nep-mfd New Economics Papers
on Microfinance
Issue of 2019‒07‒08
three papers chosen by
Olivier Dagnelie
Université de Caen

  1. Demand and supply of infrequent payments as a commitment device: evidence from Kenya By Casaburi, Lorenzo; Macchiavello, Rocco
  2. Access to Banking, Savings and Consumption Smoothing in Rural India By Vincent Somville; Lore Vandewalle
  3. Can Insurance Payouts Prevent a Poverty Trap? Evidence from Randomized Experiments in Northern Kenya By Yuma Noritomo; Kazushi Takahashi

  1. By: Casaburi, Lorenzo; Macchiavello, Rocco
    Abstract: Despite extensive evidence that preferences are often time-inconsistent, there is only scarce evidence of willingness to pay for commitment. Infrequent payments for frequently provided goods and services are a common feature of many markets and they may naturally provide commitment to save for lumpy expenses. Multiple experiments in the Kenyan dairy sector show that: (i) farmers are willing to incur sizable costs to receive infrequent payments as a commitment device, (ii) poor contract enforcement, however, limits competition among buyers in the supply of infrequent payments. We then present a model of demand and supply of infrequent payments and test its additional predictions.
    JEL: K12 L66 O13 O17 Q12 Q13
    Date: 2019–02–01
  2. By: Vincent Somville (Chr. Michelsen Institute, Bergen); Lore Vandewalle (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: Access to formal banking is increasing across the world and may transform how people manage their finances. 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 respondents save actively into the account and their individual savings increase. There is, however, no signi cant impact on mean household savings nor on average expenditures, income, loans or transfers. Based on weekly data from financial diaries, we show the control households partially smooth consumption through transfers received from others. The treated households smooth consumption (and nutrition) better than the control households, thanks to pro-cyclical saving on the account. The latter result provides an important new insight into the role of banking in low and middle-income countries.
    JEL: C93 D14 G21 O16 O12
    Date: 2019–06–20
  3. By: Yuma Noritomo (Graduate School of Economics, The University of Tokyo); Kazushi Takahashi (National Graduate Institute for Policy Studies, Tokyo, Japan)
    Abstract: Index-based insurance can have welfare-enhancing effects through two pathways: by mitigating weather-related shocks through payouts and by inducing policyholders to take greater yet more profitable risks. Most studies fail to distinguish between these two. Thus, we know little about which effects dominate and their long-term welfare implications. Using a random distribution of discount coupons and drought events that trigger payouts as exogenous variations, this study aims to identify both the ex ante risk-management and ex post payout effects of index insurance in a pastoral-dominant society of northern Kenya, where the presence of asset-based poverty traps, represented by bifurcated herd-size dynamics, has been established in the literature. We find the following: (1) Both risk-management and payout effects contribute to reducing the probability of distress sales of livestock; (2) payout effects also lead to a reduced slaughter of livestock; (3) while payout effects remain robust in a subsample of poorer households below the poverty trap threshold, riskmanagement effects do not. Overall, our results suggest that insurance payouts assist people in escaping from poverty traps more effectively than do behavioural changes accompanied by insurance purchases.
    Date: 2019–06

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.
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.