Reem Nabil Hashad - Thesis

7/25/2019 Reem Nabil Hashad - Thesis

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THEAMERICANUNIVERSITYINCAIRO

SCHOOLOFBUSINESS

Repayment Determinants for Egyptian

Microfinance Institutions

A Thesis Submitted to the

Economics De!"tment

In !"ti!# $u#$i##ment o$ the "e%ui"ements $o" the de&"ee o$

M!ste" o$ A"ts in Economics

By: Reem Nabil Hashad

Unde" the sue"'ision o$

Dr. Mohamed El-omi

M!( )*+,


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Dedication

To the one -ho &!'e me be(ond the c!## o$ dut(. -ho insti##ed in me theimo"t!nce o$ !nd #e!su"e de"i'ed $"om educ!tion/ In the memo"( o$ m( #!te

$!the"/


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!c"no#ledgement

Fi"st !nd $o"emost. th!n0s !"e due to A##!h. the most Bene$icent !nd Me"ci$u#.to -hom I "e#!te m( success in #i$e/

I -ou#d #i0e to e1"ess m( since"e !"eci!tion to m( thesis sue"'iso".Dr.Mohamed El- Komi, Assistant Professor of Economics at the American University

in Cairo, $o" his &uid!nce. &"e!t he#. continuous sue"'ision !s -e## !s "ecious time!nd e$$o"t in "e!din& !nd "e'isin& the m!nusc"it/ It -!s !n hono" $o" me to -o"0unde" his sue"'ision/

I2m !#so &"!te$u# to Dr.Abeer Abeer El Shennawy, Associate Professor ofEconomics at the American University in Cairo, $o" the time she dedic!ted to "e!d m("ese!"ch !nd $o" he" use$u# !d'ice/

I -ou#d !#so #i0e to e1"ess m( deeest &"!titude toDr.Dalia El-Edel,AssistantProfessor of Economics at the American University in Cairo, $o" he" continuous he#.enthusi!stic suo"t !nd encou"!&ement/

I -ou#d !#so #i0e to th!n0 Res!#!. Mis" E# 3hei" !nd T!nme(!h $o" "o'idin&me -ith the d!t! needed $o" this "ese!"ch !nd !##o-in& me to inte"'ie- thei" c#ients/

L!st but de$inite#( not #e!st. I o-e &"!titude to m( $!mi#( !nd $"iends -hocontinuous#( suo"ted me/ This stud( -ou#d not h!'e been ossib#e -ithout thei"he#/


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!bstract

Fin!nce is one o$ the co"e de'e#oment !1es !nd is the b!sis $o" 4ob c"e!tion. income.

o'e"t( "eduction !nd economic &"o-th/ Fin!nci!# "esou"ces in E&(t !"e both id#e !nd

mis!##oc!ted/ Access to $in!nce is ! m!4o" const"!int eseci!##( to the oo" st"!tum o$ the

E&(ti!n societ(/ Mic"o$in!nce is one o$ the me!ns th"ou&h -hich the oo" c!n &!in !ccess

to $in!nce/ Ho-e'e". E&(ti!n mic"o$in!nce institutions 5MFIs6 !"e ine$$icient !nd !"e un!b#e

to su#( 7*8 o$ the dem!nd $o" mic"oc"edit/

This "ese!"ch $ocuses on ho- the su#(9dem!nd &! o$ mic"oc"edit in E&(t c!n be

"educed/ Hence this !e" e1!mines -h!t !"e the bo""o-e"s2 socio9demo&"!hic

ch!"!cte"istics !nd #o!n conditions th!t !$$ect the mic"oc"edit "e!(ment "!te in E&(t/ These

$!cto"s !"e e1!mined so th!t E&(ti!n MFIs c!n be $in!nci!##( !nd soci!##( e$$icient !nd se"'e!s bette" en&ines $o" ch!n&e/

This !e" em#o(s the mi1ed method 5%u!#it!ti'e !nd %u!ntit!ti'e6 !"o!ch in !n

!ttemt to !ns-e" the "ese!"ch %uestion "oosed/ The !e" estim!tes the #o& #i0e#ihood o$ !

"obit "e&"ession mode# b!sed on d!t! $"om t-o MFIs: Mis" E# 3hei" 5ME36 !nd Res!#!/ In

!ddition. inte"'ie-s -e"e conducted -ith t-e#'e bo""o-e"s o$ one o$ E&(t2s MFIs

5T!nme(!h6/ The "esu#ts sho- th!t the "e!(ment dete"min!nts !"e count"(9seci$ic/ L!c0 o$

time#( "e!(ment is both ! su#(9sided !nd dem!nd9sided "ob#em i/e/ it is !tt"ibuted to boththe MFI o#icies !nd the bo""o-e"s2 ch!"!cte"istics/ L!c0 o$ time#( "e!(ment is due to the

MFI #endin& o#icies. #on& "e!(ment e"iod. the time the $i"st inst!##ment is due. the

bo""o-e"2s 4ob. income. !dd"ess !nd most imo"t!nt#( his;he" -i##in&ness to !(/

M!c"oeconomic shoc0s. such !s the )


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$able of %ontents

Ch!te" One:

Introduction.................................................................................................................&

%hapter $#o: Lite"!tu"e Re'ie- ................................................................................'

