nep-mfd 2020-04-20 papers

on Microfinance

Issue of 2020‒04‒20
two papers chosen by
Aastha Pudasainee and Olivier Dagnelie

Increasing Financial Inclusion in the Muslim World : Evidence from an Islamic Finance Marketing Experiment By Karlan,Dean S.; Osman,Adam Mohamed; Shammout,Nour Musallam
Are the Operations of Microfinance Institutions Different Across Countries? A Comparative Analysis of Cambodia and the Philippines Using DEA and PCA By Hidenobu Okuda; Daiju Aiba

Increasing Financial Inclusion in the Muslim World : Evidence from an Islamic Finance Marketing Experiment

By:	Karlan,Dean S.; Osman,Adam Mohamed; Shammout,Nour Musallam
Abstract:	Low utilization of household credit in developing countries may be partially due to religious considerations. In a randomized marketing experiment in Jordan, this paper estimates the effect of sharia-compliant loan features on demand for credit. To comply with Islamic law, the sharia-compliant product uses a bank fee rather than an interest payment structure, while keeping the rest of the product features very similar. Sharia-compliance increased the application rate for loans from 18 percent to 22 percent, an increase in demand that is equivalent to a 10 percent decrease in interest rates. This study also randomly varied the price of the sharia-compliant loan and finds that less religious individuals are twice as elastic with respect to price as the more religious. By comparing reasons for refusal across treatment groups, this paper estimates that survey measures that try to assess the importance of religious objections to conventional credit overestimate the importance of this type of objection by a third.
Date:	2020–04–02
URL:	http://d.repec.org/n?u=RePEc:wbk:wbrwps:9200&r=all

Are the Operations of Microfinance Institutions Different Across Countries? A Comparative Analysis of Cambodia and the Philippines Using DEA and PCA

By:	Hidenobu Okuda; Daiju Aiba
Abstract:	Abstract Of all the Southeast Asian countries, Cambodia and the Philippines have well-developed microfinance institutions (MFIs). However, the environments in which MFIs operate differ considerably between the two countries. Our study investigates the differences in management characteristics and efficiency of Cambodian and Philippine MFIs during the period of 2009-2015 using Data Envelopment Analysis (DEA) and Principal Component Analysis (PCA) and measures the key management characteristics and efficiency levels of local MFIs. Our study found that Cambodian MFIs tend to target sustainability (profitability) oriented management, and Philippine MFIs tend to target outreach (financial service to the poor) oriented management. Second, MFIs in the Philippines had a tendency to shift toward more outreach-orientated management over the period of our analysis. Third, while there are no clear differences in the capital-intensity of MFI operations between the two countries, over time capital-intensity improved in both. We further examined the relationship between country-specific factors, management characteristics and efficiency. We found that overall efficiency, outreach-orientation, and labor-intensive management were associated with the initial conditions of deposit-to-GDP ratio in the period of our analysis. This suggests that the development paths of MFIs are dependent on the development of traditional financial institutions in the early period of MFI development.
Keywords:	Cambodia, the Philippines, MFIs, Operational Characteristics, Data Envelopment Analysis, Principle Component Analysis
Date:	2020–04
URL:	http://d.repec.org/n?u=RePEc:jic:wpaper:212&r=all

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