an important “ingredient” in promoting growth through various channels. The results suggest that microfinance institutions should be supported and promoted by ensuring proper legal and regulatory policies, frameworks and institutions. Islamic microfinance should be allowed to flourish, incorporating qard al-hasan, sadaqah, zakah and waqf models along with others to alleviate poverty.
    Keywords: microfinance, economic growth, financial development, ARDL
    JEL: C22 C58 G21 O47
    Date: 2016–06–18
  2. By: Khandker, Shahidur R.; Samad, Hussain A.
    Abstract: This paper reviews the process of structural transformation and its consequences on the welfare of rural households in Bangladesh. We argue that public investments in roads, electricity, and financial institutions trigger structural transformation, which increases and diversifies rural incomes, raises consumption expenditures, reduces poverty, and increases educational achievements. Data analysis suggests that the average household income goes up by 10 percent and consumption expenditure by 4.7 percent as a result of one additional microfinance institution branch in a village. Grid connectivity and road investment also increase incomes and expenditures, and lower poverty. Analysis also shows that incomes increase more for non-farm sources than for farm sources as a result of infrastructure investments. These developments point to a structural transformation at play in rural Bangladesh.
    Keywords: infrastructure investments,electrification benefits,road impacts,Bangladesh
    Date: 2016–04–11
  3. By: Sawada, Yasuyuki; Aida, Takeshi; Griffen, Andrew; Kazianga, Harounan; Kozuka, Eiji; Nogushi, Haruko; Todo, Yasuyuki
    Abstract: We estimate the short-term impacts of a school-based management program in Burkina Faso in a range of outcomes that include education, voluntary contribution to public goods, participation in informal saving groups, and health. Evaluated at the control average, COGES increases the voluntary contributions to public goods by 15.90%. Participation in informal saving groups increases by 0.016 percent for the lowest income group, and enrollment in school increases by 7.1%. Overall the findings are consistent with the observation that social capital, strengthened by SBM, plays a critical complementary role in correcting financial market failures in low income economies. The results also demonstrate that impact evaluation of SBM that focus only on education are likely to undervalue the overall effects of SBMS.
    Keywords: School Based Management, Public Goods, Education, Informal Saving Groups, Health, Developing Countries, Burkina Faso, Institutional and Behavioral Economics, International Development, Public Economics, O12, D14, H41, I1, I2,
    Date: 2016–05–30

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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