Academic literature on the topic 'Microfinance – Developing countries'

This thesis contains three empirical essays which aim to contribute to economic research in the field of microfinance. Specifically, the first of these essays, presented in Chapter 2, examines the effect of commercialisation on efficiency of microfinance institutions (MFIs) in Sub-Saharan Africa using Data Envelopment Analysis and truncated regression model. The analysis is performed on 273 MFIs in Sub-Saharan Africa for the period 2005 - 2011. It is shown that commercialisation has a positive effect on efficiency of MFIs. In the light of this finding, we uphold the view that commercialisation can bring some benefits to the microfinance industry. Chapter 3 reports the investigations of whether productivity growth in the microfinance industry are passed to microcredit clients in the form of lower interest rates, and whether the effect depends on the extent of competition in the industry, using a balanced panel data on 175 MFIs worldwide over the period 2005 - 2012. The study finds that the effect of productivity growth in reducing microcredit interest rates is greater for high levels of competition than for low levels of competition. Thus, the evidence suggests that microcredit clients can benefit from productivity growth in the form of lower interest rates as the microfinance industry increasingly becomes competitive. We therefore argue that productivity growth and competition should be encouraged in the microfinance industry. The third essay, presented in Chapter 4 considers the possibility of mission drift in microfinance; a situation whereby MFIs move away from targeting the poor towards better-off clients. Using two different measures of poverty, the chapter examines whether the location choices of MFIs in Uganda are consistent with the objective of extending financial services to the extreme poor; and whether the pattern observed varies across different types of MFIs. The analysis is conducted on 118 MFIs over the period 2009 - 2013, by adopting a static count data model and dynamic regression approach. The results point towards an interesting picture that is important to take into account in the debate on mission drift. We show that the location of branches of MFIs is initially correlated negatively with poverty, but this correlation disappears over time; suggesting that MFIs have a greater incentive to target richer districts during earlier years, but poorer districts tend to catch-up with time. Again, we show that Commercial Bank MFIs are more likely to increase their presence in poorer districts than do other types of MFIs. These results suggest that full-fledged commercially oriented MFIs can have a strong positive response to targeting poorer districts. The implication of these findings is that commercial microfinance could be pursued as a strategy to reach the unbanked segment of the world's poor population. Taken together the analysis presented in each of these three chapters appears to indicate that, contrary to the writing of some popular commentators, the cause of economic development may have little to fear and much to gain from the entrance of commercial MFIs. While this conclusion may surprise many development professional, it should not surprise the development economist that the very forces of competition appear to drive these findings. While it is quite possible that the MFI revolution could not have been set lose by the commercial sector, it certainly does appear that the market which they established is now a viable and flourishing area to do business. Just as importantly, fears that commercial lenders might not target the poorest, or could charge exploitative rates of interest, may have been overstated.

