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on Microfinance |
| By: | Soumajyoti Sarkar; Hamidreza Alvari |
| Abstract: | Over the last couple of decades in the lending industry, financial disintermediation has occurred on a global scale. Traditionally, even for small supply of funds, banks would act as the conduit between the funds and the borrowers. It has now been possible to overcome some of the obstacles associated with such supply of funds with the advent of online platforms like Kiva, Prosper, LendingClub. Kiva for example, works with Micro Finance Institutions (MFIs) in developing countries to build Internet profiles of borrowers with a brief biography, loan requested, loan term, and purpose. Kiva, in particular, allows lenders to fund projects in different sectors through group or individual funding. Traditional research studies have investigated various factors behind lender preferences purely from the perspective of loan attributes and only until recently have some cross-country cultural preferences been investigated. In this paper, we investigate lender perceptions of economic factors of the borrower countries in relation to their preferences towards loans associated with different sectors. We find that the influence from economic factors and loan attributes can have substantially different roles to play for different sectors in achieving faster funding. We formally investigate and quantify the hidden biases prevalent in different loan sectors using recent tools from causal inference and regression models that rely on Bayesian variable selection methods. We then extend these models to incorporate fairness constraints based on our empirical analysis and find that such models can still achieve near comparable results with respect to baseline regression models. |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2006.12995&r=all |
| By: | Philip Protter; Alejandra Quintos |
| Abstract: | This paper uses a mathematical model with appropriate assumptions, to model and to determine the optimal group size for microfinance loans. An optimal size is defined to be the size which maximizes the probability of no default of the group |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2006.06035&r=all |
| By: | Ozili, Peterson K |
| Abstract: | This article critically examines digital finance as a pro-poor private sector intervention for international development. It examines the turn from ‘microfinance for the poor’ to ‘digital finance for the poor’. It then considers three key issues, and contest the argument that digital finance is pro-poor. Notably, proponents argue that digital finance can improve development outcomes, but this is based on weak economic logic; secondly, proponents argue that digital finance for the poor is good business - this claim is very weak because evidence suggest that digital finance is good business only with government support. The article further argues that digital finance for the poor will expose the poorest to multiple risks in the financial sector. Therefore, digital finance for the poor should be a contested enterprise. |
| Keywords: | digital finance, microfinance, financial inclusion, financial development, financial innovation, poor people, financial technology, blockchain, fintech, regtech, sandbox, access to finance, financial services |
| JEL: | O1 O12 O3 R2 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:101812&r=all |
| By: | Isabelle Guérin; Sébastien Michiels; Arnaud Natal; Christophe Jalil Nordman; Govindan Venkatasubramanian |
| Abstract: | This article focuses on the consequences of the Indian lockdown in terms of debt. It is based on an ongoing study in a rural area of Tamil Nadu, South India. It draws on a long-term knowledge of this region, longitudinal quantitative household survey data on employment, debt and assets (2010-2016/17) as well as qualitative surveys conducted by telephone since the beginning of the lockdown in March 2020. Our results show: (i) the drying up of part of farm income and the bulk of off-farm income; (ii) the limited role of cash saving and cash transfers; (iii) the debt burden, since the population has faced massive debt growth over the past decade and some households are already very financially fragile; (iv) a predominance of informal finance with, however, a rise in finance; (v) a suspension of repayments, including for most informal lenders; (vi) a halt to unsecured debt and an erosion of the trust that cements most transactions; (vii) finally, the emergence of new forms of secured debt that threaten household assets. The sharp rise in debt observed over the last decade is the result of a widening of credit opportunities, partly formal but mostly informal. These have been made possible by building new relationships of trust but also of confidence in the future, based on strong economic growth that was believed to be sustainable. The lockdown highlights the fragility of these dynamics. For the poorest (mostly, but not only, Dalits), neither the state nor intra-caste or kinship solidarity are sufficient as a safety net. Impoverishment and a return to old forms of dependency seem to be the only way out. |
| Keywords: | Debt; lockdown; caste; employment; India; Trust |
| JEL: | I13 E24 O18 R20 Z13 |
| Date: | 2020–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/309493&r=all |
| By: | Wendy Janssens (Vrije Universiteit Amsterdam); Menno Pradhan (Vrije Universiteit Amsterdam); Richard de Groot (Amsterdam Institute for Global Health and Development); Estelle Sidze (African Population & Health Research Centre); Hermann Donfouet (African Population & Health Research Centre); Amanuel Abajobir (African Population & Health Research Centre) |
| Abstract: | This research assesses how low-income households in Western Kenya coped with the immediate economic consequences of the COVID-19 outbreak. It uses granular financial data from weekly household interviews covering six weeks before the first case was detected in Kenya to five weeks after. Our results suggest that income from work decreased with almost one third and income from gifts and remittances reduced by more than one third since the start of the pandemic. Nevertheless, household expenditures on food remained at pre-outbreak levels after preventive measures were implemented. We do not find evidence that households coped with reduced income through increased borrowing, selling assets or withdrawing savings. Instead, they gave out less gifts and remittances themselves, lent less money to others and postponed loan repayments. Moreover, they significantly reduced expenditures on schooling and transportation, related to the school closures and travel restrictions. Taken together and despite their affected livelihoods, households managed to keep food consumption at par, but this came at the cost of reduced informal risk-sharing and social support between households. |
| Keywords: | COVID-19, lockdown, economic effects, food security, risk-coping, East-Africa, Kenya |
| JEL: | I38 O12 I15 |
| Date: | 2020–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20200040&r=all |