nep-mfd New Economics Papers
on Microfinance
Issue of 2016‒09‒04
three papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Involuntary Entrepreneurship - Evidence from Thai Urban Data By Tenzin Yindok; Alexander Karaivanov
  2. Impacto del microcrédito sobre las utilidades de las microempresas en Colombia. By Diana Fernández Moreno.
  3. From participation to repurchase: Low income households and micro-insurance By Renuka Sane; Susan Thomas

  1. By: Tenzin Yindok (Simon Fraser University); Alexander Karaivanov (Simon Fraser University)
    Abstract: We build and structurally estimate an occupational choice model between entrepreneurial and non-entrepreneurial alternatives. Unlike much of the literature, we explicitly model and distinguish between "involuntary" entrepreneurship, i.e., running own business out of necessity vs. running business because this is income-maximizing. Involuntary entrepreneurship arises for those who prefer the non-business occupation (e.g., wage-work) but cannot obtain it (with some probability that we estimate), due to lack of education, qualifications, or other labor market frictions. We also allow for credit constraints and analyze their interaction with the labor constraint. We estimate the model via GMM using the 2005 Townsend Thai urban survey. We find that 16% of all business households are classified as involuntary entrepreneurs. We use the structural estimates to evaluate the effect of relaxing the credit and labor constraints, and the impact of microcredit on the rate of entrepreneurship (voluntary and involuntary) and income, on average and stratified by wealth and schooling. Our results suggest that there are large potential income gains for poor households from relaxing both the labor and credit constraints or from providing access to microcredit, but the fraction of involuntary entrepreneurs can only be significantly reduced by addressing the labor constraint.
    Date: 2016
  2. By: Diana Fernández Moreno.
    Abstract: El microcrédito es una modalidad de préstamos que está enfocada a nanciar la microempresa, la cual generalmente ha presentado acceso limitado a los mercados de crédito formales. En los años más recientes, el microcrédito en Colombia ha presentado un rápido crecimiento, y a pesar de ser un crédito de bajo monto, concentra un gran número de deudores. Es por ello que esta clasicación de crédito llama la atención sobre cuáles son los efectos que está teniendo sobre los microempresarios colombianos, en especial por el hecho de que gran parte de las instituciones enfocadas en este mercado aplican tecnología microcrediticia. Debido a la escasa información que hay al respecto, este estudio utiliza la base de datos de una institución que otorga microcrédito en Colombia y un grupo de control basado en encuestas nacionales. Los principales resultados sugieren que esta nanciación puede tener un impacto positivo, pero decreciente, sobre las ganancias de los micronegocios. Sin embargo, existen microempresas donde no se observan estos crecimientos, lo cual puede estar asociado a una ubicación geográca lejana de las actividades de la micronanciera.
    Keywords: microcrédito, impacto, utilidades, emparejamiento, Colombia. Classification JEL:C14, D40, D61, G21
  3. By: Renuka Sane (Indian Statistical Institute, New Delhi); Susan Thomas (Indira Gandhi Institute of Development Research)
    Abstract: The paper asks what drives insurance coverage in low income households by analysing repurchase patterns of micro-insurance policies. We use data on customers of a financial services provider from three states in India and find that the probability of repurchase is highest in the first two months after the contract expires, and steadily declines after. This suggests a window of opportunity for financial firms and governments to target customers to ensure continuous insurance purchase. Non-membership of micro-finance groups and poor rainfall in the month of expiry affect the chance of repurchase adversely. Customers who take longer to repurchase tend to increase the amount of insurance cover.
    Keywords: micro-insurance; credit; repurchase; India
    JEL: D14 G21 G22
    Date: 2016–07

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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