<p>Currently, some microfinance institutions in Bolivia are adopting Corporate Social Responsibility (CSR), a concept whereby sompanies integrate social and environmental concerns in their business operations and publish the results. CSR is applied mostly by big companies in the North and in sectors more in the eye of the public, such as oil production or textile and apparel. Bolivia has been the pioneer in the commercialization of microfinance through microfinance NGO transformations. The objectives of this investigation was to asses and compare the reasons why the selected Bolivian commercial MFI's were engaged, or not engaged, in CSR. Secondly, to determine which stakeholders are more relevant for each MFI analysed, assessing how they influenced the decision to adopt or not adopt CSR and thirdly, to compare the current social performance of the selected MFI's within the framework of corporate social responsibility.</p>

Microfinance research concerns addressed in this thesis relate to: the associations between the individual characteristics of borrowers and the probabilities of being in delinquent or default; the determinants for the financial awareness of interest repayment; and the application and comparison of modern missing data techniques (Multiple Imputation, Maximum Likelihood Estimation, and Predictive Mean Matching) with incomplete loan book data. The thesis emphasises credit scoring issues that affect repayment performance and revolves around three empirical chapters that seek to address the above research concerns. Survey and loan book data from individuals in 51 MFIs across 27 developing countries. The data were compiled by the MFIs and collected by Micro Finanza Rating. Varied micro-econometric techniques (ordinary least squares, Logit regression, Tobit regression, Two-Part model, Double-Hurdle model, Box-Cox transformation, and three missing data imputation methods: Multiple Imputation, Maximum Likelihood Estimation, and Predictive Mean Matching) are used depending on the hypotheses being considered in each chapter. The main findings are: engaging in agriculture is related to a lower probability of default that measured by the amount of arrear in general; besides, the association between agriculture and the length of delayed repayment is insignificant; previous access to micro-finance has positive association with the financial awareness of the clients who lived in urban areas; in addition, previous access to saving service has positive effect on the clients with at least primary education; when the missing microfinance data is semi-continuous, PMM outperforms MI and ML in most simulations; for binary or ordinal categorical data, PMM performance surpass MI and ML only when the sample sizes of data are large, the missing rates are low, and the missing mechanism is MAR. The thesis suggests the following recommendation both for management of MFIs and government, we need to: make financial services for poor farm households and farm-related business more attractive to the MFIs; financial awareness can be improved by access to microfinance services, hence extra learning programmes may be unnecessary; Two-Part Model should be applied to credit scoring; and PMM imputation is the best technique to be applied to deal with the missing data issues and improve data quality in microfinance.

In the first part of the thesis I focus on credit markets in developing countries, and describe the competitive interaction between Microfinance Institutions (MFIs). <p>Microfinance has recently attracted a lot of attention from investors, politicians, scholars and, most of all, people working on development. As a results, a huge number of MFIs are being created all over the world so that, as of today, practitioners reckon that about 100 millions of customers are being served. Remarkably, about 67% of them are women. <p><p>The reason of this extraordinary effort is that Microfinance is considered the most promising development tool currently available. This belief is based on two important features of Microfinance: (i) It promises to be financially viable (and in some cases even profitable) since poor people have proven to be reliable clients. As a result, Microfinance is potentially a zero-cost development tool. (ii) It hinges on the entrepreneurial abilities of the poor. It is designed to help the poor to help themselves, in their own home countries, by allowing them to use their skills, ideas and potentials. This should progressively make developing countries independent of rich ones' help. <p><p>The growth of Microfinance has been so fast that many issues and related research questions are still not answered. In my thesis I try to address one of them, that I believe particularly important: the increase of competition between MFIs. As economic theory predicts, competition can have dramatic consequences in terms of borrower welfare, profitability of the institutions and, therefore, on the attractiveness of the business for potential investors, donors and entrants. I use the tools of industrial organization and contract theory to understand these effects, measure them, and give some interesting policy advice. <p><p>In the first paper, I analyze the effects of