nep-mfd New Economics Papers
on Microfinance
Issue of 2021‒08‒23
three papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Crowding-In or Crowding-Out? How Subsidies Signal the Path to Financial Independence of Social Enterprises By Patrick Reichert; Marek Hudon; Ariane Szafarz; Robert K. Christensen
  2. Appropriation des dirigeants de la Responsabilité Sociale vers l'inclusion financière : Cas des Institutions de microfinance au Bénin By Zinsou Nakou; Serge Francis Simen Nana
  3. Money or Power? Financial Infrastructure and Optimal Policy By Susanna B. Berkouwer; Pierre E. Biscaye; Eric Hsu; Oliver W. Kim; Kenneth Lee; Edward Miguel; Catherine Wolfram

  1. By: Patrick Reichert; Marek Hudon; Ariane Szafarz; Robert K. Christensen
    Abstract: In today’s multisector configurations, there is little clarity about whether and how public and private subsidies influence social enterprises’ pursuit of financial stability. We address the strategic role of donors in the social-business life cycle whereby social enterprise start-ups rely on subsidies, while mature social enterprises strive for independence from donors. To address the “missing middle,” we develop a typology of subsidy instruments and an intermediary signaling model to clarify how subsidies shape the evolution of outcomes for social enterprises. We argue that source variation matters for certain instruments like corporate intangibles and governmentally subsidized credit guarantees, which trigger crowding-in effects and attract commercial partners, while preventing perverse crowding-out effects, such as soft budget constraints. To illustrate this commercialization story, we draw upon a microfinance case study, demonstrating how public and private donors can induce crowding-in and crowding-out effects. In short, our subsidy typology helps unpack the signals that public and private subsidies send to commercial funders of social enterprises and how they shape the path to future financial independence.
    Keywords: Subsidy; Crowding-in; Crowding-out; Signaling theory; Resource acquisition; Social finance
    JEL: H83 G23 H81 M16 M14 G21
    Date: 2021–08–10
  2. By: Zinsou Nakou (LAED - Laboratoire de recherche Entreprise et Developpement - ESP - École Supérieure Polytechnique de Dakar - UCAD - Université Cheikh Anta Diop [Dakar, Sénégal]); Serge Francis Simen Nana (ESP - École Supérieure Polytechnique de Dakar - UCAD - Université Cheikh Anta Diop [Dakar, Sénégal])
    Abstract: This paper aims to understand the factors that may explain social responsibility for financial inclusion in Benin's microfinance institutions (MFIs). To achieve this goal, we conducted a comprehensive qualitative study based on semi-structured individual interviews with the managers of 10 MFIs whose data were presented and processed according to thematic content analysis. Our results showed that the leaders of MFIs are aware of CSR, are aware of its existence and seize a symmetrical link between CSR and financial inclusion, and that this link is part of the coordination of behaviors, as well as in the convergence values of the different stakeholders of the institution. Because internal CSR management is seen not as a managerial and organizational constraint that consumes costs and time, but rather as an activity that allows the institution to generate direct and, above all, indirect benefits. Our results suggest that it may not be enough for MFIs to simply engage in CSR. Rather, CSR, perceived as coherent, can inspire positive attitudes and behaviors among leaders.
    Abstract: Cette communication se propose de comprendre les facteurs susceptibles d'expliquer la responsabilité sociale en matière d'inclusion financière dans les institutions de microfinance (IMF) béninoises. Pour atteindre cet objectif, nous avons procédé à une étude qualitative à visée compréhensive basée sur des entretiens individuels semi-directifs auprès les dirigeants de 10 IMF dont les données ont été présentées et traitées selon l'analyse de contenu thématique. Nos résultats ont montré que les dirigeants des IMF connaissent la RSE, en sont conscients de son existence et en saisissent un lien symétrique entre la RSE et l'inclusion financière, et que ce lien loge dans la coordination des comportements, ainsi que dans la convergence des valeurs des différentes parties prenantes de l'institution. Car, le management de la RSE en interne est vu non pas comme une contrainte managériale et organisationnelle consommatrice de coûts et de temps, mais plutôt comme une activité permettant à l'institution de dégager des bénéfices directs et surtout indirects. Nos résultats suggèrent qu'il peut ne pas suffire que les IMF s'engagent simplement dans la RSE. C'est plutôt la RSE perçue comme cohérente qui peut inspirer des attitudes et des comportements positifs chez les dirigeants.
    Keywords: social inclusion,financial inclusion,microfinance institution,leader,CSR,dirigeant,institution de microfinance,inclusion sociale,inclusion financière,RSE
    Date: 2020–03–12
  3. By: Susanna B. Berkouwer; Pierre E. Biscaye; Eric Hsu; Oliver W. Kim; Kenneth Lee; Edward Miguel; Catherine Wolfram
    Abstract: In response to the Covid-19 crisis, 186 countries implemented direct cash transfers to households, and 181 introduced in-kind programs that lowered the cost of utilities such as electricity, water, transport, and mobile money. Do cash or in-kind transfers generate greater welfare improvements? And, does a country’s financial infrastructure affect optimal aid disbursement? Through a parallel set of surveys in two urban regions in Africa—with comparable education, cell phone ownership, and electricity connectivity—we show that optimal government aid disbursement hinges on financial infrastructure. In line with economic theory favoring direct cash transfers, in a randomized experiment in Kenya 95% of urban recipients prefer mobile money over electricity transfers of a similar monetary value. But Kenya is an outlier with high mobile money adoption: this increases its value and reduces transaction costs of buying electricity credit. By contrast, in Ghana—where mobile money is less widespread and the transaction costs for buying electricity are higher—half of recipients prefer electricity transfers, and many are willing to forego significant value to receive electricity instead of mobile money. These results have several important policy implications. First, the optimal government policy in response to an economic crisis is not uniform: cash and in-kind transfers have different advantages that make each suitable for specific contexts. Second, the adoption of modern financial technologies will likely increase the efficiency of government cash transfer programs, even as in-kind transfers continue to be preferred in settings where mobile money uptake is slow. Finally, giving recipients a choice harnesses valuable local information that a policy maker may not have access to.
    JEL: G23 O38 Q38
    Date: 2021–07

This nep-mfd issue is ©2021 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.