Microcredit Institutions Research Articles

Commercial Law Reform in Africa: A Means of Socio-Economic Development, but for Whom? Perspective of Women Entrepreneurs in Benin

This thesis explores the relationship between formal commercial law in Benin and women’s on-the-ground business practices. It constitutes the starting point of the author’s doctoral project in the course of which she intends to further pursue her research on the impact of the OHADA commercial law on socio-economic development in the region. As such, the author would welcome receiving comments and criticisms.The dissertation first looks at the evolution of business law and of economic activity in the region from pre-colonial times to present where OHADA Uniform Acts ('Acts') constitute Beninese formal commercial law’s primary source. The thesis then examines elements of business women’s socio-cultural realities and economic practices in the region (some of which were observed during empirical research carried out in Benin) to assess the extent to which they are accounted for in the Acts, these being largely inspired by French and foreign law. While the Acts may benefit foreign companies that contribute to the region’s economic vitality to varying extents, the analysis reveals that considerable gap that continues to exist between the OHADA regime and the preoccupations of micro, small and medium (in particular female) enterprises in Benin. This prevents many Beninese citizens and enterprises from playing a greater role in the socio-economic development of their country. The dissertation suggests that the paradigms and methods currently used by OHADA and international organizations such as the World Bank in their law reform activities do not take appropriate account of the identity of legal actors in the region (banks, small, medium and large entrepreneurs, micro-credit institutions, financiers, etc.), the dynamics between them and the role of women in business. It argues in favor of business modernization techniques that would make echo to the norms regulating local economic agents conduct and realities rather that be founded overwhelmingly on reform models elaborated outside of their application context.

Social Theory and Poverty Reduction with Special Attention to Nigeria: Social‐Institutional Explanation of Small‐Scale Financial Institutions

AbstractDo institutions and social capital provide a viable means for advancing the goals of poverty reduction programs in low capacity states? This question has particular importance for Nigeria and Africa as a whole because of the poor performance of poverty reduction programs despite domestic and global efforts to reduce poverty in the continent. In this paper, I assess the usefulness of the informational aspects of the new institutional economics and the social network method of social capital paradigm in reducing access, information and monitoring costs faced by the poor and service providers of micro‐credit institutions in Nigeria. The general proposition of this paper is that poverty reduction can be promoted on the one hand, by designing programs to reflect some regularities (formal and informal rules and regulations) which best enhance benefits and mitigate costs faced by the poor for obtaining services, and on the other hand a mobilization of cohesive social relationships based on existing networks of semiautonomous units, that substitute for weak enforcement of contracts to reduce the service delivery costs to the poor.

Off-grid electrification with solar home systems: The experience of a fee-for-service concession in South Africa

In rural areas of developing countries, electrification projects with photovoltaic systems were conceived as pilot projects with the implementation of a limited number of systems. After considerable financial support from international donors, photovoltaic systems were often quickly abandoned few years after their installation. Using micro-credit institutions in the energy sector or implementing small utilities with a fee-for-service model is now considered as two desirable options to create a dynamic self-sustained market for solar home systems. South Africa launched in 1999 an ambitious off-grid solar electrification programme with fee-for-service concessions. Operating as small-scale utilities, fee-for-service concessions have facilitated the implementation on a large scale of solar home systems and solved the issue of high up-front cost and of long-term maintenance. This paper focuses on operational and design issues linked to the implementation of fee-for-service concessions. Even in a challenging institutional context, some South African operators seem almost able to reach their break-even point. The case of one concessionaire is detailed and serves as a basis for a discussion on the benefits and difficulties linked to the fee-for-service model and on the potential for replication.

Path To Financial Inclusion: The Success Of Self-Help Groups-Bank Linkage Program In India

Financial inclusion has been a major theme in both industrialized and developing economies in the era of financial globalization. When microcredit institutions have received limited success in many countries, microfinance is being used in India for the purpose of accomplishing universal financial inclusion. This paper recognizes the overwhelming efforts of the Government of India and focuses on the success of the linkage between commercial banks and self-help groups (SHGs). The SHGs comprising predominantly women groups help in the social cause of alleviation of poverty, , increase of sustainability, reduction of vulnerability, improvement of capacity building and help the weaker sections build assets. Increased education, better standard of living, reduced child mortality and child labor, emancipation cum empowerment of women, and communal harmony are value adding benefits to the country.