entry of a new MFI in a previously monopolistic microcredit market. In order to catch the salient features of financial markets in developing countries, I use a model of asymmetric information and assume that institutions can offer only one type of contract. I consider different behavioral assumptions for the MFIs and study their influence on equilibrium predictions. The model allows showing that competition can lead to equilibria in which MFIs differentiate their contracts in order to screen borrowers. This process can, unfortunately, make the poor borrowers worse off. Interestingly, the screening process we describe creates a previously unexplored source of credit rationing. I also prove that the presence in the market of an altruistic MFI, reduces rationing and, via this channel, affects positively the competitor's profit.<p><p>In the second paper, I study the effects of competition in those markets in which, due to the absence of credit bureaus, small entrepreneurs can simultaneously borrow from more than one institution. As in the first paper, I analyze an oligopolistic microcredit market characterized by asymmetric information and institutions that can offer only one type of contract. The main contribution is to show that appropriate contract design can eliminate the ex-ante incentives for multiple borrowing. Moreover, when the market is still largely unserved and particularly risky, a screening strategy leading to con- <p>tract differentiation and credit rationing is unambiguously the most effective to avoid multiple borrowing. The result of this paper can also be read as important robustness checks of the findings of my first paper. <p><p>In the last part of the thesis, I depart from the analysis of developing countries to consider, more generally, the corporate governance of financial infrastructures. The efficient functioning of financial markets relies more and more on the presence of infrastructures providing services like clearing, settlement, messaging and many others. The last years have been characterized by interesting dynamics in the ownership regime of these service providers. Both mutualizations and de-mutualizations took place, together with entry and exit of different players. <p><p>Starting from this observation, in the last paper (with Joachim Keller), we analyze the effects of competitive interaction between differently owned financial providers. We mainly focus on the incentives to invest in safety enhancing measures and we describe the different equilibrium market configurations. We use a model in which agents need an input service for the financial market they operate in. They can decide whether to provide it them selves by forming a Cooperative or outsource it from a Third Party Provider. We prove that the co-existence of differently governed infrastructures leads to a significant reduction in the investment in safety. In most cases, monopolistic provision is preferable to competition. Moreover, the decision rule used within the Cooperative plays a central role in determining the optimal market configuration. <p><p>All in all, throughout my thesis, I use the tools of industrial organization and contract theory to model the competitive interaction of the different actors operating in financial markets. Understanding the dynamics typical of developing countries can help in gaining a deeper comprehension of the markets in richer countries, and vice-versa. I am convinced that analyzing the differences and the similarities of financial markets in different regions of the world can be of great importance for economic theorists, in that it provides a counterfactual for the assumptions and the results on which our predictions and policy advices are based.<p><br>Doctorat en Sciences économiques et de gestion<br>info:eu-repo/semantics/nonPublished

Tout d'abord, cette thèse examine les relations d'une part entre la politique monétaire et la microfinance et d'autre part celles liées à la croissance économique et le secteur de la microfinance. Nos résultats montrent dans le premier cas que les taux des institutions de microfinance (IMF) à vocation non commerciale sont moins sensibles à la politique monétaire contrairement à ceux des IMF à vocation commerciale. Ce résultat peut s'expliquer par la possibilité des IMF à vocation commerciale à avoir un accès plus important au financement bancaire contrairement aux IMF à vocation non commerciale. Quant au deuxième cas, nous trouvons que la microfinance affecte la croissance économique à travers les canaux de transmission que sont la consommation et l'investissement. Ensuite, nous avons analysé l'impact des indicateurs de gouvernance notamment le nombre de personnes au conseil d'administration, le statut juridique et les ratios de prudentielles sur les performances financières et sociales des IMF dans un premier temps et dans un second temps nous examinons l'effet de la structure du capital sur l'activité de microcrédit à court, moyen et long terme. En ce qui concerne la gouvernance, nous trouvons que les IMF ayant le statut de « société anonyme » dégagent des marges bénéficiaires plus importantes que les institutions mutualiste et coopérative d'épargne et de crédit (IMCEC). Quant aux