nep-mfd New Economics Papers
on Microfinance
Issue of 2022‒07‒11
three papers chosen by
Olivier Dagnelie
Université de Pau et des Pays de l’Adour

  1. Investigating the unobserved heterogeneity effect on microfinance social efficiency By Fall, François Seck; Tchakoute Tchuigoua, Hubert; Vanhems, Anne; Simar, Léopold
  2. The Mediating Effect of Psychological Empowerment on the Relationship between Transformational Leadership and Staff Retention in Microfinance Institutions in Kenya By Kariuki, Josphat K.; Wandiga, Eunice N.; Odiyo, Wilson O.
  3. Graduating from Group to Individual Loans, with the Help of Personal Guarantees By Vasso Ioannidou; Sheng Li; Mrinal Mishra; Steven Ongena

  1. By: Fall, François Seck; Tchakoute Tchuigoua, Hubert; Vanhems, Anne; Simar, Léopold (Université catholique de Louvain, LIDAM/ISBA, Belgium)
    Abstract: The main objective of this study is to assess the impact of unobserved heterogeneity on microfinance social efficiency analysis . Based on recent nonparametric techniques and directional distances, we identify a latent heterogeneity factor related to the microfinance institute (MFI) manager’s ability to promote women, independent of MFI size . We test for the significance of this unobserved factor and analyze the impact of MFI social inefficiency measures . Using a cross-country sample of 501 MFIs in 2011 from six main regions of the world, our findings reveal a significant effect of unobserved heterogeneity on the frontier and hence stress the importance of subjective factors in defining the set of production possibilities. We assess the robustness of our findings with the considered profit-oriented status and analyze the link between our unobserved heterogeneity factor and institutional and socioeconomic indicators.
    Keywords: OR in Developing Countries ; Microfinance ; Gender ; Social Efficiency ; Unobserved Heterogeneity ; Nonparametric Robust Frontier Models
    Date: 2022–03–11
  2. By: Kariuki, Josphat K.; Wandiga, Eunice N.; Odiyo, Wilson O.
    Abstract: Retention of the desired staff in microfinance institutions has remained a major challenge as depicted from extant literature. It is often associated with inappropriate leadership deployed in these institutions among other antecedents. The current study, therefore, set out to establish the effect of transformational leadership on staff retention in microfinance institutions in Nairobi City County, Kenya, as well as the mediating effect psychological empowerment on the relationship between transformational leadership and staff retention in microfinance institutions in Nairobi City County, Kenya. The study was guided by Transformational Leadership Theory, Leader-Member Exchange Theory, Social Exchange Theory, and Resource-Based View Theory and founded on the positivism philosophy. Descriptive and explanatory research designs were adopted to guide the study. A sample of 298 respondents was obtained from 12 microfinance institutions in the Nairobi City County, Kenya, through census method for data collection. The unit of analysis was the head offices of the 12 microfinance institutions, while the unit of observation was the senior management level, middle management level and lower management level. Data was collected using structured questionnaires and analysed using descriptive and inferential statistics. The hypotheses were tested at the 5% significance level. The study established that transformational leadership was a significant predictor of staff retention, and that this relationship was partially mediated by the psychological empowerment. The study recommends that the microfinance institutions management should align transformational leadership practices with the strategic goals set for staff retention and emphasize on psychologically empowering strategies for their staff.
    Date: 2022–05–24
  3. By: Vasso Ioannidou (Centre for Economic Policy Research (CEPR)); Sheng Li (University of Zurich); Mrinal Mishra (University of Zurich - Department of Banking and Finance; Swiss Finance Institute); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))
    Abstract: Loans granted by banks to several entrepreneurs jointly, but for their own individual business and/or projects, are rarely studied. Analyzing 32 million month-loan observations from the Bolivian credit register, we establish that group loans comprise a sizeable part of the formal credit market, and that the most common group size equals two. Larger than individual loans, per borrower the group loans are smaller, with a longer duration and lower loan rates than individual loans. When borrowers are immature, they obtain credit through group loans. Later, involving personal guarantees, they are more likely to graduate to obtain credit through individual loans.
    Keywords: group loan, individual loan, micro credit
    JEL: G20 O16
    Date: 2022–06

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