Accessibility to microcredit by Chinese rural households

This paper examines the factors influencing the accessibility of microcredit by rural households in China. The empirical analysis utilises logistic regression, with data collected through a household survey carried out in one province in China. A total of twelve household-level factors are identified as determinants in households’ access to microcredit, including educational level, household size, income, among others. In addition to these, results indicate that rural households’ accessibility to microcredit can also be impaired by the supply-side factors (e.g., interest rates, loan processing time). The empirical analysis establishes a positive relationship between households’ credit demand and access to credit. The paper thus concludes that households should be encouraged to raise capital requirements (for example, create investment opportunities in on/off farm activities) to increase their demand for credit, which can enhance their access to microcredit. In addition, microcredit institutions (such as the Rural Credit Cooperatives) should improve their lending schemes and micro loan products to better suit the diversified needs of the rural population.

English

IntroductionThis paper explores whether microcredit (MC) programs have any effect on alleviating poverty and restoring livelihoods for the targeted populations in Bosnia and Herzegovina (BH). Doyle, who conducted a comprehensive review on the general impact of MC in helping refugees, returnees and IDPs in improving their living conditions and restoring their livelihoods, seems to believe so (Doyle, 1998 & 2008). As a mechanism that has a stated directive and the objective of targeting the most impoverished groups of society, the role of microfinance in BH deserves much more attention and serious exploration.Bosnia and Herzegovina is a country that endured a devastating war from 1992- 1995. The traditional best-practice paradigms of microfinance are inapplicable in war and conflict-affected situations because of the instability of the governmental and financial institutions, and the lack of communal and social trust among individuals. Within these post-war environments, refugees, returnees and internally displaced populations (IDPs) are among the most marginalized and helpless of the affected groups. Providing microfinance to them is then perhaps the most challenging problem facing practitioners and MC institutions engaged in this kind of relief and development work. Various micro-financial institutions have been active in Bosnia-Herzegovina since 1996 and struggle with providing services in such a challenging environment. An insight into their work promises to uncover strategies that may be employed with the problems and successes of such endeavors. Therefore, this paper will shed light on the work of these organizations and their effectiveness.The following relevant research questions are addressed in this study:Research question number one: How do micro-credits affect the livelihoods of the targeted groups, and to what extent do refugees, internally displaced persons and returnees have access to micro-credits in Bosnia and Herzegovina?Research question number two: What are the objectives of the microcredit programs, and what are the most requested loans in Bosnia and Herzegovina?Research question number three: What are the perspectives of the beneficiaries of micro-credits in Bosnia and Herzegovina regarding this service and its impact on them?There is a big debate and doubts about the certain impact of the MC industry in BH both at the local and international levels. The reports from the World Bank, Microfinance Information Exchange (MIX) and the Association of Microfinance Institutions in Bosnia and Herzegovina (AMFI) show that; among peers in Kosovo and in the Balkans (Albania, Croatia, Macedonia, Montenegro, Serbia) in general, as well as peers similar in size and market outreach from Eastern Europe and Central Asia (ECA), the Bosnian MFIs are some of the most highly leveraged, more than 70 percent of all funding to MFIs in BH during 2007 came from foreign lenders. In 2007, most Bosnian MFIs showed high growth rates in active borrowers and especially loan portfolio. More than half of the non-bank MFIs grew by more than 50 percent in outreach. On the other hand, others like Karnani (2007a) suggested that governments, businesses and civil society should work together to reallocate their resources away from microfinance and instead support larger enterprises in labour intensive industries. A strong critique comes from Bateman (2007a) 'new wave commercial microfinance' where he asks whether microfinance can actually undermine medium-term economic development because it supports inefficient activities. Bateman found that there is little solid evidence to confirm that commercial microfinance facilitates sustain economic and social development.However, this paper might provide some evidence as to whether the MCI in BH, with it's both commercial and non-profit institutions, helps in alleviating poverty and promots economic and social development.Literature ReviewOrigin and Philosophy of MicrocreditMicro-credits, as a viable tool of development, began in 1976 when Bangladeshi economist and social reformer Muhammad Yunus began lending small amounts of money to rural poor women of Jobra village to start or expand their businesses. …

Credit Officers and Loan Granting in Microfinance: Brazilian Evidence

In microcredit institutions, credit officers play a prominent role in loan granting decisions. Indeed, they collect field data, meet with the applicants, and provide personal recommendations to the credit committee that takes the final decisions (loan approval/denial, and loan size). This paper offers the first precise quantification of the degree of influence of the credit officers on the final decision making. Based on a detailed database from a Brazilian microcredit institution, we are able scrutinize the process that drives the determination of loan size within the institution. The partiality of the credit officers is analyzed through the lens of gender bias, providing a measure of the extent of the agency problem at stake. The results show that there is indeed a gender gap in loan size generated by the MFI, and that this gap is almost exclusively attributable the credit officers. In conclusion, this paper confirms that, despite monitoring, the credit officers remain by far the dominant decision-makers in microloan granting.