travaux sur la structure du capital, nous remarquons que les prêts aux populations à faibles revenus sont refinancés par les emprunts bancaires dont la conséquence est le renchérissement du taux prêteur. Enfin, nous constatons que les IMF qui se refinancent par les dépôts ont une activité de prêt plus importante que celles qui se refinancent par des emprunts bancaires<br>Firstly, this thesis examines the relationships between monetary policy and microfinance on the one hand and economic growth and the microfinance sector on the other. Our results show in the first case that the rates of non-commercial microfinance institutions (MFIs) are less sensitive to monetary policy than those of commercial MFIs. This result can be explained by the possibility that commercial MFIs have greater access to bank financing than non-commercial MFIs. As for the second case, we find that microfinance affects economic growth through the transmission channels of consumption and investment. Then, we analyzed the impact of governance indicators such as the number of people on the board of directors, legal status and prudential ratios on the financial and social performance of MFIs first and then we examine the effect of capital structure on microcredit activity in the short, medium and long term. With regard to governance, we find that MFIs with "public limited company" status generate higher profit margins than mutual and cooperative savings and credit institutions (IMCEC). As for the work on the capital structure, we note that loans to low-income populations are refinanced by bank loans, the consequence of which is the increase in the lending rate. Finally, we note that MFIs that refinance themselves through deposits have a higher lending activity than those that refinance themselves through bank loans

Limited access to financial services is known as a major constraint to agricultural development (FAO, 2002). Farmers need liquidity to face agricultural expenses throughout the production cycle but mainly at the beginning. Mainstream financial institutions are reluctant to serve the agricultural sector for several reasons. First, they consider the sector to be highly risky with low performance. Also, agricultural activities depend on the weather, they take place in remote rural areas, and commodities prices are volatile. All these aspects make it hard for standard banks to reach their profit goals when lending to farmers. Since microfinance was conceived, it has generated a lot of hope for alleviating poverty in low-income countries. Microfinance provides the poor with access to affordable capital by granting low-income individuals with loans they would not otherwise have access to, because of economic and geographic constraints. The goal of the dissertation is to examine the role and the importance of microfinance in the agricultural sector of developing countries. A survey took place in October 2017, in both rural and urban areas of Benin and involved 750 agricultural households. Three different agricultural zones were selected: the North-East (cotton zone); the Center (tubers and cashew nut zone) and the South (a region with special crops such as vegetables, pineapple, palm tree, exotic plants). The study focuses on agricultural loans. It includes clients of the major microfinance institution in Benin: FECECAM - Faîtière des Caisses d’Epargne et de Crédit Agricole Mutuel. This research contributes to the literature in several ways. The study allows shedding light on the effects of agricultural loans, specifically, on households’ efficiency and labor employment, which are mostly overlooked in the microfinance literature. To overcome selection bias in microcredit evaluation, the research employs a pipeline design. Control and treatment groups consist of individuals who have chosen to participate in the microfinance program. The loan treatment considered is the experience with loans which includes program entry timing, loan take-up frequency, and the average amount of loan obtained over the 2012-2017 period. The study employs a cluster analysis technique to create reliable comparable groups. Multiple variables and indicators are analyzed. A descriptive analysis of loan impact on farmers’ labor input choices shows that past loans have residual effects on both hired and family labor use. Farm loans, especially those obtained for farm machinery significantly reduce expenditure on hired labor but more family labor is employed using machine loans while other loan categories reduced the use of family labor. The evaluation of the whole-farm efficiency of borrowers in the presence of agricultural loans reveals significant technical and allocative errors leading to profit loss in all studied regions. However, experience with loans significantly increases farmers’ whole-farm efficiency, particularly in the North. Finally, the assessment of well-being indicators suggests that those farm loans have a significant positive impact on sampled recipients’ net farm income, food security and food quality statuses. Agricultural loans also have a positive impact on women’s empowerment. The monitoring and implementation mechanism of FECECAM played a crucial role in the success of its loan programs.

