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on Microfinance |
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Issue of 2024–04–29
three papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Angelo D’Andrea; Patrick Hitayezu; Mr. Kangni R Kpodar; Nicola Limodio; Mr. Andrea F Presbitero |
| Abstract: | Combining administrative data on credit, internet penetration and a land reform in Rwanda, this paper shows that the complementarity between technology and law can overcome financial frictions. Leveraging quasi-experimental variation in 3G availability from lightning strikes and incidental coverage, we show that mobile connectivity steers borrowers from microfinance to commercial banks and improves loan terms. These effects are partly due to the role of 3G internet in facilitating the acquisition of land titles from the reform, used as a collateral for bank loans and mortgages. We quantify that the collateral's availability mediates 35% of the overall effect of mobile internet on credit and 80% for collateralized loans. |
| Keywords: | Banks; Credit; High-speed Internet; Mobile; Technological Change |
| Date: | 2024–03–29 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/070 |
| By: | Juan Daniel Hernandez (Université Paris Saclay, Ecole Normale Supérieure Paris-Saclay, CEPS); Fernando Jaramillo (Universidad del Rosario, Bogota, Colombia); Hubert Kempf (Université Paris Saclay, Ecole Normale Supérieure Paris-Saclay, CEPS); Fabien Moizeau (Université de Rennes, CNRS, CREM-UMR62111, F-35000 Rennes, France); Thomas Vendryes (Université Paris Saclay, Ecole Normale Supérieure Paris-Saclay, CEPS) |
| Abstract: | The need to insure against idiosyncratic income risk leads to the formation of risksharing groups in village economies where formal financial markets are absent. We develop a theoretical model to address the impact of limited commitment and social control on the extent of informal risk-sharing when agents are induced to form such risk-sharing coalitions. Social control increases the prospect of the future punishment of present defectors and thus mitigates the absence of commitment. A defection-proof core-partition exists, is unique, and is homophilic. Riskier societies may not be more segmented and may not pay a higher cost for insurance. A higher social control leads to a less segmented society but does not necessarily lead to a lower price for sharing risk. We provide evidence, based on data on Thai villages, that consumption smoothing conforms with our theoretical result of homophily-based coalitions and that social control contributes to a lesser segmentation of a society. |
| Keywords: | Risk Sharing, Informal Insurance, Group Formation, Social Control, Risk Heterogeneity, Homophily, Dyadic Models, Thailand |
| JEL: | C71 D81 O12 O17 |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:eve:wpaper:23-03 |
| By: | Zixuan Huang; Ms. Amina Lahreche; Mika Saito; Ursula Wiriadinata |
| Abstract: | E-money development has important yet theoretically ambiguous consequences for monetary policy transmission, because nonbank deposit-taking e-money issuers (EMIs) (e.g., mobile network operators) can either complement or substitute banks. Case studies of e-money regulations point to complementarity of EMIs with banks, implying that the development of e-money could deepen financial intermediation and strengthen monetary policy transmission. The issue is further explored with panel data, on both monthly (covering 21 countries) and annual (covering 47 countries) frequencies, over 2001 to 2019. We use a two-way fixed effect estimator to estimate the causal effects of e-money development on monetary policy transmission. We find that e-money development has accompanied stronger monetary policy transmission (measured by the responsiveness of interest rates to the policy rate), growth in bank deposits and credit, and efficiency gains in financial intermediation (measured by the lending-to-deposit rate spread). Evidence is more pronounced in countries where e-money development takes off in a context of limited financial inclusion. This paper highlights the potential benefits of e-money development in strengthening monetary policy transmission, especially in countries with limited financial inclusion. |
| Keywords: | Monetary policy transmission; banks; nonbank financial institutions; e-money; panel data |
| Date: | 2024–03–29 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/069 |