nep-mfd New Economics Papers
on Microfinance
Issue of 2020‒12‒14
five papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Simultaneous Borrowing and Saving in Microfinance By Dyotona Dasgupta; Prabal Roy Chowdhury
  2. Impact evaluation, social performance assessment and standardisation: reflections from microfinance evaluations in Pakistan and Zimbabwe By Joana Silva Afonso
  3. Subgroup Analysis of Investment Constraints: Evidence from Ugandan Microenterprises By Helke Seitz
  4. The Gender of Debt and Credit: Insights from Rural Tamil Nadu By Guérin, Isabelle; Nordman, Christophe Jalil; Reboul, Elena
  5. Transparency and Financial Inclusion : Experimental Evidence from Mobile Money (revision of CentER DP 2018-042) By Dalton, Patricio; Pamuk, H.; Ramrattan, R.; van Soest, Daan; Uras, Burak

  1. By: Dyotona Dasgupta (Center for Development Economics, Delhi School of Economics); Prabal Roy Chowdhury (Indian Statistical Institute, Delhi)
    Abstract: This paper studies dynamic incentives provided by the microfinance institutions (MFIs) to ensure repayment. MFIs provide collateral-free loans, and yet observe near perfect repayment rate. In this paper, we provide an explanation of two widely practised mechanisms by MFIs – progressive lending i.e. increasing loan size over time and deposit collection. In our model, the MFI provides both credit and savings services. These help a strategic, poor borrower to accumulate a lumpsum amount and “graduate†to an improved lifetime utility which is not achievable when only credit is provided. These savings also act as an incentive device for repayment. We find that the optimal loan scheme is weakly progressive. It is “progressive with a cap†when the increase in utility from graduation is “modestly positive†. Further, we show that, since the MFI is benevolent, an improvement in the borrower’s outside option lengthens the time required to graduate which in turn reduces her welfare.
    Keywords: dynamic incentives, progressive lending, deposit collection, collateral substitute, graduation
    JEL: O12 O16 D86 G21
    Date: 2020–11
  2. By: Joana Silva Afonso (Portsmouth Business School)
    Abstract: Heterogeneity associated with the microfinance and financial inclusion sector discourages the application of ‘one-fits-all’ evaluation models. However, under certain conditions, there can be advantages in adopting a ‘common project approach’ to evaluation. This paper is based on my participation as academic consultant on a project led by the crowdfunding platform Lendwithcare, which aimed to assess the outcomes at client level of two microcredit programmes developed by its partner microfinance institutions in Pakistan and Zimbabwe. Applying qualitative methodologies, including participant-observation and interviews, I analyse the conditions in which some degree of standardisation is feasible, its advantages and limitations and how this experience can add to the knowledge on impact evaluation and social performance assessment in the sector. In doing so, I establish a parallel with previous evaluation projects in the sector, namely the AIMS, Imp-Act and Microfinance for Decent Work projects. The findings show that the approach followed in the Lendwithcare project contributed to change mind-sets regarding evaluation and trigger the process of social performance management in the participating institutions, which had incipient experience in measuring social performance and were not familiar with the evaluation process. It attracted also the attention of other Lendwithcare partner MFIs whose managers showed interest in replicating the process in their institutions.
    Date: 2020–12–02
  3. By: Helke Seitz
    Abstract: This study examines the effect of a soft commitment device in the form of a savings goal calendar on savings for small business owners in Kampala, Uganda. We run a randomized controlled trial (RCT) under which the treatment group receives a calendar designed to set savings goals and to make a plan to reach this goal. The control group is given a plain calendar. We find no average effect on savings, but show that present-biased individuals save more when given the calendar. Further examinations indicate that present-biased individuals are more likely to use the calendar, suggesting that, in line with theory, present-biased individuals have a demand.
    Keywords: Entrepreneurship, investment, credit constraints, savings constraints, managerial constraints
    JEL: D22 D25 O12 O16
    Date: 2020
  4. By: Guérin, Isabelle (IRD); Nordman, Christophe Jalil (IRD, DIAL, Paris-Dauphine); Reboul, Elena (IRD)
    Abstract: The champions of financial inclusion regret women’s lack of access to credit, while critics of financialization, by contrast, claim that women have become overly indebted. But little is actually known about women’s debt/credit in quantitative terms, mostly due to a lack of data. This descriptive paper uses first-hand survey data from southern India disaggregated by sex in order to analyze the gender of debt and its interplay with caste and poverty, based on descriptive statistics and econometric results. We show that women are heavily indebted, first and foremost to informal sources, alongside microcredit. While men are much higher earners, they borrow much less in relative terms. Furthermore, women prominently - and markedly more so than men - borrow in order to make ends meet; productive investment largely remains a male practice. Lastly, women of the poorest and lowest-caste households have the heaviest borrowing responsibilities, managing the highest proportions of household debt. On a theoretical level, these results highlight the gendered earmarking of debt and credit: male and female debts/credits do not have the same meanings and uses. They also confirm the gendered dimension of behavior, in as much as women's behavior is constrained by family affiliation, poverty level and caste, all of which affects men much less. Last, in terms of policy implications, these results put into question the specific targeting of women by microcredit policies, likely to strengthen the association between debt and poverty for women, and in particular to exacerbate female responsibilities for managing scarcity.
    Keywords: gender, debt, poverty, caste, microcredit, India
    JEL: G51 O16 J16 D14
    Date: 2020–11
  5. By: Dalton, Patricio (Tilburg University, School of Economics and Management); Pamuk, H. (Tilburg University, School of Economics and Management); Ramrattan, R.; van Soest, Daan (Tilburg University, School of Economics and Management); Uras, Burak (Tilburg University, School of Economics and Management)
    Date: 2019

This nep-mfd issue is ©2020 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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