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on Microfinance |
| By: | Carolina Laureti; Alain De Janvry; Elisabeth Sadoulet |
| Abstract: | Well-functioning financial services are key for consumption smoothing and to take advantage of investment opportunities. Even though poor households badly need financial services for their day-to-day money management, a commonly held view is that they are ‘too poor’ to save and to repay loans with flexible terms. This paper explores whether this view holds true for two specific flexible financial products, namely passbook savings accounts and credit lines. Analyzing the daily transactions and balances in more than 10,000 SafeSave accounts—a microfinance institution based in Dhaka, Bangladesh—over nine years (2004-2012) shows that clients make extensive use of their flexible savings-and-loan accounts to accommodate changing availability of and needs for liquidity in the face of three kinds of events: paydays, Islamic festivals (Ramadan, Eid al-Fitr, and Eid al-Adha), and political protests (hartals). Cash-in (savings deposit and loan repayment) flexibility is used to cope with both positive (paydays) and negative shocks (Islamic festivals and political protests); cash-out (withdrawal and loan taken) flexibility is used if the negative shock is anticipated well in advance (as in the case of Islamic festivals). We show that, while interest rates on loans are higher than in competing MFIs, repayment rates are comparably high. We also show that SafeSave is covering its operational costs, indicating that this type of flexible financial services can be offered to the poor in a sustainable fashion. Overall, analysis of the SafeSave experience shows that flexible financial products are much in demand by the poor and that they can be profitable for the microfinance institution that offers them. |
| Keywords: | Bangladesh; liquidity; household finance; contract design |
| JEL: | D14 G21 O12 |
| Date: | 2017–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/262437&r=mfd |
| By: | Jeremy Clark (University of Canterbury); John Spraggon |
| Abstract: | This paper reports the results of a micro finance lab experiment that seeks first to replicate the difference in loan repayment rates between groups composed of high vs. low risk borrowers, and then to test a mechanism we propose to make micro finance work better for high risk borrowers. The mechanism involves revenue sharing among members of a borrowing group, above and beyond usual repayment bailouts that successful members can choose to make on behalf of unsuccessful members. Revenue sharing makes repayment of the total group loan optimal under more business outcome states, and thus increases the expected benefit of repaying the current loan to qualify for future ones. We compare loan repayment rates between high and low risk borrowing groups, with and without the option of entering into binding ex ante agreements to revenue share. For high risk borrowers, we further test the effect of allowing them to renege on revenue sharing agreements once individual business outcomes are known. We are able to capture the result that loan repayment rates are lower for higher risk borrowers than for lower risk borrowers. We also find that introducing the option of binding revenue sharing agreements modestly but significantly increases loan repayment rates. Most of this gain is lost, however, when successful individuals can renege on commitments to revenue share after learning individual business outcomes. |
| Keywords: | Micro finance; Revenue sharing; Profit sharing; Risk |
| JEL: | G21 O16 O17 O43 |
| Date: | 2017–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:17/20&r=mfd |
| By: | Mathilde Maîtrot; Miguel Niño-Zarazúa |
| Abstract: | Over the last 35 years, microfinance has been generally regarded as an effective policy tool in the fight against poverty. Yet, the question of whether access to credit leads to poverty reduction and improved wellbeing remains open. To address this question, we conduct a systematic review of the quantitative literature of microfinance’s impacts in the developing world, and develop a theory of change that links inputs to impacts on several welfare outcomes. Overall, we find that the limited comparability of outcomes and the heterogeneity of microfinance-lending technologies, together with a considerable variation in socio-economic conditions and contexts in which impact studies have been conducted, render the interpretation and generalization of findings intricate. Our results indicate that, at best, microfinance induces short-term dynamism in the financial life of the poor; however, we do not find compelling evidence that this dynamism leads to increases in income, consumption, human capital and assets, and, ultimately, a reduction in poverty |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2017-190&r=mfd |
| By: | Diego A. Vera-Cossio (University of California - San Diego) |
