nep-mfd New Economics Papers
on Microfinance
Issue of 2022‒02‒28
five papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Impact of Interest Rate Cap Policies on the Lending Behavior of Microfinance Institutions: Evidence from Millions of Observations in the Credit Registry Database By Daiju Aiba; Sovannroeun Samreth; Sothearoath Oeur; Vanndy Vat
  2. Sustainability, Growth and Impact of MFIs in Africa By Agbloyor, Elikplimi; Asongu, Simplice; Muriu, Peter
  3. Is Better Access to Mobile Networks Associated with Increased Mobile Money Adoption? Evidence from the Micro-data of Six Developing Countries By Hisahiro Naito; Shinnosuke Yamamoto
  4. Farmers’ willingness to pay for digital and conventional credit: Evidence from a discrete choice experiment in Madagascar By Sarfo, Yaw; Musshoff, Oliver; Weber, Ron; Danne, Michael
  5. The Changing Role of Banks in the Financial System: Social versus Conventional Banks By Simon Cornée; Anastasia Cozarenco; Ariane Szafarz

  1. By: Daiju Aiba; Sovannroeun Samreth; Sothearoath Oeur; Vanndy Vat
    Abstract: In April 2017, the Cambodian central bank introduced an interest rate cap (IR cap) policy relating to lending by microfinance institutions (MFIs). There was no restriction on lending rates before the policy implementation and many of the MFIs was lending at a rate of more than 18%. Thus, there was some concern about the negative effects the IR cap policy may have on outreach efforts by MFIs. This paper explores the impact of the IR cap on MFIs, by accessing granular data from the credit registry database in Cambodia. We use 6,897,168 individual loans from all regulated financial institutions, including commercial banks, specialized banks, and microfinance institutions in the period from January 2016 to March 2019. We find that both the average size per loan and the probability of requiring collateral increased after the IR cap policy was introduced for MFIs, as small-sized loans and non-collateral loans are typically costly for microfinance institutions to extend. In addition, we found that the borrowers of small-sized loans before the IR cap were likely to be excluded from the formal financial market after the IR cap. Those findings suggest that the IR cap did have an impact on the outreach of financial systems.
    Keywords: Interest Rate Cap, Microfinance, Cambodia, Regulation, Bank Lending
    Date: 2022–01
  2. By: Agbloyor, Elikplimi; Asongu, Simplice; Muriu, Peter
    Abstract: This study provides insights into the sustainability of microfinance institutions (MFIs) in Africa with specific emphasis on documented measures of MFI sustainability, stylized facts surrounding the phenomenon, perspectives on the growth of MFIs, determinants of the growth of MFIs and the impact of MFIs.
    Keywords: Sustainability; Growth; MFIs; Africa
    JEL: O10 O20
    Date: 2021–08
  3. By: Hisahiro Naito; Shinnosuke Yamamoto
    Abstract: In several developing countries in Sub-Saharan Africa, accessibility to digital financial services is increasing because of the development of mobile money services. People previously excluded from the financial system have started to have access to financial services such as receiving and sending remittances, saving, and borrowing. This study examines the effect of network accessibility on the use of mobile money in six developing countries (Bangladesh, Kenya, Nigeria, Pakistan, Tanzania, and Uganda) using GPS information on each household and mobile phone network coverage maps. We find that among these six countries, network accessibility is associated with the use of mobile money in a robust way only in Pakistan and Tanzania. In those two countries, when a household location becomes 10 km closer to the center of the area with multiple mobile networks, the probability of using mobile money increases by 10 percent. In the other countries, we did not find a robust relationship between the use of mobile money and network accessibility. This suggests that increasing network accessibility may not be an efficient method for increasing mobile money adoption in certain countries. The fact that mobile money use rates differ between Tanzania and Pakistan also suggests that the effect of mobile networks is unrelated to the overall level of mobile money adoption.
    Date: 2022–01
  4. By: Sarfo, Yaw; Musshoff, Oliver; Weber, Ron; Danne, Michael
    Abstract: In recent decades, microfinance institutions (MFIs) with financial products designed for low income groups have been established all over the world. However, credit access for farmers in developing countries remains low. Digital financial services are rapidly expanding globally at the moment. They also bear great potential to address farmers in remote rural areas. Beyond mobile money services, digital credit is successively offered and also discussed in literature. Compared to conventional credit which is granted based on a thorough assessment of the loan applicant’s financial situation, digital credit is granted based on an automated analysis of the existing data of the loan applicant. However, empirical research on farmers’ preferences and willingness to pay (WTP) for digital credit is non-existent. We employ a discrete choice experiment (DCE) to compare farmers’ WTP for digital and conventional credit. Our results indicate a higher WTP for digital credit compared to conventional credit. Furthermore, we find that longer loan duration has a higher effect on farmers’ WTP for digital credit compared to conventional credit. Additionally, our results show that instalment repayment condition reduces farmers’ WTP for digital credit whilst increasing their WTP for conventional credit. Our results show the potential of digital credit for agricultural finance in rural areas of Madagascar if a certain level of innovation is applied in designing digital credit products.
    Keywords: Farm Management
    Date: 2021–11–18
  5. By: Simon Cornée; Anastasia Cozarenco; Ariane Szafarz
    Abstract: Social banks have emerged as a new group of banks that call themselves as “alternative”, “ethical”, “sustainable”, and “value-based”. Their small market share increases at a rapid pace and is still expected to grow in the future. Social banks are institutions with both (at least some) activities of financial intermediation and one or several non-financial missions, typically based on environmental and social values. By unpacking the observable, real-life differences between social banks and conventional banks, this chapter paves the way to theorizing the multidimensional characteristics of social banks within the global banking industry. Business models, governance issues, lending technologies; and social outcomes appear to be key aspects to understand how innovative, value-based, social banks work and how they might one day substantively affect mainstream banking business.
    Keywords: Social Banks; Ethical Banks; Social Mission; Financial Cooperatives; Microcredit
    JEL: G21 B55 H23 G32 G28 H81
    Date: 2022–02–22

This nep-mfd issue is ©2022 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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