(.&. Impact of microfinance/////////////////////////////////////////////////////////////////////////////////////////////////>>>>>>>>.'7

$able 2: /tatistics on beneficiaries? health condition>>>>>>>>>>>>>>..'

$able 5: Marginal Effects>>>>>>>>>>>>>>>>>>>>>>>>>..'2

$able ;: 3eneral information on successful borro#ers>>>>>>>>>>>>>..2

$able =: 3eneral information on unsuccessful borro#ers>>>>>>>>>>>>.20

$able &7: 4oan characteristics of the successful borro#ers>>>>>>>>>>>...2'

$able &&: Repayment Determinants for the successful borro#ers>>>>>>>>>22

$able &(: 4oan characteristics of the unsuccessful borro#ers>>>>>>>>>>..25

$able &: Repayment determinants for the unsuccessful borro#ers>>>>>>>>2=


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%hapter ,ne

Introduction

Fin!nce is one o$ the m!in de'e#oment !1es ho-e'e" in E&(t the $in!nci!# secto" is

undi'e"si$ied !nd m!n( !"e de"i'ed $"om &!inin& !ccess to $in!nce/ This is the c!se since the

b!n0in& secto" domin!tes the $in!nci!# secto" !nd the b!n0in& secto" is domin!ted b(

con'ention!# b!n0s/ E'en the non9 b!n0in& $in!nci!# secto" in E&(t is unde"de'e#oed 5Abu

#o&hod. )*++6/ The $ocus o$ the b!n0in& secto" is on ! 'e"( n!""o- st"!tum o$ the E&(ti!n

societ( the e#ite c#iente#e. those -ho !"e #ess "is0( to the b!n0. o" mo"e !ccu"!te#(. those -ith

o#itic!# !t"on!&e/ Access to $in!nce is imo"t!nt !s ! "e"e%uisite $o" economic &"o-th.

em#o(ment. soci!# cohesion !nd o'e"t( "eduction 53um!". )*++6/

In the (e!" )**>. on#( +/,8 o$ the $i"ms oe"!tin& in E&(t h!d ! b!n0 #o!n o" ! #ine

o$ c"edit !nd >,/


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bo""o-e"s !"e those in the Ue" E&(t &o'e"no"!tes !nd !#most th"ee9$ou"th o$ the tot!#

bo""o-e"s -o"0 in the t"!din& secto" 5E$s!. )*+*6/

The N!tion!# Im!ct Su"'e( $o" mic"o$in!nce c#ients h!d estim!ted th!t most o$ the

c#ients bo""o- $"om MFIs to $in!nce he!#th insu"!nce !nd "eti"ement $unds. $o##o-ed b(

c"edit insu"!nce then s!'in&s !ccounts !nd $in!##( consumtion #o!ns 5G!#(. )**>6/ MFIs

m!in#( o$$e" mic"oc"edit the oo" t!0e ! mic"o#o!n in o"de" to est!b#ish ! ne- mic"o"o4ect

o" e1!nd !n !#"e!d( e1istin& mic"o"o4ect/ E1!m#es o$ mic"o"o4ects inc#ude. but !"e not

#imited to. h!ndic"!$t "oduction. $"uit !nd 'e&et!b#e 'endo"s. sm!## "et!i# shos !nd 0ios0s

5D!i#( Ne-s. )*+*6/

B!n0s #imit the !mount #ent to oo" househo#ds since the( !"e e"cei'ed th!t the( c!n

not h!'e !n !cti'e $in!nci!# #i$e !s ! "esu#t o$ thei" o'e"t(/ Ho-e'e". Mo"duch in his boo0.

o"t$o#ios o$ the oo" Ho- the Go"#ds oo" #i'e on J) ! d!(. st!tes th!t the oo"

househo#ds h!'e !n !cti'e $in!nci!# #i$e !s ! conse%uence o$ thei" o'e"t(. not desite o$ it

5Mo"duch. )*+*6/ Ghi#e b!n0s #endin& decisions deend m!in#( on thei" c#ients2 histo"(.

