nep-mfd New Economics Papers
on Microfinance
Issue of 2017‒05‒14
three papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Household Matters: Revisiting the Returns to Capital among Female Micro-entrepreneurs By Bernhardt, Arielle; Field, Erica; Pande, Rohini; Rigol, Natalia
  2. Hiding Money: Evidence from a field experiment with aspiring female entrepreneurs By Farah Said; Mahreen Mahmud; Giovanna d’Adda; Azam Chaudhry
  3. Insuring against droughts: Evidence on agricultural intensification and index insurance demand from a randomized evaluation in rural Bangladesh: By Hill, Ruth Vargas; Kumar, Neha; Magnan, Nicholas; Makhija, Simrin; de Nicola, Francesca; Spielman, David J.; Ward, Patrick S.

  1. By: Bernhardt, Arielle; Field, Erica; Pande, Rohini; Rigol, Natalia
    Abstract: Several field experiments find positive returns to grants for male and not female micro-entrepreneurs. But, these analyses largely overlook that male and female micro-entrepreneurs often belong to the same household. Using data from randomized trials in India, Sri Lanka and Ghana, we show that the gender gap in microenterprise performance is not due to a gap in aptitude. Instead, low average returns of female-run enterprises are observed because women's capital is invested into their husbands' enterprises rather than their own. When women are the sole household enterprise operator, capital shocks lead to large increases in profits. Household-level income gains are equivalent regardless of the grant or loan recipient's gender.
    Date: 2017–04
  2. By: Farah Said; Mahreen Mahmud; Giovanna d’Adda; Azam Chaudhry
    Abstract: We investigate the role of social and intra-household norms in women’s decision to hide money from their male household members through artefactual field experiments with microfinance clients receiving start-up loans and training as part of a RCT in Pakistan. We find that hiding is positively correlated with women’s sense of entitlement over their own earnings and with their male household members’ lack of respect over their earned property, and negatively correlated with their agency within the household. Finally, we find that this agency can be influenced by experiences outside the household, namely agency is positively impacted by being treated within the RCT.
    Date: 2017
  3. By: Hill, Ruth Vargas; Kumar, Neha; Magnan, Nicholas; Makhija, Simrin; de Nicola, Francesca; Spielman, David J.; Ward, Patrick S.
    Abstract: It is widely acknowledged that unmitigated risks provide a disincentive for otherwise optimal investments in modern farm inputs. Index insurance provides a means for managing risk without the burdens of asymmetric information and high transaction costs that plague traditional indemnity-based crop insurance programs. Yet many index insurance programs that have been piloted around the world have met with rather limited success, so the potential for insurance to foster more intensive agricultural production has yet to be realized. This study assesses both the demand for and the effectiveness of an innovative index insurance product designed to help smallholder farmers in Bangladesh manage risk to crop yields and the increased production costs associated with drought. Villages were randomized into either an insurance treatment or a comparison group, and discounts and rebates were randomly allocated across treatment villages to encourage insurance take-up and to allow for the estimation of the price elasticity of insurance demand. Among those offered insurance, we find insurance demand to be moderately price elastic, with discounts significantly more successful in stimulating demand than rebates. Farmers who are highly risk averse or sensitive to basis risk prefer a rebate to a discount, suggesting that the rebate may partially offset some of the implicit costs associated with insurance contract nonperformance. Having insurance yields both ex ante risk management effects and ex post income effects on agricultural input use. The risk management effects lead to increased expenditures on inputs during the aman rice-growing season, including expenditures for risky inputs such as fertilizers, as well as those for irrigation and pesticides. The income effects lead to increased seed expenditures during the boro rice-growing season, which may signal insured farmers’ higher rates of seed replacement, which broadens their access to technological improvements embodied in newer seeds as well as enhancing the genetic purity of cultivated seeds.
    Keywords: agriculture; investment; risk management; insurance; risk; weather hazards; drought; weather; climate; price elasticities; price formation; inputs; farm inputs; fertilizers; irrigation; pesticides; crops; yields; smallholders, index insurance; risk and uncertainty, O12 Microeconomic Analyses of Economic Development; O13 Economic Development: Agriculture, Natural Resources, Energy, Environment, Other Primary Product; Q12 Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets; G22 Insurance, Insurance Companies, Actuarial Studies,
    Date: 2017

This nep-mfd issue is ©2017 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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