nep-mfd New Economics Papers
on Microfinance
Issue of 2016‒07‒09
three papers chosen by
Olivier Dagnelie
Université de Caen

  1. How to Help the Poor to Save a Bit: Evidence from a Field Experiment in Kenya By Akbas, Merve; Ariely, Dan; Robalino, David A.; Weber, Michael
  2. From NGOs to banks: Does institutional transformation alter the business model of microfinance institutions? By Bert B. D'Espallier; Jann Goedecke; Marek Hudon; Roy Mersland
  3. Improving access to microcredit in Benin: are the poor and women benefiting? By Djossou, Gbètoton Nadège Adèle; Monwanou, Djohodo Ines; Novignon, Jacob

  1. By: Akbas, Merve (Duke University); Ariely, Dan (Duke University); Robalino, David A. (World Bank); Weber, Michael (World Bank)
    Abstract: Partnering with a savings product provider in Kenya, we tested the extent to which behavioral interventions and financial incentives can increase the saving rate of individuals with low and irregular income. Our experiment lasted for six months and included a total of twelve conditions. The control condition received weekly reminders and balance reporting via text messages. The treatment conditions received in addition one of the following interventions: (1) reminder text messages framed as if they came from the participant's kid (2) a golden colored coin with numbers for each week of the trial, on which participants were asked to keep track of their weekly deposits (3) a match of weekly savings: The match was either 10% or 20% up to a certain amount per week. The match was either deposited at the end of each week or the highest possible match was deposited at the start of each week and was adjusted at the end. Among these interventions, by far the most effective was the coin: Those in the coin condition saved on average the highest amount and more than twice as those in the control condition. We hypothesize that being a tangible track-keeping object; the coin made subjects remember to save more often. Our results support the line of literature suggesting that saving decisions involve psychological aspects and that policy makers and product designers should take these influences into account.
    Keywords: savings, field experiment, behavioral economics
    JEL: G21 B49 D03
    Date: 2016–06
  2. By: Bert B. D'Espallier; Jann Goedecke; Marek Hudon; Roy Mersland
    Abstract: Microfinance, which pledges to provide financial services to people without access to banking, is chiefly run by non-governmental organizations (NGOs). Little is known about the extent to which the transformation of these NGOs into shareholder-owned and, most often, regulated firms affects the way microfinance institutions (MFIs) conduct their business. By applying the event study methodology to 66 MFIs that have transformed, we quantify the effect that transformation has on the MFIs’ business models. Our results suggest that portfolio yield is driven down by 3.9 percentage points due to transformation, indicating that clients get more favorable interest rates. At the same time, MFIs are able to significantly cut down their operational expenses, of which 1.1 percentage points can be attributed to transformation. Other findings include a steep increase in commercial debt leverage and deposits, a significant decrease in the fluctuation of funding costs and a sharp rise in average loan size. Profitability goes down in the short and medium term, while return on equity is driven up in the medium to long run. By exploiting within-MFI data, our approach goes beyond previous studies that mainly relied on between-MFI data. Overall, the results suggest that transformed MFIs become an attractive environment for investors, potentially encouraging a more profit-seeking behavior among transformed MFIs.
    Keywords: Microfinance; transformation; business model; regulation
    JEL: O16 G21 D61 G32 F21
  3. By: Djossou, Gbètoton Nadège Adèle; Monwanou, Djohodo Ines; Novignon, Jacob
    Abstract: In February 2007, the Government of Benin set up a Microcredit Program to support the Poor (MPP). The main objective of this programme was to alleviate household poverty and particularly women through easy access to microcredit to start their own microenterprises. The objective of this paper was to assess the impact of the MPP on poverty and women empowerment in Benin. Our empirical strategy relies on comparing socioeconomic outcomes (poverty and gender inequality index) of individual with access to MPP and those without. Using data from the Beninese Household Survey (EMICoV: Enquête Modulaire Intégrée sur les Conditions de vie des Ménages) conducted by the National Institute of Statistics in 2011, we estimate the average treatment effect of the MPP using Propensity Score Matching (PSM). To measure poverty and gender inequality, we construct a composite indicator using various dimensions of wellbeing (e.g. Education, health, assets etc.). In general, the results showed a positive and significant impact of MPP on poverty. Women empowerment in health care access and assets ownership were positively impacted by MPP access. The results encourage further expansion of the MPP and to ensure effective as well as efficient implementation of the programme.
    Keywords: Microcredit, poverty, Women empowerment, Propensity Matching Score, Benin
    JEL: D6 D60 I3 I38
    Date: 2016–06–27

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