MFIs on the othe" h!nd b!se thei" #endin& decision m!in#( on the c#ients2 $utu"e/ So the m!in

distin&uishin& $!cto" is th!t MFIs #oo0 !t the economic otenti!# o$ the bo""o-e" !s the

se#ection c"ite"ion. "!the" th!n thei" o'e"t( !nd need $o" the mone(/

The !im o$ mic"o$in!nce is to mobi#ie the oo" eo#e to !ct inste!d o$ -!itin& $o"

ch!"it( 5Consu#t!ti'e "ou to Assist the oo". )**


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mic"oc"edit "em!ins unmet i/e/ ! 7*8 su#(9dem!nd &! e1ists desite th!t E&(t h!s the

hi&hest #e'e# o$ cu""ent out"e!ch 5E$s!. )*+*6/

In o"de" to "educe this su#(9dem!nd &!. the"e h!s to be !n im"o'ement in the

e"$o"m!nce o$ MFIs/ One o$ the me!ns to me!su"e the e"$o"m!nce o$ MFIs is th"ou&h

me!su"in& the #o!n "e!(ment "!te 5Rosenbe"&. )**76/ MFIs #end to bo""o-e"s !nd ob#i&e

them to "e!( the $u## #o!n !mount. ! ce"t!in e"cent!&e o$ the #o!n o" the -ho#e #o!n !mount

-ith !n inte"est/ The !mount o$ mone( !id b( the bo""o-e" to the MFI. !"t o" !## o$ it is

then in4ected into ! ne- #o!n $o" ! di$$e"ent bo""o-e"/ This !e" e1!mines #o!n "e!(ment in

the conte1t o$ the bo""o-e" bein& !b#e to meet !## o$ his;he" $in!nci!# ob#i&!tions on time/ Fo"

! bo""o-e" to de$!u#t me!ns th!t the bo""o-e" $!i#s to !bide b( the te"ms o$ the !&"eement

!nd th!t ent!i#s $!i#u"e o$ m!0in& "e!(ment on the due d!te 5Business Diction!"(. )*+,6/

Acco"din(. ! bo""o-e" -i## de$!u#t i$ he;she does not "e!( the $u## #o!n !mount o" de#!(s

!(in& !t #e!st one inst!##ment/ I$ the bo""o-e" de$!u#ts. then the !bi#it( o$ MFIs to #end to

mo"e bo""o-e"s -i## dec"e!se. hence dec"e!sin& the #e'e# o$ e$$icienc( o$ E&(ti!n MFIs !nd

-idenin& the su#(9dem!nd &!/

This !e" hence $ocuses on E&(t since im"o'in& the #e'e# o$ e$$icienc( o$ MFIs in

E&(t is det"iment!#. since MFIs in the MENA "e&ion !"e ch!"!cte"ied -ith the #o-est #e'e#s

o$ e$$icienc( -o"#d-ide/ Desite s#i&ht im"o'ements in e$$icienc( #e'e#s in some (e!"s. the

MENA "e&ion h!s been !#so e1e"iencin& dec"e!sin& #e'e#s o$ e$$icienc( in othe"s 5T"i0i.

)*+?6/ Ho-e'e". the"e is no d!t! !'!i#!b#e $o" the #e'e# o$ e$$icienc( $o" E&(ti!n MFIs in

te"ms o$ #o!n "e!(ment/

The"e$o"e. &i'en the 7*8 su#(9dem!nd &! !nd cu""ent #o- enet"!tion "!te. is

the"e ! -!( out $o" the MENA "e&ion o" did -e "e!ch ! de!d#oc0 In $!ct. ! hu&e otenti!# o$

&"o-th e1ists $o" the mic"o$in!nce indust"(/ The "ob#em is th!t the"e !"e missed

oo"tunities "esou"ces !"e not on#( mis!##oc!ted. but ! #!"&e o"tion "em!ins id#e/

Mic"o$in!nce is ! too# th!t "ec(c#es $in!nci!# "esou"ces;!ssets/ The %uestion o$ ho- to "e'i'e

$in!nci!# "esou"ces is !ns-e"ed b( "e!#iin& th!t the "ob#em is not in the "esence o$ the

!ssets. but ho- to ch!nne# them/ Aimin& !t "e'i'in& the $in!nci!# "esou"ces !nd ch!nne#in&

them !"o"i!te#(. this !e" e1!mines -h!t !"e the bo""o-e"s2 socio9demo&"!hic

ch!"!cte"istics !nd #o!n conditions th!t !$$ect the mic"oc"edit "e!(ment "!te in E&(t so th!t

MFIs c!n be $in!nci!##( !nd soci!##( e$$icient !nd se"'e !s bette" en&ines $o" ch!n&e/

?