| Abstract: | Delegating the allocation of public resources to community members is an increasingly popular form of delivering development programs and are associated with a tradeoff between improved information about potential benef ciaries and favoritism towards local elites. Unlike targeting cash transfers to the poor, the optimal targeting of credit is a more complex problem involving issues of productivity, repayment, and market responses: This paper analyzes this problem using a large-scale lending program, the Thai Million Baht Credit Fund, which decentralizes the allocation of loans to an elected group of community members, and provides three main results. First, exploiting a long and detailed panel, I recover pre-program structural estimates of household total factor productivity and f nd that resources from the program were not allocated to high-productivity, poor households, which is inconsistent with poverty and productive eff ciency as targeting criteria. Second, using socioeconomic networks data, I show that actual targeting is strongly driven by connections to village elites and is related to lower program profitability, which suggests favoritism as a reason for mistargeting. Finally, I exploit quasi-experimental variation in the rollout of the program and uncover evidence that, in general equilibrium, informal credit markets compensate for targeting distortions by redirecting credit towards unconnected households, albeit at higher interest rates than those provided by the program. The results highlight the limitations of community-driven approaches to program delivery and the role of markets in attenuating potential targeting errors. |
| Keywords: | credit, social networks, misallocation, targeting |
| JEL: | D14 G21 O12 O16 O17 L14 Z13 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:adv:wpaper:201707&r=mfd |
| By: | Vincent Somville; Lore Vandewalle |
| Abstract: | Access to formal banking is spreading across the world. Obtaining a bank account may transform how people manage their finances, and affect their savings and consumption. We report from a field experiment that randomly provides access to a bank account to a representative sample of villagers in rural India. The treated keep relatively important savings on their account, but reduce their other savings by a similar amount. Their household’s overall savings and expenditures do not change. We identify several barriers that may constraint total savings. |
| Keywords: | banking bank accounts villages rural savings |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:chm:wpaper:wp2017-1&r=mfd |
| By: | Lecuona, Ramón |
| Abstract: | A raíz de la crisis financiera internacional de 2008, la banca de desarrollo en México empezó a desempeñar un papel más importante; en especial, después de la reforma financiera de 2014, mediante la cual se otorgó mayor relevancia a las pequeñas y medianas empresas (pymes). Entre los instrumentos de fomento utilizados, destacan el factoraje y las garantías. En el caso del factoraje, se favoreció en primer lugar a proveedores de grandes empresas y, posteriormente, del sector público. Por su parte, las garantías han sido las grandes impulsoras del financiamiento de fomento durante los últimos años. Así, se ha atenuado la incertidumbre que surge de la información asimétrica, un problema especialmente grave en el caso de las pymes, y se ha contribuido a mejorar el acceso al crédito de empresas que de otra manera no podrían acceder a él, así como a reducir las tasas de interés a las que se recibe el financiamiento y a aumentar los montos concedidos. |
| Keywords: | PEQUEÑAS EMPRESAS, EMPRESAS MEDIANAS, FINANCIAMIENTO DE EMPRESAS, BANCOS DE DESARROLLO, CREDITO, POLITICA CREDITICIA, ESTADISTICAS BANCARIAS, SMALL ENTERPRISES, MEDIUM ENTERPRISES, BUSINESS FINANCING, DEVELOPMENT BANKS, CREDIT, CREDIT POLICY, BANKING STATISTICS |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col022:42504&r=mfd |
| By: | Sancho, Francisco |
| Abstract: | Este estudio hace un análisis de la forma en que en Costa Rica se ha encarado la necesidad de propiciar la inclusión financiera de la pequeña y mediana empresa (Pyme). La experiencia de este país ofrece algunas particularidades en el manejo del concepto de Pyme, ya que sus políticas también incorporan a la microempresa y al denominado sector emprendedor, que está constituido por el trabajador independiente que ofrece productos o servicios similar a las empresas Pyme, pero no está organizado en algún tipo de empresa, y estadísticamente es parte del trabajador independiente y del sector informal. |
| Keywords: | PEQUEÑAS EMPRESAS, EMPRESAS MEDIANAS, FINANCIAMIENTO DE EMPRESAS, BANCOS DE DESARROLLO, BANCOS COMERCIALES, CREDITO, POLITICA CREDITICIA, ESTADISTICAS BANCARIAS, SMALL ENTERPRISES, MEDIUM ENTERPRISES, BUSINESS FINANCING, DEVELOPMENT BANKS, COMMERCIAL BANKS, CREDIT, CREDIT POLICY, BANKING STATISTICS |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col022:42509&r=mfd |