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on Microfinance |
| By: | Malikov, Emir; Hartarska, Valentina |
| Abstract: | Scope economies resulting from the joint offering of loans and savings accounts (as opposed to loans only) are customarily invoked to promote the transformation of credit-only microfinance institutions (MFIs) into integrated loans-and-savings entities. To ensure robust inference, we estimate scope economies for the microfinance industry using a novel approach which, among its other advantages, accommodates inherent heterogeneity across loans-only and loans-and-savings MFIs as well as controls for endogenous self-selection of institutions into the either type. For analysis, we use a large 2004--2014 Mixmarket dataset. Unlike earlier studies, we do not find prevalent scope economies in the microfinance industry. We find that the median degree of scope economies is statistically indistinguishable from zero and that scope economies are significantly positive for less than a half of loans-and-savings MFIs. For a non-trivial 14% of institutions, the empirical evidence suggests the existence of significantly negative diseconomies of scope indicating that the separate production of loans and savings accounts actually has the potential to reduce an MFI's costs. We also find that the failure to account for endogenous selectivity dramatically overestimates the degree of scope economies resulting in the failure to detect scope diseconomies among MFIs. Thus, our findings call for caution when invoking scope economies as a blanket justification for universal expansion of the scope of financial operations by MFIs. Instead, promoting integrated loans-and-savings MFIs may be justifiable as a means to meeting the needs of the poor rather than as a way for the industry to save costs. |
| Keywords: | microfinance institutions, scope economies, endogenous selection, financial intermediation, savings and lending |
| JEL: | G15 G21 L33 O16 |
| Date: | 2018–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:87450&r=mfd |
| By: | Lakdawala, Leah (Michigan State University, Department of Economics) |
| Abstract: | This paper seeks to understand household business decisions in response to increased credit access in an environment with multiple market failures. A simple model suggests that households at certain wealth thresholds might be able to overcome the fixed costs of entering entrepreneurship when they have increased access to credit. In the presence of labor market imperfections however, these same households may also be more likely to employ child labor. I test these predictions using household- and child-level panel data from Thailand. To isolate the causal impacts of household borrowing, I exploit the exogenous timing and institutional features of the Million Baht Program, one of the largest government initiatives to increase household access to credit in the world. I find that, consistent with the model, expanded access to credit raises entry into entrepreneurship for households in specific wealth groups while simultaneously increasing the use of child labor in these households. The results suggest that through the avenue of encouraging entrepreneurial activity, expanding credit access may have unintended consequences for the supply of child labor. |
| Keywords: | Credit; Microcredit; Entrepreneurship; Child Labor; Child Work; Schooling |
| JEL: | D13 J22 O12 O15 |
| Date: | 2018–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:ris:msuecw:2018_004&r=mfd |