One of the greatest challenges faced by post-independence Developing Countries (DCs) is an immerse backlog, shortages and unsatisfactory conditions of housing for the poverty-stricken and lowest socioeconomic groups of their population. Governments and their development partners have previously embarked on many ambitious housing programmes by engaging in mass delivery of urban housing in fulfilment of the vision of adequate housing for all as reflected in many international housing policy frameworks. However, over a million of the lowest socioeconomic groups in DCs are still living in housing poverty. This is as a result of rapid urbanisation outpacing the effectiveness of most housing policies. Moreover, rapid urbanisation has led to lack of employment and lack of access to low-income housing finance among low-income groups to meet their housing needs. To address such challenges requires alternatives and innovative financial mechanisms such as Housing microfinance (HMF). Moreover, despite many microfinance institutions (MFIs) operating worldwide, there are only a few that operate within the low-income housing market. There is also little evidence in the literature about the role and motivations of such institution's involvement in the provision of HMF to low-income groups, particularly in Ghana. This study investigated the role of microfinance as an innovative strategy and modelled the motivations behind MFIs intention to enter the low-income housing market. The primary aim of the study was to explore the role of microfinance as an innovative strategy and the motivation behind MFIs’ and individuals in low-income group’s’ intentions to supply or demand HMF in Ghana. The study adopts a mixed method research approach involving in-depth interviews with three Housing Microfinance Institutions and focus group discussions with 36 low-income groups in the Greater Accra and Ashanti regions in Ghana. A total of 200 survey questionnaires were also distributed to MFIs of which 135 questionnaires were returned, and 125 were usable. The qualitative data was analysed using Nvivo Version 10. The Statistical Package for Social Sciences (SPSS) Version 22 and Partial Least Square Structural Equation Modelling (PLS-SEM) Version 3.0 Software were also used to analyse the quantitative data. A model of MFIs’ intention to enter the low-income housing market was subsequently developed and analysed. The results show that existing Housing Microfinance Institutions motivations are the social, economic and sustainability incentives for being in the low-income housing market. It further emerged that risks and appetite for profit are the strongest demotivating and motivating factors that can deter or attract new MFIs into the low-income housing market. The provision of construction and technical assistance as part of HMF packages will serve as a moderating factor between both demotivating and motivating factors. The barriers and constraints in the supply and demand for HMF include indigenous, industry capacity, credit and managerial, economic and finance issues, low-income and stringent HMF eligibility requirements. On the other hand, the risk factors identified were behavioural and relationship, economic and financial issues. Others are lack of institutional and regulatory framework, collateral and security issues, socio-cultural and construction risks. Furthermore, low-income groups are motivated to use HMF for new construction and land acquisition due to their desire for individual home ownership rather than renting. The model of intention shows that the motivating factors were more significant in predicting intention than the demotivating and moderating factors. However, together with their latent variables and factors, they explained 45% of MFIs intention to enter the low-income housing market in Ghana. The study, therefore, recommends the establishment of a national housing authority and a separate supportive and financially inclusive regulatory environment for HMF delivery. The development of any HMF programmes by the government, donor partners and MFIs should take into account the motivations behind the decisions of those in low-income groups to use HMF, rather than their effective demand for housing. Housing Microfinance Institutions should be more efficient, innovative, sustainable and viable by making their products simple, accessible and transparent. Furthermore, the future of the low-income housing market in DCs should be responsive to the 12-factor model of intention, and especially the demotivating factors vis-a-vis those from the low-income groups’ perspectives. The study provides stakeholders in the two sectors with a set of prioritised factors for making rational decisions concerning the supply and demand for HMF to low-income groups to meet their housing needs. The study demonstrates the role and usefulness of HMF and the motivations behind MFIs’ and low-income groups’ intentions to supply or demand HMF in Ghana. It has uncovered the barriers and risks associated with the provision or demand of HMF in a developing country context. Moreover, it has also re-contextualised the Push-Pull-Mooring model of human migration in a new context of demotivating-motivating-moderating factors. Hence, the study offers a foundation for other researchers to use as a follow-up for future research. Notwithstanding, further studies are required to investigate and establish the varying levels and segmentation needs of both markets.

