nep-mfd New Economics Papers
on Microfinance
Issue of 2018‒04‒16
five papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Preference Driven Intra-household Conflict and Commitment Savings Strategies By Pavel Luengas-Sierra
  2. Determinants of Loans’ Growth in Microfinance Institutions: The Case of Sub-Saharan Africa and Comparisons with other Regions of the World By Eliud Moyi; Eftychia Nikolaidou
  3. The capability approach as a framework for assessing the role of microcredit in resource conversion: the case of rural households in the Madagascar highlands By Sandrine Michel; Holimalala Randriamanampisoa
  4. Microfinance development in Armenia: Sectoral characteristics and problems By Knar Khachatryan; Emma Avetisyan
  5. When Salespeople Manage Customer Relationships: Multidimensional Incentives and Private Information By Minkyung Kim; K. Sudhir; Kosuke Uetake; Rodrigo Canales

  1. By: Pavel Luengas-Sierra
    Abstract: I analyze whether intra-household conflict induces females to use commitment savings strategies. A model of participation in Rotating Savings and Credit Associations, an informal commitment savings strategy, predicts females with mid-bargaining power levels will participate to protect their savings from partner’s claims. In the model, preference heterogeneity for an indivisible good drives conflict and the couple’s decision making is efficient by following the collective framework. I use the 2005 and 2009 waves of a nationally representative panel survey from Mexico to test the model. I exploit the difference-indifference effect the 2007 Great Recession had on couples in which females but not males worked in manufactures prior the shock. It instruments a labor-earnings based female bargaining power measure. I find in instrumented first-differences estimations that, compared to other females in couple, females with mid-bargaining power levels are more likely to participate. Results are robust to accounting for couple’s heterogeneity in discount factors as additional conflict source. But when females are either more or less patient than their partner, female participation doubles. Results are robust to whether female’s partners participate. But when they do, female participation increases fourfold. Results hold for old couples, those that had been together longer, but not for young couples; suggesting old but not young couples reach efficient allocations.
    Date: 2018
  2. By: Eliud Moyi (School of Economics, University of Cape Town); Eftychia Nikolaidou (School of Economics, University of Cape Town)
    Abstract: The purpose of this study is to identify factors that explain variations in loan growth in sub-Saharan African microfinance institutions and, if such factors exist, to investigate whether they predict loan growth differences in other regions.To address these objectives, the study merges data from 745 microfinance institutions with macro-institutional data from 37 countriesin Sub-Saharan Africa. The data is corrected for dynamic panel bias by applying a modelling strategy that accommodates endogeneity through the two-step system generalised method of moments estimators. The results show that loan growth is higher in microfinance institutions that are facing lower risk exposure, those that are having higher capital asset ratios and among those that are already having high loan growth. Furthermore, results indicate that loan growth is higher in countries with better economic prospects, and in those with sound private sector policies and regulations. Against expectations, loan growth is faster in countries with poor legal rights of borrowers and lenders. Results also suggest that variables that enter the Sub-Saharan Africa regressions significantly do not enter the regressions for the other regions with the same effect.These results point to the need for interventions that mainstream regional and even country-level heterogeneity.
    Date: 2018
  3. By: Sandrine Michel (ART-Dev - Acteurs, Ressources et Territoires dans le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - UPVD - Université de Perpignan Via Domitia - UM3 - Université Paul-Valéry - Montpellier 3 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique); Holimalala Randriamanampisoa
    Abstract: This article applies the capabilities approach in order to analyse microcredit as a tool for resource conversion permitting poor households to take advantage of latent opportunities. This approach calls for linking microcredit with the choices of the poor themselves. A sample of 290 rural households from the Madagascar highlands has been surveyed two consecutive years. To characterize the dimensions of poverty based on social practices of the poor and to inform about the most relevant dimensions available for a conversion process, data have been processed by a factor analysis. A hierarchical classification then permits the distribution of the households over three capabilities levels. Finally, an ordered multinomial logit brings out how microcredit influences the likelihood that a household receiving such a loan will reach a higher capability level. The main findings indicate that the microcredit represents a robust means to obtain a higher level of capability regardless the starting situation. Moreover, when the process of borrowing endures, poor households enter into a learning process which increases the effect of microcredit. Regardless of the gender of the household head, microcredit increases the probability to reach an enhanced level of capability, except for the poorest household headed by a woman. The education of the head of household improves the effect of microcredit only if the productive system implemented needs competences related to the educational attainment. JEL classification: O12, I32, G21
    Keywords: Resource conversion process,Multidimensional poverty,Capability approach,Microcredit
    Date: 2017–08–30
  4. By: Knar Khachatryan (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur); Emma Avetisyan (Audencia Business School)
    Abstract: The heavy-handed regulation enforced a commercialization process and as a result pushed microfinance institutions towards a commercial logic. This commercial shift, in its turn, diminished the importance of the social component.
    Date: 2017–11
  5. By: Minkyung Kim (School of Management, Yale University); K. Sudhir (Cowles Foundation & School of Management, Yale University); Kosuke Uetake (School of Management, Yale University); Rodrigo Canales (School of Management, Yale University)
    Abstract: At many firms, incentivized salespeople with private information about customers are responsible for CRM. While incentives motivate sales performance, private information can induce moral hazard by salespeople to gain compensation at the expense of the firm. We investigate the sales performance–moral hazard tradeoff in response to multidimensional performance (acquisition and maintenance) incentives in the presence of private information. Using unique panel data on customer loan acquisition and repayments linked to salespeople from a microfinance bank, we detect evidence of salesperson private information. Acquisition incentives induce salesperson moral hazard leading to adverse customer selection, but maintenance incentives moderate it as salespeople recognize the negative effects of acquiring low-quality customers on future payoffs. Critically, without the moderating effect of maintenance incentives, adverse selection effect of acquisition incentives overwhelms the sales enhancing effects, clarifying the importance of multidimensional incentives for CRM. Reducing private information (through job transfers) hurts customer maintenance, but has greater impact on productivity by moderating adverse selection at acquisition. The paper also contributes to the recent literature on detecting and disentangling customer adverse selection and customer moral hazard (defaults) with a new identification strategy that exploits the time-varying effects of salesperson incentives.
    Keywords: When Salespeople Manage Customer Relationships: Multidimensional Incentives and Private Information
    Date: 2018–02

This nep-mfd issue is ©2018 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.