nep-mfd New Economics Papers
on Microfinance
Issue of 2019‒01‒14
six papers chosen by
Olivier Dagnelie
Université de Caen

  1. Too Many Cooks Spoil the Broth: The Conflicting Impacts of Subsidies and Deposits on the Cost-Efficiency of Microfinance Institutions By Anastasia Cozarenco; Valentina Hartarska; Ariane Szafarz
  2. Micro-insurance at Scale: Evidence on Impact from Rwanda By Anuj Pratap Singh
  3. Islamic Microfinance Experience in a Secular State: Case of Benin By Seck, Ousmane
  4. On the Trade-off Between Size, Sustainability and Social Outcome of the Microfinance Institutions: A Two Stages Bootstrapped DEA Approach By Mohamed Mekki Ben Jemaa; Sahar Obey
  5. Integrating Microfinance and Cooperatives for Jobs Creation in Tunisia By Abdelkafi, Rami; Nabi, Mahmoud Sami
  6. Developing a Model for Corporate Governance and Conflict of Interest Deterrence in Shari’ahbased Cooperatives By Shafii, Zurina; Obaidullah, Mohamed; Samad, Rose Ruziana; Yunanda, Rochania Ayu

  1. By: Anastasia Cozarenco; Valentina Hartarska; Ariane Szafarz
    Abstract: The costs and benefits of subsidized microfinance are still a controversial topic. We evaluate how subsidies affect the cost-efficiency of microfinance institutions (MFIs). At the same time, we account for endogenous self-selection into the business models of credit-only versus credit-plus-deposit MFIs. Our findings draw a contrasting picture. First, they suggest that unsubsidized credit-plus-deposit MFIs have achieved optimal capacity and therefore constitute the most cost-efficient group of institutions in our sample. Second, the unsubsidized credit-only MFIs are the farthest away from their minimum cost. Between the two polar cases, there are subsidized institutions, among which the credit-only ones are closer to optimal capacity. Our results reveal the redundancy between subsidization and deposit-taking in microfinance. In conclusion, combining funds from donors and depositors tends to harm cost-efficiency.
    Keywords: Microfinance; Cost efficiency; Scale economies; Subsidies; Deposit accounts
    JEL: O14 D24 G21 O16 F35
    Date: 2019–01–07
  2. By: Anuj Pratap Singh (Department of Economics, Trinity College Dublin)
    Abstract: Health insurance protects households from costly health shocks, and by encouraging health seeking behaviour, can safeguard earnings and assets. We confirm that micro-insurance serves as a social safety net by increasing health seeking behavior and reducing out of pocket medical expenses. We find evidence for complementarity between health micro-insurance membership and formal savings activity, confirming positive spillovers between formal financial products. We find substitution between health micro-insurance and informal financial services, where microinsurance crowds out both informal savings and informal borrowings. In obtaining these results, we use instrument variable estimation to correct for the issue of self-selection, an issue that undermines many previous studies. The study uses nationally representative cross-sectional data from Rwandan Integrated Living Conditions Survey conducted in 2005-06 and 2010-11.
    Keywords: Micro-insurance, CBHI, Health Service Utilisation, OOP Expenses, Hardship Financing, Financial Status
    JEL: I13 I31 O16 D81 G22
    Date: 2018–10
  3. By: Seck, Ousmane (The Islamic Research and Teaching Institute (IRTI))
    Abstract: Islamic finance has gained interest in Muslim as well as non-Muslim countries as financial markets are trying to attract capital from investors in search of investment opportunities in accordance with Islamic principles. While the industry is growing on fertile grounds in countries such as Malaysia, the United Arab Emirates, Saudi Arabia, a mix of other countries such as the United Kingdom, Luxemburg, Hong Kong, Senegal, South Africa etc., have tapped into that market by issuing Sukuk or Islamic bonds, although their regulatory frameworks are not designed for their specificities. In 2010, Benin, a former French colony, which inherited its secular constitution has introduced Islamic microfinance without modifying its regulatory framework. The objectives in this paper are three-fold: review the microfinance policy, the regulatory framework and its relevance to the effective functioning of Islamic microfinance. The paper also presents the experience of Benin in Islamic microfinance, and the evaluation of its impact in a policy environment characterized by secularism that implies exclusion of religious specificities. Using a combination of evaluation studies, survey of stakeholders and experts in Islamic microfinance in Benin, and complementary interviews, this research finds that the impact of Islamic microfinance is not separable from the impact of the overall microfinance sector in which it is blended. The impact appears to be positive in terms of contributing to the improvement of living conditions, and loosening the financing constraints on households and small and medium enterprises through additional financial resources.