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The !e" is di'ided !s $o##o-s: Ch!te" one is the int"oduction. ch!te" t-o "esents

!n o'e"'ie- o$ the e1istin& emi"ic!# #ite"!tu"e on mic"o$in!nce. -hi#e ch!te" th"ee

discusses the methodo#o&( !nd d!t! this !e" em#o(s/ Ch!te" $ou" "esents the emi"ic!#

"esu#ts o$ the "obit mode# !nd ! discussion o$ the "esu#ts. $o##o-ed b( ch!te" $i'e -hich

desc"ibes the %u!#it!ti'e !"o!ch !nd "esu#ts/ The !e" then ends b( ch!te" si1 -hich is

the conc#usion !nd o#ic( im#ic!tions on ho- c!n E&(ti!n MFIs be mo"e e$$icient !nd

n!""o- the su#(9dem!nd &!/

,


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%hapter $#o

4iterature Re*ie#

This ch!te" !ims to &i'e !n o'e"'ie- o$ the emi"ic!# #ite"!tu"e on mic"o$in!nce/ To

t!c0#e the issues th!t !$$ect the e$$icienc( o$ MFIs. one h!s to st!"t b( stud(in& the e$$ect o$

MFIs on !##e'i!tin& o'e"t( th"ou&h di$$e"ent !"o!ches/ Since it c!n be in$e""ed $"om the

#ite"!tu"e th!t mic"o$in!nce !#one is not the !n!ce! $o" the o'e"t( "ob#em. the #ite"!tu"e

discusses $in!nci!# inc#usion !nd ho- does out"e!ch o$ the MFIs to the oo" !$$ect the MFIs2

soci!# !nd technic!# e$$icienc(/ The mo"e e$$icient MFIs !"e. it is "oosed b( the #ite"!tu"e

th!t. the mo"e sust!in!b#e the( become/ A "e"e%uisite $o" this sust!in!bi#it( is "e&u#!tion. o"

#!c0 the"eo$ in E&(t/ The ch!te" then $ocuses on the #ite"!tu"e "e#!ted to mic"oc"edit"e!(ment dete"min!nts the bo""o-e"s2 ch!"!cte"istics !nd #o!n ch!"!cte"istics th!t !$$ect the

"e!(ment "!tes/ The ch!te" -i## end b( com!"in& !nd cont"!stin& &"ou #endin& -ith

indi'idu!# #endin& !s ! $!cto" th!t mi&ht !$$ect "e!(ment/

(.&. Impact of microfinance

Since the m!in !im o$ MFIs is to "o'ide the 4ob#ess !nd #o-9 income househo#ds

-ith !ccess to c"edit. it is c"uci!# to e1!mine -hethe" MFIs !chie'e thei" !im !nd o$$e" theoo" -ith the needed c"edit/ Not on#( is it imo"t!nt to dete"mine -hethe" the( c!n h!'e

!ccess. but mo"e imo"t!nt#( -hethe" this c"edit c!n he# !##e'i!te o'e"t( #e'e#s/ The"e is no

e'idence in the #ite"!tu"e th!t MFIs c!use o'e"t( #e'e#s to dec"e!se/ Some !e"s $ound th!t

MFIs h!'e ! ositi'e e$$ect on o'e"t( ho-e'e" this is ! co""e#!tion "e#!tionshi. not

c!us!tion/

(.&.& )ositi*e impacts of microfinance

(.&.&.&. Impact on po*erty

Most o$ the #ite"!tu"e su&&ested th!t mic"o$in!nce is ositi'e#( co""e#!ted to

!##e'i!tin& o'e"t( #e'e#s/ Th!t h!s been e'ident since mic"oente""eneu"s !"e !b#e to "emo'e

the $in!nci!# const"!ints the( $!ce/ As ! "esu#t o$ the mic"o$in!nce "oducts. the oo" bene$it

$"om !ccess to $in!nce !nd it h!s been sho-n th!t the"e !"e si##o'e" e$$ects o$ these $in!nci!#

"oducts th!t "e!ch the "ich/ o'e"t( "eduction due to !ccess to mic"o$in!nce h!d ! ositi'e

e$$ect on em#o(ment since these oo" no- -o"0 on thei" mic"o"o4etcs/ As ! "esu#t o$em#o(ment. the income inc"e!sed !nd since consumtion is ! $unction o$ income. then


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consumtion #e'e#s inc"e!sed in the sho"t9"un !nd in the #on&9 "un/ In the #on&9 "un. the"e is

!#so ! ositi'e im!ct o$ inc"e!sed s!'in&s !nd in'estment/ Fin!##(. besides !##e'i!tin&

o'e"t(. non9monet!"( &!ins such !s economic emo-e"ment !nd &ende" e%u!#it( !#so t!0e

#!ce/

To be&in -ith. Im!i. Annim !nd A"un 5)*+*6 used ! %u!ntit!ti'e !"o!ch to test

-hethe" !ccess to mic"o$in!nce c!n "educe househo#d o'e"t( b!sed on !n Inde1ed B!sed

