nep-mfd New Economics Papers
on Microfinance
Issue of 2021‒02‒15
five papers chosen by
Olivier Dagnelie
Université de Caen

  1. Changes in Social Network Structure in Response to Exposure to Formal Credit Markets By Abhijit Banerjee; Emily Breza; Arun G. Chandrasekhar; Esther Duflo; Matthew O. Jackson; Cynthia Kinnan
  2. Unruly entrepreneurs–investigating value creation by microfinance clients in rural Burundi By Katarzyna Cieslik; Marek Hudon; Philip Verwimp
  3. Do Interest Rate Controls Work? Evidence from Kenya By Emre Alper; Benedict J. Clements; Niko A Hobdari; Rafel Moyà Porcel
  4. Can integrated social protection programmes affect social cohesion? Mixed-methods evidence from Malawi By Burchi, Francesco; Roscioli, Federico
  5. Preliminary findings on structural issues in the Vietnamese financial research landscape from 2008-2020 By Ho, Tung Manh; Nguyen, Quoc-Hung; Le, Ngoc-Thang B.; Tran, Hung-Long D.

  1. By: Abhijit Banerjee; Emily Breza; Arun G. Chandrasekhar; Esther Duflo; Matthew O. Jackson; Cynthia Kinnan
    Abstract: Formal financial institutions can have far-reaching and long-lasting impacts on informal lending and information networks. We first study 75 villages in Karnataka, 43 of which were exposed to microfinance after we first collected detailed network data. Networks shrink more in exposed villages. Links between households that were unlikely to ever borrow from microfinance are at least as likely to disappear as links involving likely borrowers. We replicate these surprising findings in the context of a randomized controlled trial in Hyderabad, where a microfinance institution randomly selected neighborhoods to enter first. Four years after all neighborhoods were treated, households in early-entry neighborhoods had credit access longer and had larger loans. We again find fewer social relationships between households in early-entry neighborhoods, even among those ex-ante unlikely to borrow. Because the results suggest global spillovers, which are inconsistent with standard models of network formation, we develop a new dynamic model of network formation that emphasizes chance meetings, where efforts to socialize generate a global network-level externality. Finally, we analyze informal borrowing and the sensitivity of consumption to income fluctuations. Households unlikely to take up microcredit suffer the greatest loss of informal borrowing and risk sharing, underscoring the global nature of the externality.
    JEL: D13 D85 L14 O12 Z13
    Date: 2021–01
  2. By: Katarzyna Cieslik; Marek Hudon; Philip Verwimp
    Abstract: This study explores the entrepreneurial potential of the rule-breaking practices of microfinance programs’ beneficiaries. Using the storyboard methodology, we examine the strategies employed by the poor in Burundi to bypass institutional rules. Based on 66 short interviews conducted in seven rural provinces of Burundi, our exploratory study analyzes the entrepreneurial potential in four instances of rule-evasion: consumption spending, illegitimate investment, loan juggling and loan arrogation. We argue that some of the unruly practices are in fact entrepreneurial, as they create tangible and intangible value for the rural poor at both household and community levels. These include strengthening social ties through gift exchange and ceremonies, which then help poor households to self-insure against shocks through social networks. By analyzing the push and pull factors for unruly behavior, we show that rule-breaking practices are often necessitated by the microfinance industry itself and call for increased flexibility and adaptability of microfinance products.
    Keywords: Burundi; entrepreneurship; Microfinance; rule-breaking; subsistence communities
    Date: 2019–10–01
  3. By: Emre Alper; Benedict J. Clements; Niko A Hobdari; Rafel Moyà Porcel
    Abstract: This paper reviews the impact of interest rate controls in Kenya, introduced in September 2016. The intent of the controls was to reduce the cost of borrowing, expand access to credit, and increase the return on savings. However, we find that the law on interest rate controls has had the opposite effect of what was intended. Specifically, it has led to a collapse of credit to micro, small, and medium enterprises; shrinking of the loan book of the small banks; and reduced financial intermediation. We also show that interest rate caps reduced the signaling effects of monetary policy. These suggest that (i) the adverse effects could largely be avoided if the ceiling was high enough to facilitate lending to higher risk borrowers; and (ii) alternative policies could be preferable to address concerns about the high cost of credit.
    Keywords: Interest rate policy;Banking;Bank credit;Credit;Central bank policy rate;WP,interest rate,rate,lending,control,bank
    Date: 2019–05–31
  4. By: Burchi, Francesco; Roscioli, Federico
    Abstract: The primary objective of social protection is to fight poverty and food insecurity. However, there are good theoretical arguments to support the idea that it can also contribute to more complex outcomes, such as social cohesion. This paper investigates the effects of the Tingathe Economic Empowerment Programme (TEEP) in Malawi on three key pillars of social cohesion, namely inclusive identity, trust and cooperation. The TEEP is a multi-component social protection scheme, which targets ultra-poor and labor-constrained households. It provides three randomly selected groups of beneficiaries with three different packages: a lump-sum transfer, a financial and business training connected to the creation of saving (VSL) groups, and a combination of both. A sequential mixed-methods approach was employed to assess the effects of the different project components. This consists of: i) a quantitative analysis based on an experimental design and primary data collected one year after project implementation; ii) a qualitative analysis, based on focus group discussions and individual interviews conducted three years after project implementation. [...]
    Date: 2021
  5. By: Ho, Tung Manh; Nguyen, Quoc-Hung; Le, Ngoc-Thang B.; Tran, Hung-Long D.
    Abstract: In this report, we will look at major research findings on foreign direct investment (FDI), SMEs, micro-credit programs, financial inclusion, and IFRS adoption. These topics are of increasing importance, and they have gradually become critical for academia, policymakers, and corporate sectors if they are set to investigate Vietnam’s fast-expanding economy.
    Date: 2021–01–12

This nep-mfd issue is ©2021 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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