nep-mfd New Economics Papers
on Microfinance
Issue of 2017‒01‒01
two papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Whose voice matters? An experimental examination of women empowerment in microfinance By Klaus Abbink; Asadul Islam; Chau Nguyen
  2. Land Ownership, Access to Informal Credit and Its Cost in Rural Vietnam. By Migheli, Matteo

  1. By: Klaus Abbink; Asadul Islam; Chau Nguyen
    Abstract: Offering microfinance loans to women to empower them may be ineffective if borrowers hand over control of loans to their husbands. We conduct a lab-in-the-field experiment to examine potential gender bias in intra-household decision making in rural Bangladesh. The experiment mimics a real-life scenario in which a microfinance loan is offered to either the wife or the husband and the borrower can decide whether or not to transfer the decision to his/her spouse. We find that women are more likely to let their spouses make decisions than men. Different treatments in the experiment test the underlying causes. Our findings suggest that women’s decision to transfer decision making is driven both by their lower decision-making power and their belief in their spouses’ higher financial capabilities. We also examine subjects’ control over the use of earnings and find that offering credit to women has no effect on their control over household expenditures.
    Keywords: Microfinance, women empowerment, gender bias, intra-household bargaining, field experiment.
    JEL: C91 C93 D13 O12
    Date: 2016–11
  2. By: Migheli, Matteo (University of Turin)
    Abstract: Access to credit and its cost is a major challenge for farmers in developing countries. Formal moneylenders often ration these economic agents, as they lack assets to give as collateral for the loans. The phenomenon is particularly diffused in the countryside, where the formal moneylenders are less present. Consequently, farmers resort to informal credit. Several studies show that land serves as collateral for accessing formal credit, but they often do not find any significant effect of land size on access to informal credit. Here I study the effects of land ownership on both the demand and the cost of informal credit in the Mekong Delta. Vietnam is an interesting country for studying this issue, as informal credit is widespread in the countryside, despite the government’s effort to eradicate it, also subsidising the formal lenders. The analysis is based on 603 households farming relatively small parcels. The results show that as land ownership increases, both the demand and the cost of informal loans decrease. This result is relevant in developing countries, where land reforms are still ongoing, as it shows that land redistribution may contribute to the development of formal credit markets. In particular, from a policy point of view, design and implementation of appropriate land redistributions appears to be a fundamental way to fight the informal credit market.
    Date: 2016–11

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