R!n0in& indic!to" th!t dis#!(s mu#tidimension!# !sects o$ o'e"t(/ A n!tion!# #e'e#

mic"o$in!nce im!ct stud( -!s then de'e#oed usin& c"oss9section!# d!t! $o"


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e%uit!b#e endo-ment dist"ibution. $i&htin& o'e"t(. !nd "educin& insecu"it( com!"ed to its

n!""o-. di"ect $in!nci!# im!ct/ This !e" $ound th!t mic"o$in!nce h!s ! si&ni$ic!nt ositi'e

im!ct on o'e"t( !##e'i!tion !nd economic secu"it(/ o'e"t( !nd economic insecu"it(

"e"esent ! 'icious ci"c#e -ith economic insecu"it( bein& embedded in o'e"t(/ o'e"t(

"eduction stems $"om !n e&!#it!"i!n dist"ibution o$ endo-ments !nd mic"o$in!nce c!n

$!ci#it!te hum!n !nd h(sic!# endo-ment dist"ibution !nd !##o- househo#ds to !ccess

oo"tunities o$$e"ed b( the ub#ic !nd "i'!te secto"s/

Simi#!"#(. G!heed 5)**76 uti#ied "im!"( d!t! $o" the (e!" )**< !nd !#ied !

st"!ti$ied "!ndom s!m#e techni%ue o$ '!"i!b#es such !s househo#ds2 income. educ!tion.

$!mi#( sie. !ssets !nd c"edit/ Second!"( d!t! on the un4!b Ru"!# Suo"t "o&"!mme

5RS6 o$ ), dist"icts $o" the (e!"s +7779)**, !nd inte"'ie-s -e"e !#so e1!mined/ Th"ou&h

these d!t!. the stud( e'!#u!ted the im!ct o$ the RS on income im"o'ement o$ "u"!#

bo""o-e"s in !0ist!n !nd e1!mined -hethe" these #o!ns "o'ide ! b!sis $o" ! sust!in!b#e #i$e/

The stud( $ound th!t not on#( do the oo" bene$it $"om mic"oc"edit. but !#so the non oo"/ In

!ddition. mic"oc"edit. "o1imit( to u"b!n m!"0et !nd educ!tion e#e'!ted income. -hi#e the

$!mi#( sie !nd !ssets h!d no e$$ect on income im"o'ement/ A#so the #o!n uti#i!tion

u"ose. -hethe" in'estment o" consumtion. dete"mined the !bi#it( to "e!( the #o!n !nd the

sust!in!bi#it( o$ income/ Hence. MFIs in "u"!# !"e!s shou#d t!"&et ne- #o!n "oducts !nddec"e!se the misuse o$ #o!ns/ 3e( #essons de"i'ed !"e th!t the 'i##!&es in !0ist!n !"e

economic!##( !nd soci!##( distinct !nd hence the mic"o$in!nce st!$$ h!s to !( !ttention to the

"e&ion seci$icities/

Gee#e !nd Gee#e 5)**6 $ocused on the ente""ise $o"m!tion #o!ns &i'en b( the

Instituto de Desen'o#'imento Hum!no 5IDH6 $"om the e"iod +7 to +7>) !nd $"om +7>7 to

+77)/ Lo!ns $o" ente""ise $o"m!tion h!'e been 'ie-ed !s the best -!( to out"e!ch to ! #!"&e

m!"0et se&ment !nd !cco"din( the best -!( to bui#d ! sust!in!b#e MFI/ +A #ine!" "e&"ession

mode# -!s estim!ted cont"o##in& $o" ente""ise !nd bo""o-e"s e"son!# '!"i!b#es/ The "esu#ts

sho- th!t ente""ise $o"m!tion #o!ns used b( sm!## mic"oente""ises he#ed !##e'i!te o'e"t(

!nd inc"e!se "o"ieto" income/ Ghen the soci!# cost9bene$it "!tio -!s em#o(ed -ithout the

cont"o# &"ou. the soci!# cost9bene$it "!tio is !m#i$ied/ A #imit!tion is th!t the stud( -!s

b!sed on#( on mic"oente""ises in Hond!"us !nd the "esu#ts mi&ht be i""e#e'!nt to othe"

+A $ie#d su"'e( -!s c!""ied out to ente""ises -ho too0 #o!ns $"om the IDH !nd those -ho

did not t!0e #o!ns $"om the IDH 5cont"o# &"ou6/ This su"'e( !ssessed the im!ct !nd soci!#bene$its !nd costs o$ the mic"oc"edit "o&"!m/


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count"ies/ In !ddition. the &"o-th o$ these mic"oente""ises deends on the economic.

