nep-mfd New Economics Papers
on Microfinance
Issue of 2019‒12‒23
six papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. The Impact of Mobile Money on Long-Term Poverty: Evidence from Bangladesh By A.T.M. Hasibul, Islam; Syed Abul, Basher; A.K. Enamul, Haque
  2. Determinants of financing of agricultural microenterprises by microfinance institutions: the case of Burundi By Théogène Nsengiyumva; Célestin Mayoukou
  3. Inside Productivity of Microcredit in Bangladesh: A surgical Analysis By Alam, Md. Mahmudul; Molla, Rafiqul Islam
  4. The limitations of microcredit for promoting microenterprises in Bangladesh By Alam, Md. Mahmudul; Molla, Rafiqul Islam
  5. Microcredit - A More Credible Social than Economic Program in Bangladesh By Alam, Md. Mahmudul; Molla, Rafiqul Islam
  6. Why do defaults affect behavior? Experimental evidence from Afghanistan By Callen, Mike; Blumenstock, Joshua; Ghani, Tarek

  1. By: A.T.M. Hasibul, Islam; Syed Abul, Basher; A.K. Enamul, Haque
    Abstract: Mobile money has become a lifeline for millions of poor people who have limited access to a formal banking system. It encompasses a wide range of benefits such as women’s empowerment, risk sharing, improved labor market outcomes and reductions in poverty. In this paper, we ask whether mobile money can help lift people out of poverty. Previous studies have addressed this question by using microanalyses of field experiments or longitudinal data on rural households, whereas we use district-level data to reevaluate the mobile money–poverty nexus. In particular, we study the impact of mobile money on district-level poverty in Bangladesh over the period 2010–2016. Our study finds that every 1 billion Taka (approximately US$ 11.76 million) increase in mobile money transactions via the bKash system leads to a 0.48% reduction in the poverty rate in Bangladesh. The marginal impact ranges from 0.27 to 0.48 percentage points across five poverty quintiles, implying a reduction of poverty rates between 0.9 and 1.5 percentage points compared with the base poverty rate of 31.5% in 2010. The findings suggest that mobile money has been successful in fostering various poverty reduction initiatives and that targeted policy prescriptions can be devised to lift up poorer societies that are still outside the purview of mobile financial services. To further increase mobile money use, the government could use its own infrastructure to enhance mobile agent density in the poorest sectors of society.
    Keywords: Mobile money, poverty, bKash.
    JEL: G20 I32 L96 O16
    Date: 2019–12–09
  2. By: Théogène Nsengiyumva (CREAM - Centre de Recherche en Economie Appliquée à la Mondialisation - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université); Célestin Mayoukou (CREAM - Centre de Recherche en Economie Appliquée à la Mondialisation - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université)
    Abstract: Cette étude a comme objectif, d'identifier les déterminants du faible financement des microentreprises agricoles par les IMF au Burundi. Les données utilisées sont issues des 6IMF du Burundi. A l'aide du modèle économétrique probit, les résultats révèlent que plusieurs facteurs empêchent les IMF à financer plus efficacement les microentreprises agricoles. C'est le cas du manque et/ou faible qualité des garanties de la part des MPE, les besoins financiers exprimés par l'exploitant agricoles, la faible organisation des exploitants agricoles en groupement solidaire. De même la nature de l'activité agricole à financer constitue également un facteur déterminant pour le financement. Ainsi la restructuration des fonds de garantie en général et ceux des micro entrepreneurs agricoles en particulier, l'organisation des micro entrepreneurs dans des groupements associatifs inciteraient plus les IMF à contribuer plus efficacement au financement des micro-activités agricoles entrepreneuriales. Abstarct This study has as objective, to identify the determinants of the selectivity of the agricultural entrepreneurial microcredits by MFIs in Burundi. The data used are from the 6MFIs of Burundi. The econometric model using logit, the results show that several factors prevent the MFIs to finance more effectively the agricultural entrepreneurial Small-activities. For example the lack of guarantees on the part of MEPs, the financial needs expressed by the farm operator, the weak organization of farmers in solidarity group. In addition to these factors, forcing the MFIs to contribute more intensely to the financing of the agricultural entrepreneurial Small-activities, the nature of agricultural activity to finance is also a determining factor for the funding. In this way, restructuring of guarantee funds and those of the micro farming entrepreneurs in particular, the Organization of micro entrepreneurs in associative groupings would encourage more MFIs to contribute more effectively to the financing of entrepreneurial farming Small-activities.