    Keywords: Islamic microfinance; Poverty alleviation; Financial Inclusion; SMEs; Africa
    Date: 2017–05–30
  4. By: Mohamed Mekki Ben Jemaa (University of Carthage); Sahar Obey
    Abstract: The paper aims at measuring the performance of MFIs in MENA region with reference to all the MFIs around the world. The efficiency scores are derived using the nonparametric Data Envelopment Analysis (DEA) technique in order to calculate both Pure Technical Efficiency and Scale Efficiency. Bootstrapping is used in order to correct the Efficiency scores from their bias and to retrieve the correct inference when it comes to perform the second stage estimation. Data used are a non-balanced panel of 1179 MFIs from 103 countries covering the period from 2006 to 2012. The main aim of taking all the operating MFIs, for which, data are available is to produce a sound benchmark and evaluate the real performance of the MFIs in the MENA region compared to the rest of the world. In a second stage, a double censored multilevel regression is performed to assess the determinants of scale efficiency in the MFIs. The results show, among others, that financial performances enhance the possibility to operate under the optimal scale weather the MFI is too small or too big while social performances are reached more by too large MFIs.
    Date: 2018–10–28
  5. By: Abdelkafi, Rami (The Islamic Research and Teaching Institute (IRTI)); Nabi, Mahmoud Sami (The Islamic Research and Teaching Institute (IRTI))
    Abstract: Although Tunisia has completed its political transition toward democracy, its economy remains fragile and faces huge challenges. Professional insertion of young people in the labor market is among the top economic priorities of the country. Sound public policies with the objective of creating employment opportunities on a short-term horizon have to support the implementation of structural reforms aiming at boosting the private sector, improving the labor market and restructuring the education system. This paper is a contribution to the discussions on short-term solutions to the youth unemployment, which may accompany structural policies over the long term. We propose a jobs creation program for the youth including several components. The implementation of the proposed program assigns an important role to the government in terms of training, incentives to involve the private sector and in terms of funding. The originality of the proposed program is in linking microfinance to cooperative structure; two efficient tools against social exclusion and which are underutilized in jobs creation in Tunisia. The financial participation of the government is proposed according to a specific funding mechanism of Islamic microfinance: decreasing partnership. This mode of financing allows for a full public financing of the cooperatives' capital with an exit strategy after several years, incentivizing the cooperators to generate sufficient profits to buy the government shares
    Keywords: Microfinance; Cooperatives; Employment; Tunisia
    Date: 2017–03–16
  6. By: Shafii, Zurina (Universiti Sains Islam Malaysia); Obaidullah, Mohamed (The Islamic Research and Teaching Institute (IRTI)); Samad, Rose Ruziana (Universiti Sains Islam Malaysia); Yunanda, Rochania Ayu (Universiti Sains Islam Malaysia)
    Abstract: Different from a conventional cooperative, a Shari’ah-based cooperative observes Shari’ah principles. As these cooperatives offers Islamic financial products and involves in Shari’ah compliant investment, they are bound to observe Shari’ah governance structure, transparency, disclosure of information and strict compliance with Shari’ah principles. Compliance with the Shari’ah principles will strengthen public confidence in the credibility of the system of the Islamic Muamalat particularly in the cooperative movement. Due to the infancy of Shari’ahbased cooperative industry that needs for proper governance measures, this paper aims to discuss corporate governance in Shari’ah-based cooperatives in the attempt to propose a model for resolving stakeholders’ conflicts of interest
    Keywords: Microfinance; Cooperatives; Shari’ah; Corporate Governance
    Date: 2017–07–11

This nep-mfd issue is ©2019 by 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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