o#itic!#. soci!#. o#ic( !nd institution!# en'i"onment -hich -e"e not t!0en into

conside"!tion/

Hence. the !bo'e !e"s !&"ee th!t !ccess to $in!nce inc"e!se the st!nd!"d o$ #i'in& o$

the bo""o-e"s !nd "educe the #e'e# o$ o'e"t(/ The studies sho-ed th!t the"e h!s been !n

inc"e!se in economic secu"it( !nd ! otenti!# o$ "emo'in& the oo" $"om thei" o'e"t( t"!/

This e$$ect ho-e'e". mi&ht di$$e" !cco"din& to -he"e the bo""o-e" #i'es !nd -he"e the

mic"o"o4ect is c!""ied out/

(.&.&.(. Impact on Rural *ersus Arban districts

So $ocusin& on &eo&"!hic!# di$$e"ences. Mont&ome"( !nd Geiss 5)**


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tsun!mi mic"o$in!nce #o!ns h!d ! ositi'e si&ni$ic!nt e$$ect on income !nd #!bo" hou"s !nd

th!t d!m!&ed bo""o-e"s -e"e !b#e to "einst!te thei" economic !cti'it(/ The e$$ect o$ the #o!ns

on the bo""o-e"s !$$ected b( the Tsun!mi -!s st"on&e" th!n those -ho -e"e not !$$ected b(

the Tsun!mi/ Dono" inte"'ention -!s use$u# bec!use se'e"!# MFIs -ou#d not h!'e been !b#e

to continue thei" oe"!tions -ithout ne- c!it!# in4ections/ Rec!it!#iin& MFIs "o'ides

e$$ecti'e #i%uidit( in4ections. -hich $o" the oo" h!s simi#!" e$$ects !s !n e1!nsion!"(

monet!"( o#ic(/

Mo"eo'e". Abio#! 5)*++6 in'esti&!ted -hethe" mic"o$in!nce institutions h!'e he#ed

Ni&e"i!n mic"oent"e"eneu"s &!in !ccess to c"edit/ Usin& ! "!ndom s!m#in& techni%ue. !

c"oss section!# su"'e( -!s conducted on the ente""ise business !cti'it( in Decembe" )**7/

Then ! bin!"( #o&it "e&"ession -!s estim!ted to me!su"e the dem!nd $o" inte"n!# $unds in t-o

st!tes/ L!&os St!te. ! st!te -he"e ! si&ni$ic!nt numbe" o$ mic"o$in!nce b!n0s 5MFBs6 e1isted

-!s com!"ed !nd cont"!sted -ith E0iti St!te. -he"e ! #imited numbe" o$ MFBs e1isted/ Ten

indeendent '!"i!b#es -e"e used in the mode# to e1!mine the e$$ect o$ MFB in const"!ined

!nd unconst"!ined #oc!tions on the ossibi#it( th!t mic"oent"e"eneu"s -ou#d in'est in $i1ed

!ssets. -hich is used to me!su"e the ent"e"eneu"s2 sensiti'it( to $in!nci!# const"!int/ The

!e" "e!ched the conc#usion th!t ente""ises th!t !"e #oc!ted in const"!ined #oc!tions h!d

&"e!te" dem!nd $o" inte"n!# sou"ces o$ $undin& th!n ente""ises in unconst"!ined #oc!tions/A&e !nd &ende" h!d !n insi&ni$ic!nt e$$ect on business in'estment/ O'e"!##. MFBs #!(ed !n

e$$ecti'e "o#e in so#'in& the mic"oent"e"eneu"s $in!nci!# const"!ints !'!i#!bi#it( o$

mic"o#o!ns !##e'i!ted c"edit const"!int in the Ni&e"i!n $in!nci!# m!"0ets/

(.&.&.0. Impact on consumption

Since C!st"iot! 5)*++6 is in consensus -ith Abio#! 5)*++6 in th!t mic"o$in!nce h!s !

ositi'e im!ct on income. it is hence e1ected th!t those in'o#'ed in mic"o$in!nce -i##

en4o( bette" #e'e#s o$ consumtion/ Me!su"in& the e$$ect o$ mic"o$in!nce on consumtion.