Microcredit, money transfers, women, and the Cameroon diaspora

The paper introduces the topic of Rotating Savings and Credit Associations (ROSCAs) and several other forms of microcredit institutions, variations of which are found in most communities around the world, and considers the impact on them of the current financial crisis. For many women and men, poor and wealthy alike, these institutions have been economic and social lifelines. Among many African peoples, they provide the main source of rural and urban credit, both for sustainable living and entrepreneurial endeavour. This paper draws on the experience of con-temporary Cameroonians, including those in the diaspora, in particular that of Dr Bridget Teboh. Social anthropologists have espoused ROSCAs for many decades. This paper cites the increasing attention such institutions now get from governments, NGOs, bankers and economists, and considers the impact of the current worldwide financial crisis on the behaviour of those who save in them. Key words: micro nance, tontines, ROSCAs

Avoiding the perils and fulfilling the promises of microfinance: A closer examination of the educational outcomes of clients’ children in Nicaragua

Many microfinance advocates claim that micro-credit has a positive effect on the educational outcomes of the children of micro-credit borrowers, and that these educational improvements provide us with evidence that micro-credit institutions are serving the social function for which they have been designed. This paper draws attention to this area of microfinance-impact research, and explores the promises and perils associated with the impact of microfinance on children's educational outcomes. The goal of this discussion is to ensure that the pervasive spread of microfinance to all parts of the globe is accompanied by benefits to children's educational outcomes. Drawing on the research we conducted in Nicaragua in 2008, we, the joint authors of this paper share insights that we hope can help to upgrade the practices currently being employed by both microfinancers and children's educational institutions, and to thereby strengthen academic-credit linkages within client households.

Benchmark – based review as a strategy for microfinance delivery

Microfinance is one of the development tools for poverty reduction. The traditional supply-led subsidized credit delivery has led to increase in credit disbursements. However, there is shortage of model benchmark and indicators for evaluating and comparing performance of microfinance schemes. This study reviewed the monitoring strategy of the Micro Finance Policy Regulatory and Supervisory Framework and highlighted the acute absence of benchmarks and indicators for measurement of performance. Data were gathered from secondary sources. Analysis was by simple descriptive statistics. Recommendations were made for effective benchmark-based periodic review of the performance of micro-credit institutions.

Avaliação do processo de implementação do Programa Nacional de Microcrédito Produtivo Orientado (PNMPO), em Minas Gerais, na percepção dos dirigentes das instituições habilitadas

This study was conducted in order to evaluate the current operation of the “Programa Nacional de Microcredito Produtivo Orientado” (PNMPO) in the institutions and to identify the leaders´ perceptions on the progresses and their futures perspectives. The data were collected using by semi-structured interviews and open questionnaire. The qualitative analysis of the data were accomplished, by using the content analysis technique. According to the results, the following conclusions were drawn: the program generated no significant changes in the performance of the institutions; there are also many difficulties to be overcome for the program to improve the microcredit institutions’ performance; even so, the leaders' expectations for future are the program will consolidate its objective toward promoting and qualifying the institutions. Key-Words: Credit. Financial system. Microcredit.

Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India

We use experimental measures of time discounting and risk aversion for villagers in south India to highlight behavioral features of microcredit, a financial tool designed to reduce poverty and fix credit market imperfections. The evidence suggests that microcredit contracts may do more than reduce moral hazard and adverse selection by imposing new forms of discipline on borrowers. We find that, conditional on borrowing from any source, women with present-biased preferences are more likely than others to borrow through microcredit institutions. Another particular contribution of microcredit may thus be to provide helpful structure for borrowers seeking self-discipline. JEL: G21, I38, O15, O16, O18

Consumpiton Difference Between Microcredit Borrowers and Non-borrowers: A Bangladesh Experience

This paper investigates the consumption behaviour of borrowers of two major microcredit institutions in Bangladesh and compares that with non-borrowers. Primary data has been collected from borrowers of the Grameen Bank and Bangladesh Rural Advancement Committee (BRAC) operating in three major districts in Bangladesh. Along with borrowers, non-borrowers data has also been collected from non-program village to avoid endogeneity. Control-group method (non-borrowers from non-program villages) has been used to compare the differences in consumption patterns between the two groups. This study analyses the impact of per capita monthly expenditure and other household characteristics on the budget share of eleven items (food and non-food) consumed by borrowers and non-borrowers. Results from the estimation on linear and quadratic model suggest that borrowers of microcredit programs are better off in terms of consumption than non-borrowers.

