nep-mfd New Economics Papers
on Microfinance
Issue of 2023‒04‒03
four papers chosen by
Aastha Pudasainee and

  1. Feasible Institutions of Social Finance: A Taxonomy By Simon Cornée; Marc Jegers; Ariane Szafarz
  2. External Financing and Firm Growth: Evidence from Micro, Small, and Medium Enterprises in Iran By Iman Cheratian; Saleh Goltabar; Hassan Gholipour Fereidouni; Mohammad Reza Farzanegan
  3. Financial inclusion and environmental sustainability By Ozili, Peterson K
  4. Rethinking MSME Finance in Asia and the Pacific - A Policy Agenda: Post COVID-19 Crisis By Masato Abe; Nick Freeman; Mike Troilo

  1. By: Simon Cornée (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Marc Jegers (VUB - Vrije Universiteit Brussel [Bruxelles]); Ariane Szafarz (ULB - Université libre de Bruxelles)
    Abstract: This paper unpacks the continuum of social finance institutions (SFIs), ranging from foundations offering pure grants to social banks supplying soft loans. The in-between category includes quasi-foundations granting loans requiring partial repayment. In our model, SFIs maximize their social contribution arising from financing successful social projects, under a budget constraint dictated by their funders. We determine the feasibility of each SFI category. Quasi-foundations appear to be efficient and adapted to low market rates. However, reciprocity from SFI borrowers can elicit a so-called hold-up effect, whereby the SFI charges a high interest rate to its loyal clients.
    Keywords: foundations, philanthropy, social banks, social finance
    Date: 2022
  2. By: Iman Cheratian (Tarbiat Modares University); Saleh Goltabar (Tarbiat Modares University); Hassan Gholipour Fereidouni (Western Sydney University); Mohammad Reza Farzanegan (Marburg University)
    Abstract: This study examines the relationship between access to finance and growth in sales for Micro, Small, and Medium Enterprises (MSMEs) in Iran. Using data from 486 firms in five provinces, our findings indicate that external financing positively impacts sales growth for MSMEs. The results suggest that financing for research and development expenditures, production diversification, new employment and advertising can significantly contribute to increased sales growth. We also find that spending on intellectual property, labor training and land and building acquisition have a negative moderating effect on the relationship between finance and sales growth.
    Keywords: Finance-sale growth nexus; Micro, Small, and Medium Enterprises (MSMEs); Iranian economy; External financing
    JEL: G21 G32 G38 O16 O53
    Date: 2023
  3. By: Ozili, Peterson K
    Abstract: This paper analyses the association between financial inclusion and environmental sustainability. The study uses Pearson correlation analysis to analyse the association between financial inclusion and environmental sustainability. The level of financial inclusion was measured using two supply-side financial inclusion indicators: the number of ATMs per 100, 000 adults and the number of commercial bank branches per 100, 000 adults. Environmental sustainability was measured using two indicators: the environmental policy stringency index and the environmentally adjusted multifactor productivity growth index. The study finds that financial inclusion is positively correlated with environmental sustainability particularly in non-EU countries. The result implies that financial inclusion programs and efforts in non-EU countries complement environmental sustainability efforts toward achieving the United Nations sustainable development goals (SDGs). The findings also reveal a significant and negative association between environmental policy stringency and environmentally adjusted multifactor productivity growth particularly in EU member-countries and European countries, implying that strict environmental protection policies may harm green growth in EU and European countries.
    Keywords: Environment, sustainability, sustainable development, financial inclusion, access to finance, supply-side financial inclusion
    JEL: G21 Q01 Q54 Q56
    Date: 2023
  4. By: Masato Abe (Macroeconomic Policy and Financing for Development Division, United Nations Economic and Social Commission for Asia and the Pacific); Nick Freeman (Consultant, Macroeconomic Policy and Financing for Development Division, United Nations Economic and Social Commission for Asia and the Pacific); Mike Troilo (Consultant, Macroeconomic Policy and Financing for Development Division, United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: The COVID-19 pandemic is a global catastrophe, with no region spared including Asia and the Pacific. The cost has been considerable, whether measured in terms of public health or economic fallout. In a bid to constrain the spread of the coronavirus, national and local governments were obliged to lock down public spaces, forbade business transactions in person, restricted travel, and otherwise interdicted the flow of people, goods, and services globally. The consequences for business have been acute (ESCAP, 2021). Micro, small, and medium-sized enterprises (MSMEs) naturally suffered more than large firms, given their limited human and financial resources, and heavier reliance on cash flows. The exogenous shock of the sudden, dramatic curtailment of business was a blow that ended an unknown number of MSMEs across the region. Access to finance, already a major constraint to MSME development prior to the pandemic, has worsened considerably, even in cases where governments have had sufficient resources to enact emergency policies aimed at keeping their MSME sectors afloat (ESCAP, 2021). The environment remains difficult. Despite these challenges, the pandemic represents an opportunity for MSME finance in the region. Policymakers can build back better to enable MSME finance to be more sustainable, efficient, and resilient. This will require dramatic changes in how policymakers and all stakeholders, including members of the international development community such as ESCAP, view MSME finance: its provision and related services. In this policy brief, we propose a holistic framework to capture this new thinking.
    Date: 2021–09

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