3!m!nou !nd Mo"duch 5)**)6 estim!ted $o" househo#ds in CKte d2I'oi"e the e1ected

dist"ibution o$ $utu"e e1enditu"es b( usin& the Monte C!"#o !nd bootst"! st!tistic!#

techni%ues/ The !n!#(sis "e#ied on the CKte d2I'oi"e Li'in& St!nd!"ds Su"'e( 5CILSS6 !nd

theo"ies o$ e1ected uti#it(. "is0 !nd unce"t!int(/ A ene"!#ied Line!" Mode# -!s estim!ted

to me!su"e the ch!n&e in the e" c!it! consumtion/ These d!t! "o'ided he#$u# insi&hts

into consumtion !tte"ns. househo#d beh!'io" !nd o'e"t( d(n!mics/ Re&!"din& o#ic(

!ctions. the e$$ecti'eness o$ o'e"t( !##e'i!tion "o&"!ms !"e best me!su"ed b( the

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com!"ison o$ 'u#ne"!bi#it( be$o"e !nd !$te" the "o&"!m/ The "esu#ts sho-ed si&ni$ic!nt

di$$e"ences in 'u#ne"!bi#it( in the cities o$ CKte d2I'oi"e bet-een +7>< !nd +7>@/ oo"

househo#ds -ho -e"e !"t o$ the CILSS h!d. on !'e"!&e. !n inc"e!se in thei" consumtion

#e'e#s desite the o'e"!## dec"e!se in the count"(s #e'e# o$ consumtion/ This !"o!ch c!n

!ccount $o" di$$e"ent o'e"t( me!su"es. but $!##s sho"t o$ e1#!inin& the t"!deo$$s bet-een

-inne"s !nd #ose"s/ A sho"tcomin& o$ the !e" is th!t the !n!#(sis is #imited on#( to the sho"t9

"un/

(.&.&.'. Impact on #omen

So MFIs cont"ibute ositi'e#( to o'e"t( !##e'i!tion !nd inc"e!se the bo""o-e"2s

#e'e#s o$ income !nd consumtion/ So th!t is in te"ms o$ the monet!"( e$$ect o$ MFIs/

Ho-e'e". c!n the"e be non9monet!"( ositi'e e$$ects o$ MFIs on the bo""o-e"s

Stud(in& the socio9economic im!cts o$ mic"oc"edit on the -e#$!"e o$ -omen #i'in&

in No"th E!ste"n South A$"ic!. Hiet!#!hti !nd Linden 5)**?6. cont"!sted the e"$o"m!nce o$

the Sm!## Ente""ise Found!tion 5SEF6 mic"oc"edit "o&"!ms on househo#d -e#$!"e/ In )**?.

emi"ic!# d!t! $"om this "o&"!m on the bo""o-e"s #o!n histo"(. educ!tion. ch!n&es in the

househo#ds !cti'ities. income. e1enditu"e !nd thei" 'ie- o$ the $utu"e -!s &!the"ed th"ou&h

oen !nd c#ose9ended su"'e(s/ A c"edit "!tionin& mode# -!s then used to insect the me!ns o$c"edit !##oc!tion !nd the SEF bo""o-e"s "e!(ment e"$o"m!nce/ Im"o'ement in -omens

income !nd -e##9bein&. #ess 'u#ne"!bi#it( !nd bette" $ood secu"it( -e"e the met"ics used to

!ssess the im!ct o$ the #o!ns on the -omens -e#$!"e/

The stud( sho-ed th!t the mo"e educ!ted c#ients -ho -e"e !t ! bette" st!"tin& oint

-e"e !b#e to di'e"si$( thei" "is0s. "otect themse#'es !&!inst 'u#ne"!bi#it( !nd enh!nce thei"

businesses/ SEF "o'ided "oducts th!t !##o-ed some o$ the oo"est -omen to &et out o$ thei"

o'e"t( t"!/ The bi&&e" the #o!n sie the -omen -e"e o$$e"ed. the &"e!te" thei" !bi#it( to

"oe"#( use thei" "esou"ces !nd &ene"!te hi&he" incomes ho-e'e" MFIs "e$e""ed &i'in&

sm!## #o!ns to !ccount $o" the hi&h "is0 !nd #o- c!!cit( o$ the oo"/ On the othe" h!nd.

&"ou hete"o&eneit(. di$$e"ent bo""o-e"s income #e'e#s. !nd mo"!# h!!"d c!used se'e"!#

"e!(ment "ob#ems/ This sho-ed ! t"!deo$$ bet-een cost9e$$ecti'eness !nd out"e!ch

m!1imiin& e$$icienc( th"ou&h cuttin& costs -ou#d h!'e !d'e"se e$$ects on the oo"/ A

#imit!tion o$ the !e" is th!t the d!t! -!s $ocused on ! #imited !"e! !nd $o" ! n!""o- s!n o$

time/

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Litt#e$ie#d. H!shemi !nd Mu"duch 5)**?6 "e#ied on %u!#it!ti'e !nd %u!ntit!ti'e

