nep-mfd New Economics Papers
on Microfinance
Issue of 2023‒02‒13
four papers chosen by
Rachita Gulati
IIT Roorkee

  1. Digital finance research and developments around the World: a literature review By Ozili, Peterson K;
  2. The Impact of Positive Information Sharing on Banks’ Lending to Households By Tamas Briglevics; Artashes Karapetyan; Steven Ongena; Ibolya Schindele
  3. Credit Markets with time-inconsistent agents and strategic loan default By Joydeep Bhattacharya; Monisankar Bishnu; Min Wang
  4. The Macroeconomic Consequences of Subsistence Self-Employment By Sergio Ocampo; Juan Herreño

  1. By: Ozili, Peterson K;
    Abstract: This paper presents a concise review of the existing digital finance research in the literature, and highlight some of the developments in digital finance around the world. The paper reached several conclusions. Firstly, it showed that digital finance has become an important part of modern finance and the major application of digital finance can be found in Fintech, embedded finance, open banking and decentralized finance, central bank digital currencies, among others. Secondly, it identified some international determinants of digital finance which includes the need for efficiency in financial services delivery, the need to achieve the United Nations sustainable development goals using existing digital technologies, the need to increase financial inclusion through digital financial inclusion and the need for efficient payments and payment settlement finality. The paper also finds that digital finance research is growing fast, and recent studies have investigated contemporary issues in digital finance that are relevant for policy and practice. Regarding the digital finance developments around the world, the paper shows that the Fintech and mobile money industries are the largest beneficiary of investments in digital finance with the total number of users of mobile money services surpassing 1 billion globally. Also, the paper predicts that the future of digital finance is to create a digital environment that permits the offering of all kinds of financial product and services that can be customized and personalized to meet the unique needs of all users on a single digital platform and without requiring any form of human assistance or intermediary. The paper then suggest some areas for future research which include the need for more research on how regulators can keep pace with emerging digital finance transformation, the need for more research on user information security and compliance, the need for more research on how to deal with bias caused by bad data, the need for more research on how to deal with algorithmic bias, and the need for more research on how to combine a risk-conscious culture with a higher risk appetite for digital finance transformation.
    Keywords: digital finance, artificial intelligence, machine learning, financial inclusion, fintech, access to finance, financial stability, economic growth, blockchain, central bank digital currency, robotics, cryptocurrency.
    JEL: G21 O32 O33
    Date: 2023
  2. By: Tamas Briglevics (Boston College; Federal Reserve Bank of Boston); Artashes Karapetyan (ESSEC Business School); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)); Ibolya Schindele (Central European University; Central Bank of Hungary)
    Abstract: What is the impact of positive information sharing on households’ access to credit? Exploiting a nation-wide introduction of mandatory information sharing between banks on borrowers` current exposures, we differentiate between borrowers who apply to new banks and those who reapply to banks with already established credit contracts, as well as between borrowers with and without past negative information. We find an overall increase in credit access, in application success and credit amount, for all borrower groups. In addition, we show that while credit access increases, default rates decrease, hence “positive” information sharing may boost aggregate welfare.
    Keywords: information sharing, bank lending, household access to credit
    JEL: G21 G28
    Date: 2022–12
  3. By: Joydeep Bhattacharya (Iowa State University); Monisankar Bishnu (Indian Statistical Institute, Delhi); Min Wang (China Center for Economic Research, National School of Development, Peking University)
    Keywords: endogenous borrowing constraints, CFPB, ability-to-pay rule, overborrowing, financial protection
    JEL: E21 E70 G40 G28
    Date: 2023–01
  4. By: Sergio Ocampo (University of Western Ontario); Juan Herreño (University of California San Diego)
    Abstract: We evaluate the aggregate effects of expansions of credit supply in environments where subsistence self-employment is prevalent. We extend a standard macro development model to include unemployment risk, which becomes a key driver of selection into self-employment. The model is consistent with the joint distribution of earnings and occupations, the reaction of wages to labor demand shocks, and the small effects of expansions in the supply of microloans on the earnings of the self-employed. We find that the elasticity of aggregate output to expansions in credit supply is proportional to the elasticity of individual earnings. This proportionality arises due to the muted effects of wages in general equilibrium in the presence of subsistence self-employment, and is not present in models without subsistence self-employment due to a larger wage response, and a larger crowding-out of private savings in response to a higher availability of credit.
    Keywords: Self-Employment, Unemployment, Development, Micro-Finance
    JEL: E44 O11 O16 O17
    Date: 2023

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