Microcredit, money transfers, women, and the Cameroon diaspora

The paper introduces the topic of Rotating Savings and Credit Associations (ROSCAs) and several other forms of microcredit institutions, variations of which are found in most communities around the world, and considers the impact on them of the current financial crisis. For many women and men, poor and wealthy alike, these institutions have been economic and social lifelines. Among many African peoples, they provide the main source of rural and urban credit, both for sustainable living and entrepreneurial endeavour. This paper draws on the experience of contemporary Cameroonians, including those in the diaspora, in particular that of Dr Bridget Teboh. Social anthropologists have espoused ROSCAs for many decades. This paper cites the increasing attention such institutions now get from governments, NGOs, bankers and economists, and considers the impact of the current worldwide financial crisis on the behaviour of those who save in them.

Climate Change Adaptation at the Local Level: A Case Study of the Abraha Wa Atsebaha Village in Tigray, Ethiopia

In the last two decades Ethiopia has been implementing a community based environmental rehabilitation program that focused on water and soil conservation with optimistic outcomes. This paper describes the experience of a successful local based and cost effective intervention that transformed a food-insecure, drought-prone Ethiopian village into a sustainable community in the Tigray region of northern Ethiopia. The result is a partnership between the local community, the government, micro-credit institutions and extension agents. The regional food security bureau calls it a food security demonstration project. Sharing this experience with the wider world is timely as “climate change adaptation” has become a buzz phrase. The experience of this “bright spot” as opposed to “hotspot” is important because it is a testimony that climate change adaptation policies should be considered part of the development process and be implemented at the local level. It is believed that when such holistic interventions are upscaled the problems associated with food security might be resolved sustainably.

Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India

Microcredit is an innovative financial tool designed to reduce poverty and fix credit market imperfections. We use experimental measures of time discounting and risk aversion for villagers in south India to highlight behavioral features of microcredit. Conditional on borrowing from any source, women with present-biased preferences are more likely than others to borrow through microcredit institutions. Microcredit contracts require loan repayments in regular, fixed installments and they harness peer pressure to encourage discipline. These innovations mirror mechanisms highlighted in behavioral approaches to saving, suggesting that microcredit's popularity stems partly from modes of encouragement and self-discipline absent in typical lending mechanisms.

Profit‐maximizing behaviour replaces social sanctions in urban microcredit markets The case of Italian MAGs1

AbstractPoor local information networks and weak social sanctions in urban settings make joint liability unable to guarantee high repayment rates to microlenders. Yet, microcredit programmes in Western Europe report good performance even if the majority of them require no collateral. We collected data from three Italian microcredit institutions which operate in urban areas, granting individual loans without collateral to single entrepreneurs and teams (associations and cooperatives). We found that teams repay with higher probability. On this basis we developed a microlending instrument which, like joint liability implemented in rural economies, mitigates informational problems but, unlike joint liability, fits the urban context in that it reproduces a cohesion among entrepreneurs based on profit‐maximizing behaviour and not on social capital.

Factors Influencing the Decision to Participate in Micro-credit Programme: An Illustration for Northern Ghana

In recent times, governments of several developing countries have been promoting micro-credit as a means for increasing investment in the livelihood activities of the poor and capital-constrained so as to raise their levels of income. This is premised on the assumption that poor people living mainly in rural areas will participate in micro-credit schemes once they are provided the opportunity. However, studies find that, in several instances, rural households refuse to borrow. This study uses the logit model to assess factors influencing the decision to participate in micro-credit schemes in Northern Ghana. The study revealed that age, value of farm output, non-farm income, number of micro-credit institutions, level of education and distance of micro-credit institutions from borrowing households influence individuals' decision to participate in micro-credit schemes. The study concludes that households will join credit programmes if there is the potential to increase gains from their farm enterprises Keywords : Micro-credit, Households, Northern Ghana, Logit model, Risk Aversion Ghana Journal of Development Studies Vol. 3 (2) 2006: pp. 57-65

Microcredit in the North: An Institutional, Impact and Dependence Analysis Applied to the Spanish Case

Abstract**: Microcredit programmes have been recently started in Spain, sparked by successful experiences in developing countries. The paper reviews the outstanding features of these programmes and their differences with developing countries models. It also moves forward the impact evaluation on unemployment and finds the subsidy dependence of Spanish microcredit institutions accurate because of the good results obtained by impact measures.

Private funding of microcredit schemes: Much ado about nothing?

Microcredit, defined as small loans to people who have no regular access to credit, is an innovative strategy in the fight against poverty. Microcredit institutions can obtain funding from private institutional investors (PIIs) that channel funds from donors, private lenders, and socially responsible investors. Private financing of development aid is likely to become more important and microcredit presents an investment opportunity within this context. Microcredit institutions (MCIs) need to become more transparent, however, and require more incentive to seek commercial funding rather than relying on subsidies. With better information about MCIs, PIIs could achieve more impact with their investment.