|
on Microfinance |
| By: | Berg, Claudia; Emran, Shahe; Shilpi, Forhad |
| Abstract: | Using two surveys from Bangladesh, this paper provides evidence on the effects of microfinance competition on village moneylender interest rates and households’ dependence on informal credit. The views among practitioners diverge sharply: proponents claim that MFI competition reduces both the moneylender interest rate and households’ reliance on informal credit, while critics argue the opposite. Taking advantage of recent econometric approaches that address selection on unobservables without imposing standard exclusion restrictions, we find that the MFI competition does not reduce moneylender interest rates, thus partially repudiating the proponents. The effects are heterogeneous; there is no perceptible effect at low levels of MFI coverage, but when MFI coverage is high enough, the moneylender interest rate increases significantly. In contrast, households’ dependence on informal credit tends to go down after becoming MFI member, which contradicts part of the critic’s argument. The evidence is consistent with a model where either MFIs or moneylenders engage in cream skimming, and fixed costs are important in informal lending. |
| Keywords: | Microfinance, Moneylenders, Microcredit, Interest Rates, Informal Borrowing, Long-run Effects, Bangladesh, Identification through Heteroskedasticity |
| JEL: | C3 O12 O17 |
| Date: | 2015–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:67395&r=all |
| By: | Nwachukwu, Jacinta; Asongu, Simplice |
| Abstract: | This study investigates the legitimacy of the relatively high interest rates charged by those microfinance institutions (MFIs) which have been transformed into regulated commercial banks using information garnered from a panel of 1232 MFIs from 107 developing countries. Results show that formally regulated micro banks have significantly higher average portfolio yields than their unregulated counterparts. By contrast, large-scale MFIs with more than eight years of experience have succeeded in lowering interest rates, but only up to a certain cut-off point. The implication is that policies which help nascent small-scale MFIs to overcome their cost disadvantages form a more effective pricing strategy than do initiatives to transform them into regulated institutions. |
| Keywords: | Microfinance, microbanks, non-bank financial institutions, interest rates, age, economies of scale, developing countries |
| JEL: | E43 G21 G23 G28 N20 |
| Date: | 2015–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:67298&r=all |
| By: | Simplice Asongu (Yaoundé/Cameroun) |
| Abstract: | Using twenty-five policy variables, we investigate determinants of mobile phone/banking in 49 Sub-Saharan African countries with data for the year 2011. The determinants are classified into six policy categories, notably: macroeconomic, business/bank, market-related, knowledge economy, external flows and human development. The empirical evidence is based on contemporary and non-contemporary Quantile regressions. The following implications are relevant to the findings. First, mobile phone penetration is positively correlated with: (i) education, domestic savings, regulation quality and patent applications, especially at low initial levels of mobile penetration; (ii) bank density; (iii) urban population density and (iv) internet penetration. Second, the use of the mobile to pay bills is positively linked with: (i) trade and internet penetration, especially in contemporary specifications and (ii) remittances and patent applications, especially at low initial levels of the dependent variable. Third, using the mobile to send/receive money is positively correlated with: internet penetration and human development, especially in the contemporary specifications. Fourth, mobile banking is positively linked with: (i) trade in contemporary specifications; (ii) remittances and patent applications at low initial levels of the dependent variable and (iii) internet penetration and human development, with contemporary threshold evidence. The policy implications are articulated with incremental policy syndromes. |
| Keywords: | Mobile phones; Mobile banking; Development; Africa |
| JEL: | G20 L96 O11 O33 O55 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:15/043&r=all |
| By: | Asongu, Simplice; De Moor, Lieven |
| Abstract: | The policy debate has been shifting from the finance-growth nexus to the finance-inequality relationship. In the transition from Millennium Development Goals (MDGs) to Sustainable Development Goals (SDGs), there has been an urgent policy challenge of putting some structure on recent advances in finance for more inclusiveness. The overarching question tackled in this paper is: to what degree has financial development contributed to providing opportunities of human development for those in the low-income strata and by what mechanisms? We survey about 170 recently published papers to provide recent advances in finance for inclusive development. The analytical approach consists of first, situating issues of exclusive growth in the context of the literature and then reviewing recent financial inclusion growth strategies. Developed and developing countries are separately engaged in some currents to account for heterogeneity in financial development benefits. Retained financial innovations are structured along three themes, notably: the rural/urban divide, women empowerment and human capital in terms of skills & training. The financial instruments are articulated with case studies, innovations and investment strategies with particular emphasis, inter alia on: informal finance, microfinance, mobile banking, crowdfunding , Islamic finance, remittances, Payment for Environmental Services (PES) and the Diaspora Investment in Agriculture (DIA) initiative. |
| Keywords: | Finance; Inclusive Growth; Economic Development |
| JEL: | G20 I10 I20 I30 O10 |
| Date: | 2015–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:67299&r=all |
| By: | Cull,Robert J.; Gan,Li; Gao,Nan; Xu,L. Colin |
| Abstract: | Using a new and representative data set of Chinese household finance, this paper documents household access to and costs of finance, along with their correlates. As in most developing countries, informal finance is a crucial element of household finance, and wealth tends to be associated with better access to formal and informal finance. Better financial knowledge shifts loan portfolios toward formal sources relative to informal ones. Connections to the Communist Party are associated with significantly better access to finance in rural areas but not in urban areas. A larger social network is positively associated with access to informal finance. Controlling for household characteristics, rural residents pay interest rates on loans similar to urban residents. Younger residents pay higher rates, while households on firmer economic footing face lower rates. Taking financial classes and college education is associated with higher interest rates for urban residents, suggesting perhaps that financial knowledge coincides with greater demand for credit in areas with more economic opportunity. Overall, the findings suggest that Chinese residents face dual credit markets, with the poor, young, those with poor financial knowledge, and those with larger family sizes relying much more on informal finance, while others are better able to access formal finance. |
| Keywords: | Access to Finance,Bankruptcy and Resolution of Financial Distress,Debt Markets,Banks&Banking Reform,Financial Literacy |
| Date: | 2015–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7454&r=all |
| By: | Ramasubramanian, Janani Akhilandeswari |
| Abstract: | This thesis presents an analysis of the demand and impact of crop microinsurance in India. The study is based on extensive fieldwork and primary data collection from two field sites in India. The first empirical chapter examines the impact of crop microinsurance on output. Accounting for the endogeneity of insurance investment, this chapter uses a two-step instrumental variables approach to assess the impact of insurance on yield for two varieties of paddy. The assessment is based on secondary district level data and primary household survey data. The findings indicate that impact of insurance on yield is not homogeneous across crops. It is based on the flexibility of the crop’s input requirement structure.The second chapter explores the impact of crop insurance on the use of inputs such as seeds, fertilizers, pesticides, irrigation and labour for paddy varieties. This chapter is a significant addition to the existing small pool of literature on the impacts of crop insurance on a range of inputs. Since both insurance and input decisions are ex-ante, a simultaneous equations model is employed to assess impacts. Results show that the impact of crop microinsurance varies based on the type of input, crop under consideration and its significance in the income portfolio of a farmer. The final chapter assesses the demand for crop microinsurance using a contingent valuation experiment on turmeric farmers. This is a first of its kind attempt to delineate the willingness to join (WTJ) from the amount of willingness to pay (WTP) for crop insurance policies. Results based on a Heckman selection model, indicate that while the WTJ is influenced by risk attitudes and product literacy, the amount of WTP is driven by a careful assessment of the other risk coping avenues available to a household. Only the ‘residual’ risk is passed on to insurance. |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susphd:0315&r=all |