nep-mfd New Economics Papers
on Microfinance
Issue of 2019‒02‒18
three papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Are the poor so present-biased? By Rachel Cassidy
  2. Friends or foes? Mobile money interaction with formal and informal finance By Serge Ky; Clovis Rugemintwari; Alain Sauviat
  3. Complémentarité Banque islamique du Sénégal/institutions de microfinance : un modèle de financement inclusif et durable des PME sénégalaises By SECK, Massamba Souleymane

  1. By: Rachel Cassidy (Institute for Fiscal Studies)
    Abstract: Estimates of "present-bias" among the poor may be exaggerated if poor individuals are credit-constrained and expect to have greater liquidity in the future. I conduct an experiment in rural Pakistan which provides causal evidence of this effect. I use windfalls to generate fully exogenous variation in subjects' liquidity constraints. I show that fluctuating liquidity has a signifi cant and sizeable effect on measures of time-inconsistency, which does not operate via cognitive functioning. Importantly, I establish that the causation runs from tighter liquidity constraints to appearing "present-biased" rather than truly present-biased individuals making choices which lead to tighter liquidity constraints.
    Date: 2018–10–17
  2. By: Serge Ky (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges); Clovis Rugemintwari (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges); Alain Sauviat (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges)
    Abstract: Access to and usage of formal financial services are important determinants of financial inclusion and yet, informal mechanisms still dominate the financial system in developing countries. In this context, the purpose of our paper is to investigate how the growing effort to harness mobile money may play a role to overcome barriers that prevent people to access formal financial services. Using a unique dataset obtained from an individual-level survey conducted in Burkina Faso, we explore the interplay between mobile money innovation as a deposit instrument and pre-existing formal and informal financial instruments. Our main findings show that, overall, the use of mobile money is not associated with deposits using formal and/or informal financial instruments. However, a closer investigation reveals suggestive evidence that it increases the probability of participants in informal mechanisms to make deposits in a bank account. Moreover, considering disadvantaged groups, we find for women, irregular income and less educated individuals that mobile money may increase their probability to make deposits in a bank and/or credit union accounts. Given the low access to formal financial services in developing countries, our findings taken together indicate how the increasing adoption of mobile money may act as a stepping-stone towards financial inclusion.
    Keywords: developing countries †,financial inclusion,mobile money,formal finance,informal finance,deposit behavior
    Date: 2019–02–06
  3. By: SECK, Massamba Souleymane
    Abstract: The purpose of this article is to analyze the complementary relationship between the Islamic Bank of Senegal (BIS) and microfinance institutions (MFIs) and their contributions to the inclusive and sustainable financing of Senegalese SMEs. Indeed, in Senegal, the SMEs that make up almost the entire productive sector, 99.8% of the economic fabric, 3450.3 billion FCFA of turnover and more than 45% of the active population in 2016 (ANSD / RGE, 2016), have great difficulty in obtaining external and formal financing. The Senegalese financial system, which is predominantly dominated by banks and MFIs, gives SMEs a very limited chance to access financing. This is because the financing needs of SMEs are too important for MFIs but too low for banks to respond optimally to their needs. In addition, the banking sector, which has sufficient liquidity, is struggling to obtain financing mechanisms that are appropriate to the needs of SMEs. On the side of MFIs that have the appropriate financing tools, they are unable to find significant resources to meet the demand for funding of large SMEs. In this momentum, the complementarity between Islamic banking and MFIs seems to be the most appropriate and effective solution to address the financial difficulties of SMEs. Indeed, the research hypothesis of this article is that the refinancing partnership between these two financial structures favorably affects the financing of SMEs. Our panel data estimates confirm our main research hypothesis because they show positively and decisively the role of the complementarity relationship between these two financial institutions on the financing of SMEs.
    Keywords: Complementarity, Islamic banking of Senegal, microfinance institutions, SMEs, inclusive and sustainable finance, panel.
    JEL: C23 G14 G21 O17
    Date: 2019–02

This nep-mfd issue is ©2019 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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