nep-mfd New Economics Papers
on Microfinance
Issue of 2023‒05‒29
six papers chosen by
Rachita Gulati,  IIT Roorkee

  1. Telecommunications regulation, mobile money innovations and financial inclusion By Simplice A. Asongu
  2. Financing Repeat Borrowers: Designing Credible Incentives for Today and Tomorrow By Anil K. Jain
  3. Better Strategies for Saving More Evidence from Three Interventions in Chile By Abhijit Banerjee; Claudia Martínez A; Esteban Puentes
  4. Wealth Distribution, Income Inequality and Financial Inclusion: A Panel Data Analysis By Patrick N. Osakwe; Olga Solleder
  5. Financial Inclusion, Economic Development, and Inequality: Evidence from Brazil By Julia Fonseca; Adrien Matray
  6. Social and institutional determinants of digital financial inclusion in Africa: A system GMM Approach By Evans, Olaniyi

  1. By: Simplice A. Asongu (Yaounde, Cameroon)
    Abstract: This study assesses how corporate telecommunication (telecom) policies follow telecom sector regulation in mobile money innovation for financial inclusion in developing countries. Telecom policies are understood in terms of mobile subscriptions, mobile connectivity coverage and mobile connectivity performance while mobile money innovations represent mobile money accounts, the mobile used to send money and the mobile used to receive money. The empirical evidence is based on Tobit regressions. Telecom sector regulation positively influences mobile money innovations. From net influences, mobile subscriptions and connectivity policies moderate telecom sector regulation to positively influence mobile money innovations; exclusively within the remit of mobile money accounts because the corresponding net influences on the mobile used to send money and the mobile used to receive money are negative. The interactive influences are consistently negative and hence, thresholds for complementary policies are provided in order to maintain the positive influence of telecom sector regulation on mobile money innovations. This study has complemented the extant literature by assessing how corporate telecommunication policies follow telecommunication sector regulation in mobile money innovations for financial inclusion.
    Keywords: Mobile money; technology diffusion; financial inclusion; inclusive innovation
    JEL: D10 D14 D31 D60 O30
    Date: 2023–01
  2. By: Anil K. Jain
    Abstract: We analyze relational contracts between a lender and borrower when borrower cash flows are not contractible and the costs of intermediation vary over time. Because lenders provide repayment incentives to borrowers through the continuation value of the lending relationship, borrowers will condition loan repayment on the likelihood of receiving loans in the future. Therefore, the borrower's beliefs about the lender's future liquidity and profitability become an important component of the borrower's repayment decision. Consequently, the possibility of high lending costs in the future weakens repayment incentives and can cause the borrower to strategically default in some states and an inefficient under-provision of credit. We characterize the optimal relational contract and discuss the application of our model to the case of microfinance and trade credit.
    Keywords: trade credit; dynamic incentives; relationship lending; microfinance; repeated games
    JEL: O16 G33 G21
    Date: 2022–12
  3. By: Abhijit Banerjee; Claudia Martínez A; Esteban Puentes
    Abstract: Individual behavioral biases can affect savings behavior. We conduct an experiment to evaluate different strategies to increase savings. We compare an automatic savings plan (or default rule), monthly reminders, and a rule-of-thumb savings package that appeals to careful spending. We find that rule-of-thumb and default rules can increase savings for one year after the intervention. In contrast, reminders can reduce account balances and debt levels. The increase in savings under the default rule is produced by a (mechanical) increase in deposits, but savings is later decreased by an increase in withdrawals.
    Date: 2023–04
  4. By: Patrick N. Osakwe; Olga Solleder
    Abstract: This working paper examines the impact of income inequality on the distribution of wealth using panel data and controlling for the roles of financial inclusion and other potential drivers of wealth inequality. We find evidence that lagged wealth and savings rates increase wealth inequality globally as well as in the developed and developing countries samples.
    Date: 2023
  5. By: Julia Fonseca (University of Illinois at Urbana-Champaign); Adrien Matray (Princeton University, NBER, and CEPR)
    Abstract: We study a financial inclusion policy targeting Brazilian cities with low bank branch coverage using data on the universe of employees from 2000–2014. The policy leads to bank entry and to similar increases in both deposits and lending. It also fosters entrepreneurship, employment, and wage growth, especially for cities initially in banking deserts. These gains are not shared equally and instead increase with workers’ education, implying a substantial increase in wage inequality. The changes in inequality are concentrated in cities where the initial supply of skilled workers is low, indicating that talent scarcity can drive how financial development affects inequality.
    Keywords: Brazil, Financial Inclusion Policy, Wage Inequality, Banks
    JEL: D63 E24 E58 G21 J30
    Date: 2022–09
  6. By: Evans, Olaniyi
    Abstract: African nations have shown remarkable promise in digital financial services in recent years. However, much more remains to be done. Given this background, this study empirically investigates the social and institutional determinants of digital financial inclusion for a panel of 42 African countries using system GMM for the period 1995-2018. The empirical results show that social factors such as literacy, infrastructure, unemployment rate and standard of living have significant influence on digital financial inclusion. These results suggest that social realities matter for digital financial services. Equally, institutional factors such as political stability and absence of violence, control of corruption, regulatory quality, government effectiveness and rule of law have statistically significant and positive effects. These results suggest that better governance and better institutions correlate with faster digital financial inclusion. The estimates are robust to changes in estimation methods.
    Keywords: digital financial services, social and institutional determinants
    JEL: O3 O33 O35
    Date: 2022

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