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on Microfinance |
| By: | Peprah, James Atta; Koomson, Isaac |
| Abstract: | Contrary to the confidence in the ability of microfinance to uplift the poor on the social structure so that upon reaching a higher echelon, the poor (clients) will be able to save and borrow from formal financial institutions (FFIs), most of the poor and socially vulnerable have now become addicted to micro-credit due to demand and supply-side factors. What could be the possible causes of this micro-credit addiction? The objective of this paper was to unravel the causes of what we call “microcredit addiction” and provide recommendations that will enable the addicted clients to break away from this craving. The paper reviews literature on social and financial impact of microfinance and finds that failure of microfinance in the delivery of its core mandate of poverty reduction results in clients’ addiction to micro-credit and, eventually, inhibits their social and financial mobility. The upscaling intentions of MFIs, compulsory savings, high interest rates and transactions costs, multiple borrowing, client’s inability to save for the future and, surprisingly, clients’ satisfaction with MFIs’ products and services are among the factors that make clients get addicted to micro-credit. |
| Keywords: | addiction, microfinance, financial mobility, over-indebtedness |
| JEL: | A14 G21 O16 |
| Date: | 2014–08–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:57894&r=mfd |
| By: | Davide Forcella; Marek Hudon |
| Abstract: | Microfinance institutions (MFIs) are alternative financial providers offering financial services to people typically excluded from the standard banking sector. While most MFIs are active in developing countries, there is also a young and developing microfinance sector in Europe; however, very little literature exists on this MFI segment. In this paper, we analyze the environmental performance of 58 European MFIs. Our results suggest that the size of the MFI, investor concern for environmental performance and, to a lesser extent, donor interest, are closely related to the institution’s environmental performance. Moreover, providing loans larger than microcredits is linked to better environmental performance. This could suggest that the additional revenues generated from these loans, also called cross-subsidies, could help MFIs to strengthen their environmental bottom line. Finally, no evidence suggests that profit status explains environmental performance. |
| Keywords: | Corporate Social Responsibility; Europe; Environment; Microcredit; Microfinance |
| Date: | 2014–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/174739&r=mfd |
| By: | Bateman, Milford |
| Abstract: | This article argues that the microfinance model that arrived in Latin America in the 1970s has proven, as elsewhere around the world, to be an almost wholly destructive economic and social policy intervention. Centrally, I argue that the microfinance model is responsible for embedding and giving continued impetus to an adverse 'anti-development' trajectory in Latin America's economies, one that has progressively helped to de-industrialise, infantilise and informalise the overall local economic and social structure. Until recently, the extent and precise nature of this 'anti-development' trajectory has been ignored for fear of undermining and delegitimizing the global microfinance model and, with it, the dominant political-economic philosophy - neoliberalism - that essentially gave life to it. Effective local industrial policies and 'pro-development' local financial institutions are now urgently required in Latin America to build genuinely sustainable and equitable solidarity-driven local economies from the bottom up. -- |
| Keywords: | microcredit,microfinance,neoliberalism,productivity,deindustrialisation |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:oefsew:39&r=mfd |
| By: | Koomson, Isaac; Annim, Samuel Kobina; Peprah, James Atta |
| Abstract: | Loan refusal has been a problem facing many loan applicants at the household level and this problem is not new to loan applicants in Ghana. Despite this knowledge, researchers passively discuss loan refusal and do not consider the intensity of this problem. This study analyses the effect of household income and savings on loan refusal and the intensity of loan refusal in Ghana using the fifth round of the Ghana Living Standards Survey (GLSS-5). The study employs the direct elicitation approach to identifying credit constrained (loan refused) households and makes use of the Logit and Poisson regression to regress the loan refusal variable on other covariates. The Logit model is applied to loan refusal as a binary variable (refused and not refused) while the Poisson is applied to loan refusal as a count variable (number of times of loan refusal). The econometric analysis of 1,600 and 1,591 households for the loan refusal and intensity of loan refusal respectively shows that income and savings inversely relate to loan refusal and the intensity of loan refusal at their respective significance levels. It is also shown that low-income and low-savings households are more likely to be discouraged from loan applications than their counterparts in high-income and savings households. Financial institutions are called upon to generally widen their coverage and to extend their activities more into the rural areas so as to increase the stock of loanable funds available to rural dwellers. This will reduce the vulnerability of rural dwellers when it comes to loan refusal. |
| Keywords: | Loan Refusal, Credit Rationing, Discouraged Borrowers, Income, Savings |
| JEL: | D1 D14 D82 G21 O16 |
| Date: | 2014–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:58049&r=mfd |
| By: | Anett John (née Hofmann) |
| Abstract: | Recent literature promotes commitment products as a new remedy for overcoming self-control problems and savings constraints. Committing to a welfare-improving contract requires knowledge about one's preferences, including biases and inconsistencies. If agents are imperfectly informed about their preferences, they may choose ill-suited commitment contracts. I designed a regular-instalment commitment savings product, intended to improve on pure withdrawal-restriction products by mimicking the fixed-instalment nature of loan repayment contracts. I conduct a randomised experiment in the Philippines, where individuals from a general low-income population were randomly offered to take up the product. Individuals chose the stakes of the contract (in the form of a default penalty) themselves. The result is that a majority appears to choose a harmful contract: While the intent-to-treat effect on bank savings for individuals assigned to the treatment group is four times that of a withdrawal-restriction product (offered as a control treatment), 55 percent of clients default on their savings contract. The explanation most strongly supported by the data is that the chosen stakes were too low (the commitment was too weak) to overcome clients' self-control problems. Moreover, both take-up and default are negatively predicted by measures of sophisticated hyperbolic discounting, suggesting that those who are fully aware of their bias realise the commitment is too weak for them, and avoid the product. The study suggests that research on new commitment products should carefully consider the risk of adverse welfare effects, particularly for naïve and partially sophisticated hyperbolic discounters. |
| Keywords: | commitment savings, hyperbolic discounting, partial sophistication, regular instalments, Philippines. |
| JEL: | D03 D14 O12 O16 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stieop:55&r=mfd |