nep-mfd New Economics Papers
on Microfinance
Issue of 2021‒04‒12
five papers chosen by
Olivier Dagnelie
Université de Caen

  1. Aspirations and Financial Decisions: Experimental Evidence from the Philippines By David McKenzie; Aakash Mohpal; Dean Yang
  2. Women in the Boardroom: A Bottom-up Approach to the Trickle-down Effect By Anaïs A Périlleux; Ariane Szafarz
  3. BangladeshMicrofinance Competition and Multiple Borrowing:Evidence using Panel Data from Bangladesh By Minhaj Mahmud; Yasuyuki Sawada; Mari Tanaka
  4. Impacts of the Interest Rate Ceiling on Microfinance Sector in Cambodia: Evidence from a Household Survey By Sovannroeun Samreth; Daiju Aiba; Sothearoath Oeur; Vanndy Vat
  5. Impact of Rural Credit on Household Welfare: Evidence from a Long-Term Panel in Bangladesh By MD. Alamgir Hossain; Abdul Malek Mohammad; Zhengfei Yu

  1. By: David McKenzie; Aakash Mohpal; Dean Yang
    Abstract: A randomized experiment among poor entrepreneurs tested the impact of exogenously inducing higher financial aspirations. In theory, raising aspirations could have positive effects by inducing higher effort, but could also reduce effort if unmet aspirations lead to frustration. Treatment resulted in more ambitious savings goals, but nearly all individuals fell far short of reaching these goals. Two years later, treated individuals had not saved more, and actually had lower borrowing and business investments. Treatment also reduced belief in the amount of control over one’s life. Setting aspirations too high can lead to frustration, leading individuals to reduce their economic investments.
    JEL: D14 G53 O12
    Date: 2021–03
  2. By: Anaïs A Périlleux; Ariane Szafarz
    Abstract: This paper argues that role modeling can explain the impact of boardroom gender diversity on corporate performance. It theorizes that female workers are boosted by female leadership, gain increased motivation, and achieve greater productivity, thereby making their female directors more effective. We test this bottom-up approach to the trickle-down hypothesis on data hand-collected among local cooperatives providing microcredit in Senegal. All the organizations surveyed are similar and small, which allows us to use a homogenous performance metric. All of them outsource their human resource management to the same third party, which mitigates the risk of endogeneity. The data cover over 100,000 triads composed of: gender dominance on the board, gender of CEO, and gender of credit officer. A better financial performance is achieved when the triad is gender-uniform—be it male or female—confirming the importance of role modeling and suggesting that the performance of female board members depends on the gender composition of the workforce.
    Keywords: Gender; Board; Trickle-Down Effect; CEO; Performance; Leadership
    JEL: M14 J82 M54 J54 O15
    Date: 2021–03–17
  3. By: Minhaj Mahmud; Yasuyuki Sawada; Mari Tanaka
    Abstract: This paper examines the causes and consequences of multiple borrowing in rural Bangladesh using long-term household and village panel data covering the years 2000 to 2014. Our empirical analysis reveals that sharply growing number of microfinance institutions (MFIs) in a wider set of villages over time, coincides with corresponding increase in household borrowing from multiple MFIs as well as households accessing loans generally. The climbing number of MFIs also explains the significant rises in the total values of household assets especially in the form of agricultural equipment. Although the increasing number of MFIs resulted in some households borrowing for the purposes of repaying previous loans, the fraction of such households is still relatively small. Overall, our results suggest that the majority of the cases of multiple borrowing are “healthy” or “solvent” overlapping loans that meet the large demand for credit for productive purposes.
    Keywords: Microfinance Institutions, Household Borrowing, Micro Business, Bangladesh
    Date: 2021–01–19
  4. By: Sovannroeun Samreth; Daiju Aiba; Sothearoath Oeur; Vanndy Vat
    Abstract: This paper examines the effects of the imposition of an interest rate ceiling in the microfinance sector in Cambodia in 2017, based on a household survey undertaken in 2019. Evidence indicates that the average interest rate was reduced after the imposition of the ceiling. Although this reduction is partially offset by the increase of the average loan assessment and processing fee, the average effective interest rate (i.e., credit cost) declined. The results also show the increase in the average loan size from formal sources at a relatively small level and the increase in the percentage of loans from informal sources by a few percentage points. Moreover, we find that relatively low-income households face a higher probability of being rejected for loans and a higher debt service ratio is positively associated with a larger loan amount. This implies the possibility of the increase of the debt burden occurring among relatively small borrowers, given that an increase of the average loan size at relatively small loan levels is observed. The evidence supporting the important role of financial literacy in reducing household debt burden is also confirmed.
    Keywords: Interest rate ceiling, Financial inclusion, Microfinance, Cambodia
    Date: 2021–03–16
  5. By: MD. Alamgir Hossain; Abdul Malek Mohammad; Zhengfei Yu
    Abstract: Access to rural credit has long been considered a potential solution to ease liquidity constraints and improve household welfare in Bangladesh.Earlier studies on rural credit mostly focused on the impact of microfinance; however, the available results could not provide conclusive findings and failed to suggest how different sources of credit, namely, banks, microfinance institutes, and informal channels affect household welfare in the long term. This study aims to evaluate the long-term impact of different rural credit sources on household welfare indicators. To generate evidence, we use five-round (1988, 2000, 2004, 2008, and 2014) panel datasets of a nationally representative sample survey. We use a household-level panel fixed-effect model to estimate the impact on different outcome indicators. The results suggest that access to rural credit from any source has no significant impact on the increase in the household economic welfare in the long term. However, in the short term, access to bank credit increases the access to rented-in land, improves rice yield, and enhances girls' school enrollment among rural households. The impact estimates are found to be consistent across different model specifications, implying the robust internal validity of the study results. Key words: Long-term impact, panel data, rural credit sources, rural households, economic welfare, Bangladesh.
    Date: 2021–03

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