    Keywords: Microfinance,Microentreprises agricoles,entrepreneuriat,finance,contraintes,Burundi Keywords: Microfinance,agricultural entrepreneurial Small-activities,entrepreneurship,forced,Burundi 2
    Date: 2018–11
  3. By: Alam, Md. Mahmudul (Universiti Utara Malaysia); Molla, Rafiqul Islam
    Abstract: Microcredit typically refers to petty collateral-free credits given to groups of poor members in the society for their socioeconomic emancipation. It is claimed to be an effective tool for enhancing income of the poor primarily through creation of self-employment opportunities for them in a variety of small economic activities. However, in this survey of microcredit borrowers in Bangladesh it is found that when self-employed family labor is paid wages at market rate, under the framework of economic-profit counting, economic productivity of credit for about 48 % of the borrowers is not enough to support payment of any interest. Similarly its social productivity in terms of job creation and women‟s empowerment at family level is also found to be low and marginal. Even then about 90% of the borrowers prefer taking microcredit from microfinance institutions (MFIs) even at exorbitantly high interest rate, ostensibly to avoid compromising their socio-political rights and potentials at the hands of the local moneylenders or friends and relatives if credits are obtained from them. They see microcredit as a means of socio-political empowerment of the economically weak and underprivileged members of the society. As such they regard it as a more credible social than economic program
    Date: 2019–02–23
  4. By: Alam, Md. Mahmudul (Universiti Utara Malaysia); Molla, Rafiqul Islam
    Abstract: Microcredit is regarded as a tool for poverty alleviation. A stereotyped delivery system is designed and used for promoting and serving survival- and subsistencelevel economic activities, particularly for poor female clients. In Bangladesh its success has raised social expectations as to its potential as also a promoter of microenterprises, which are growth-yielding small businesses beyond subsistencelevel economic activity. The field survey shows that about 11.7% of the microcredit borrowers are this kind of potential or growing microentrepreneur. It also shows that microcredit’s standardised delivery system, particularly in respect of gender preference, loan size, loan disbursement, and repayment schedules, is a strong limiting factor in effectively serving the microenterprises, which require a more flexible credit package. Therefore a methodological modification is necessary to accommodate flexibility in the microcredit delivery system.
    Date: 2019–02–23
  5. By: Alam, Md. Mahmudul (Universiti Utara Malaysia); Molla, Rafiqul Islam
    Abstract: Calculated under the framework of economic-profit counting, the productivity of microcredit in Bangladesh is found very low. In this survey about 48% of the borrowers had to compromise their normal wages for self-employed labor to be able to pay the high interest for the credit. Similarly its social productivity is also found marginal. However, about 90% of the borrowers felt comfortable with microcredit even at so high interest rate seemingly to avoid losing or compromising their social and political empowerment at the hands of the local moneylenders or relatives. Borrowers give high value to their socio-political empowerments and are ready to compromise normal wages for their self-employed labor. In the game of political economy of credit for the poor, microcredit is seen as a means of protecting and enhancing sociopolitical empowerments of the low income and distressed people in the society and is appraised as a credible social than economic institution.
    Date: 2019–02–23
  6. By: Callen, Mike; Blumenstock, Joshua; Ghani, Tarek
    Abstract: We report on an experiment examining why default options impact behavior. Working with one of the largest private firms in Afghanistan, we randomly assigned each of 949 employees to different variants of a new default savings account. Employees assigned a default contribution rate of 5% are 40 percentage points more likely to contribute than employees assigned to a default contribution rate of zero; to achieve this effect through financial incentives alone would require a 50% match from the employer. Our design permits us to rule out several common explanations for default effects, including employer endorsement, employee inattention, and a lack of awareness about how to switch. Instead, we find evidence that the default effect is driven largely by a combination of present-biased preferences and the cognitive cost of calculating alternate savings scenarios. Default assignment also causes employees to develop savings habits that outlive our experiment: they are more likely to believe that savings is important, less likely to report being too financially constrained to save, and more likely to make an active decision to save at the end of our trial.
    Keywords: defaults savings; behavioral models; peer effects; digital finance; mobile money
    JEL: D14
    Date: 2019

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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