nep-mfd New Economics Papers
on Microfinance
Issue of 2016‒08‒21
two papers chosen by
Olivier Dagnelie
Université de Caen

  1. Cultural proximity and loan outcomes By Raymond Fisman; Daniel Paravisini; Vikrant Vig
  2. The impact of trust, risk and disaster exposure on microinsurance demand: Results of a DCE analysis in Cambodia By Fiala, Oliver; Wende, Danny

  1. By: Raymond Fisman; Daniel Paravisini; Vikrant Vig
    Abstract: We present evidence that cultural proximity (shared codes, beliefs, ethnicity) between lenders and borrowers increases the quantity of credit and reduces default. We identify in-group lending using dyadic data on religion and caste for officers and borrowers from an Indian bank, and a rotation policy that induces exogenous matching between them. Having an in-group officer increases credit access and loan size dispersion, reduces collateral requirements, and induces better repayment even after the in-group officer leaves. We consider a range of explanations and suggest that the findings are most easily explained by cultural proximity serving to mitigate information frictions in lending.
    JEL: F3 G3
    Date: 2016
    URL: http://d.repec.org/n?u=RePEc:ehl:lserod:67376&r=mfd
  2. By: Fiala, Oliver; Wende, Danny
    Abstract: Natural disasters are increasing in frequency and intensity and have devastating impacts on individuals, both humanitarian and economic, particularly in developing countries. Microinsurance is seen as one promising instrument of disaster risk management, however the level of demand for respective projects remains low. Using behavioural games and a discrete choice experiment, this paper analyses the demand for hypothetical microinsurance products in rural Cambodia and contributes significant household level evidence to the current research. A general preference for microinsurance can be found, with demand significantly affected by price, provider, requirements for prevention and combinations with credit. Furthermore, financial literacy, risk aversion, levels of trust and previous disaster experience impact the individual demand for flood insurance in rural Cambodia.
    Keywords: microinsurance,trust,risk,discrete choice experiment,Cambodia
    JEL: Q10 Q50 Q54 O10 C25
    Date: 2016
    URL: http://d.repec.org/n?u=RePEc:zbw:tuddps:0116&r=mfd

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