nep-mfd New Economics Papers
on Microfinance
Issue of 2020‒02‒24
three papers chosen by
Olivier Dagnelie
Université de Caen

  1. Behavior Revealed in Mobile Phone Usage Predicts Credit Repayment By Bjorkegren,Daniel; Grissen,Darrell
  2. Financial and Human Capital of Microentrepreneurs and Financing by Microfinance Institutions (MFIs) in Cameroon By Serge MESSOMO ELLE
  3. Free Riding in Loan Approvals : Evidence from SME Lending in Peru By Arraiz,Irani; Bruhn,Miriam; Roth,Benjamin N.; Ruiz Ortega,Claudia; Stucchi,Rodolfo Mario

  1. By: Bjorkegren,Daniel; Grissen,Darrell
    Abstract: Many households in developing countries lack formal financial histories, making it difficult for firms to extend credit, and for potential borrowers to receive it. However, many of these households have mobile phones, which generate rich data about behavior. This article shows that behavioral signatures in mobile phone data predict default, using call records matched to repayment outcomes for credit extended by a South American telecom. On a sample of individuals with (thin) financial histories, our method actually outperforms models using credit bureau information, both within time and when tested on a different time period. But our method also attains similar performance on those without financial histories, who cannot be scored using traditional methods. Individuals in the highest quintile of risk by our measure are 2.8 times more likely to default than those in the lowest quintile. The method forms the basis for new forms of credit that reach the unbanked.
    Date: 2019–12–06
  2. By: Serge MESSOMO ELLE (Department of Banking and Finance University of Buea, Cameroon Author-2-Name: Author-2-Workplace-Name: Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective –This study determines the nature and the direction of how financial and human capital influence the financing of microentrepreneurs in Cameroon. Compared with past research, this work uses existing microentrepreneurs only, which are considered as the only ones having access to the financing of MFIs.Methodology/Technique – This study employs an explanatory approach and uses the Five Cs model and primary data to explain the influence of financial capital (capacity, collateral, capital and condition) and human capital (character) on the financing of microentrepreneurs by MFIs.Findings – On the one hand, the findings show that character, capacity and collateral significantly increase financing of microentrepreneurs by MFIs. On the other hand, the findings reveal that that condition is significant and has an inverse relationship with lending to microentrepreneurs. Collateral was found to be not significant.Novelty: Compared with past research, this work uses existing microentrepreneurs only, which are considered as the only ones having access to the financing of MFIs. This study examines the relationship between financial and human capital to capacity, collateral capital and condition and character of microentrepreneurs.Type of Paper: Empirical
    Keywords: Capacity; Character Collateral; Condition; Capital; Financing of Microentrepreneurs; Microfinance Institutions.
    JEL: G21 G32 L22 O15
    Date: 2019–12–13
  3. By: Arraiz,Irani; Bruhn,Miriam; Roth,Benjamin N.; Ruiz Ortega,Claudia; Stucchi,Rodolfo Mario
    Abstract: This paper provides evidence that commercial lenders in Peru free ride off their peers'screening efforts. Leveraging a discontinuity in the loan approval process of a large bank, the study finds that competing lenders responded to additional loan approvals by issuing approvals of their own. Competing lenders captured almost three-quarters of the new loans to previously financially excluded borrowers, greatly diminishing the profits accruing to the initiating bank. Lenders may therefore underinvest in screening new borrowers and expanding financial inclusion, as their competitors reap some of the benefit. The results highlight that information spillovers between lenders may operate outside credit registries.
    Date: 2019–12–03

This nep-mfd issue is ©2020 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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