Over the last few decades, microfinance industry has played an essential role in alleviating poverty level and helping the underprivileged, by enabling access to myriads of financial services. Statistics from the World Bank reveals that, currently, only 4% of the underprivileged were served out of the 3 billion potential clients. Such results were due to several claims, particularly the operational and financial challenges faced by the MFIs in the constant flux, inviting more attentions towards its performance. While explicit focuses were given by many researchers towards mobile banking and Information Communication Technology (ICT) and online services in improving the MFIs performance, the study on how Social Media, as a rapidly growing online phenomenon, could affect the MFIs performance remain scarce. Hence, this study was aimed at investigating and clarifying the impact of social media on MFIs, based on four dimensional performance indicators: efficiency, financial sustainability, portfolio quality, and outreach. A model was developed utilising Resource Based-View (RBV) Theory, to test the relationship between social media application and organisational performance. A quantitative approach has been adopted employing from web-based questionnaires, to collect data from MFIs employees in developing countries such as Kenya, India and Jordan. Structured Equation Modelling (SEM) technique (i.e. SPSS and AMOS 20 software) was used as a tool to analyse the responses. Results revealed a significant influence of the social media over the MFIs performance, offering valuable insights to both researchers and practitioners in the domain of micro-finance, as well as social media – conforming that the adoption of social media as marketing, advertising and communication tools could significantly improve the MFIs performance. Keywords: Microfinance, Microfinance Institution Performance, Social Media, Resource Based View Theory.

It is widely accepted as fact that the creation of a stable financial system is the catalyst which facilitates economic development and prosperity. However, developing countries which embark on a path of change often forget the cardinal rule: addressing the needs of those who suffer from poverty, inequality, and political strife. In other words, change starts from the ground up; not the other way around. First among the challenges facing these countries, is the need to change the lending rules followed by traditional financial institutions--banks and other private lenders--who are unwilling to provide their services to individuals with little income and few if any assets that can be used as collateral. Second, global organizations like the United Nations, World Bank, and the International Monetary Fund have failed to provide aid in a way that forces the creation of positive and sustainable change for fragile and destabilized societies. For this reason, many developing countries which receive financial aid are no better off than they were before the interventions occurred, and in some cases worse. Finally, other aid programs and even well-intentioned government efforts to reduce poverty fail simply because they are misguided. Too much attention and financial resources are devoted to grand schemes of long-term duration and not enough is given to impacting human lives in the present. In 1973, visionary economist Muhammud Yunus witnessed his beloved country of Bangladesh sinking into the deepest realms of poverty; much of its population in despair and left without hope of extricating itself from a bleak existence. The problem was compounded by the fact that its government was preoccupied with matters of State rather than those of its people; its financial institutions were oblivious to the pain and hunger which surrounded them, and international donors were simply giving away money without any form of control or direct involvement.; Out of this scenario, Yunus started with an idea that would alter not only his life, but the lives of people in Bangladesh and the world over: micro-finance. To this day, nearly every text written on the subject calls micro-finance a weapon in the fight against global poverty, but only a mere few recognize just how much of the gains made in this "fight" are attributable to the direct involvement of women in micro-financing. This thesis posits that while Muhammud Yunus created an idea for the benefit of "the global poor", it actually became a medium for the empowerment of women around the world. In fact, much of the praise awarded to micro-finance as success omit recognition of what should be obvious: the driving force behind the success of micro-lending is (poor) women. This statement does not seek to diminish the merits of an idea which has put a significant mark on the global economy, or to ignore the accomplishments of millions of men who through hard work have overcome poverty. However, what began as a genderless effort to help the poor of Bangladesh soon changed to one that overwhelmingly favored women. To this day, lending primarily to women has become the modus operandi of the microfinance industry for one reason above all: because women have proven they are a good business risk. The first part of this thesis will analyze the birth and development of the micro-financing system with special emphasis on its creator, Muhammed Yunus and the financial institution he founded for the purpose of implementing his idea, Grameen Bank. The second part will review the growth of micro-financing across the world with focus on Kiva, a web-based organization which represents the melding of micro-finance with 21st century technology. Finally, the thesis will look at Pro Mujer, a micro-financing organization which has successfully operated in Latin America for the last 20 years and developed a niche that expands the horizons of empowerment.<br>ID: 029808766; System requirements: World Wide Web browser and PDF reader.; Mode of access: World Wide Web.; Thesis (M.A.)--University of Central Florida, 2011.; Includes bibliographical references (p. 105-113).<br>M.A.<br>Masters<br>Political Science<br>Sciences