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on Microfinance |
| By: | Banerjee, Abhijit; Chandrasekhar, Arun G; Duflo, Esther; Jackson, Matthew O. |
| Abstract: | We examine how participation in a microfinance program diffuses through social networks. We collected detailed demographic and social network data in 43 villages in South India before microfinance was introduced in those villages and then tracked eventual participation. We exploit exogenous variation in the importance (in a network sense) of the people who were first informed about the program, "the injection points". Microfinance participation is higher when the injection points have higher eigenvector centrality. We estimate structural models of diffusion that allow us to (i) determine the relative roles of basic information transmission versus other forms of peer influence, and (ii) distinguish information passing by participants and non-participants. We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants, but that information passing by non-participants is still substantial and significant, accounting for roughly a third of informedness and participation. We also find that, conditioned on being informed, an individual's decision is not significantly affected by the participation of her acquaintances. |
| Keywords: | diffusion; microfinance; peer effects; social networks |
| JEL: | D13 D85 G21 L14 O12 O16 Z13 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8770&r=mfd |
| By: | Bryan, Gharad; Karlan, Dean S.; Zinman, Jonathan |
| Abstract: | We examine a randomized trial that allows separate identification of peer screening and enforcement of credit contracts. A South African microlender offered half its clients a bonus for referring a friend who repaid a loan. For the remaining clients, the bonus was conditional on loan approval. After approval, the repayment incentive was removed from half the referrers in the first group and added for half those in the second. We find large enforcement effects, a $12 (100 Rand) incentive reduced default by 10 percentage points from a base of 20%. In contrast, we find no evidence of screening. |
| Keywords: | credit market failures; Information asymmetries; peer networks; social capital; social networks |
| JEL: | C93 D12 D14 D82 O12 O16 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8857&r=mfd |
| By: | Brishti Guha (Singapore Management University); Prabal Roy Chowdhury (Indian Statistical Institute, New Delhi) |
| Abstract: | We develop a tractable model of competition among motivated MFIs. We find that equilibria may or may not involve double-dipping (and consequently default), with there being double-dipping whenever the MFIs are very profit-oriented. Moreover, in an equilibrium with double-dipping, borrowers who double-dip are actually worse off compared to those who do not. Further, for intermediate levels of motivation, there can be multiple equilibria, with a doubledipping equilibrium co-existing with a no default equilibrium. Interestingly, an increase in MFI competition can lower efficiency, as well as increase the extent of double-dipping and default. Further, the interest rates may go either way, with the interest rate likely to increase if the MFIs are very motivated. |
| Keywords: | Micro-finance competition; motivated MFIs; double-dipping |
| JEL: | C72 D40 D82 G21 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ind:isipdp:12-01&r=mfd |
| By: | M. Sahoo; Renuka Sane (Indira Gandhi Institute of Development Research); Susan Thomas (Indira Gandhi Institute of Development Research) |
| Abstract: | What is the role of financial regulation in the field of micro-finance? This paper identiles two features of micro-finance which call for unique treatment in policy considerations as compared to policy thinking in the mainstream body of financial law. These features are credit recovery and the credit risk of the MFI, when credit access is enabled through the structure of the joint liability group. The paper goes on to offer draft law which embeds a regulatory treatment of micro-finance that flows from this analysis. |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2012-005&r=mfd |