$indin&s o$ "e'ious "ese!"ch !e"s !nd "o'ed th!t mic"o$in!nce cont"ibuted si&ni$ic!nt#( to

the !chie'ement o$ the Mi##enium De'e#oment o!#s 5MDs6/ The e'idence o$ these

"e'ious "ese!"ch !e"s -e"e d"!-n $"om the Mic"oB!n0in& Bu##etin. F"eedom $"om Hun&e"

studies. A S!'e the Chi#d"en stud(. Gomens Emo-e"ment "o&"!m in Ne!# !nd othe"s/

The "esu#ts sho-ed th!t mic"o$in!nce not on#( en!b#es the oo" to !ccess c"edit. but th"ou&h

c"edit the oo" !"e !b#e to &et em#o(ed. schoo#ed !nd h!'e !ccess to he!#thc!"e se"'ices

hence "educin& o'e"t( !nd its e$$ects/ Mo"eo'e". !ccess to $in!nce me!nt bette" nut"ition.

mo"e con$ident -omen !nd #ess &ende" ine%u!#it(/ The MDs c!nt be sust!ined -ithout

inc"e!sed e!"nin&s !nd $#o- o$ $in!nci!# "esou"ces/ Bette" #!nnin& is !#so ! ositi'e si##o'e"

o$ mic"o$in!nce hence. mic"o$in!nce h!s ! ositi'e im!ct on o'e"t( !##e'i!tion in the

sho"t9"un !nd the #on&9"un/ So mic"o$in!nce !cted !s the b!sis on -hich othe" o#ic(

inte"'entions deend !s it o$$e"s soci!# bene$its on !n on&oin& b!sis/ Bein& #ess dono"

deendent o'e" time. these institutions c!n o$$e" ! sust!in!b#e too# o$ o'e"t( !##e'i!tion/

Not on#( h!d mic"o$in!nce ositi'e#( !$$ected the bo""o-e"s. but the"e -e"e !#so

inc"e!sin& m!"&in!# "etu"ns to bo""o-in&/ Im!i et !#/ 5)*+)6 usin& c"oss9count"( !nd !ne#

d!t! on MFIs $"om the Go"#d B!n0 !nd the Mic"o$in!nce In$o"m!tion E1ch!n&e $ound th!t

the hi&he" the MFIs &"oss #o!n o"t$o#io e" c!it!. the #o-e" the o'e"t( #e'e# indices/)

The!e" !#ied !n o"din!"( #e!st s%u!"es mode# 5OLS6 -e"e &"oss #o!n o"t$o#io e" c!it! -!s

estim!ted b( !n inst"ument!# '!"i!b#e in !n inst"ument!# V!"i!b#e mode# 5IV6/ The !utho"s

$ound ! !i"9-ise ositi'e si&ni$ic!nt co""e#!tion $o" &"oss #o!n o"t$o#io o$ MFI e" c!it!

-ith deosit !ccounts. #o!n !ccounts !nd numbe" o$ b"!nches o$ mic"oc"edit institutions/

o'e"t( "!tes. me!su"ed b( th"ee c"ite"i! 5incidence. deth !nd se'e"it(6 h!'e dec#ined !s the

numbe" o$ MFIs inc"e!sed. D e" c!it! !nd sh!"e o$ c"edit in D inc"e!sed/ L e"

c!it! -!s si&ni$ic!nt#( ne&!ti'e#( "e#!ted to the o'e"t( he!dcount "!tio/ The "esu#ts sho-ed

th!t mic"o$in!nce is ! $in!nci!# too# th!t si&ni$ic!nt#( dec"e!ses o'e"t( !t the m!c"o #e'e#

-hethe" b( dec"e!sin& its incidence. deth o" se'e"it( ! "esu#t cont"!"( to mic"o e'idence/

)T!0in& !ccount o$ the endo&enit( !ssoci!ted -ith the MFIs #o!ns. c"oss section!# d!t! $o"

the (e!" )** co'e"in& ,> de'e#oin& count"ies -!s used !#on& -ith ! )**? !nd )** !ne#co'e"in& @+ count"ies/

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20/101

(.&.&.2. Impact on /a*ings and In*estment

Loo0in& !t the #on&9 "un im!ct o$ mic"o$in!nce on o'e"t(. B"une 5)**76 conducted

!n emi"ic!# stud( on the im!ct o$ mic"o$in!nce institutions on de'e#oment/ B"une 5)**76

e1#!ined the im!ct o$ MFIs b( usin& desc"iti'e !nd %u!ntit!ti'e economet"ic !n!#(ses o$ !

s!m#e o$ MFIs in Asi! !nd A$"ic!/ D!t! on +.,*@ MFIs -!s "et"ie'ed $"om the M!"0et Mi1

D!t!b!se the d!t! inc#uded desc"iti'e st!tistics. $in!nci!# d!t!. !nd d!t! on out"e!ch/ The

"esu#ts $ound th!t the sim#e mic"oc"edit #endin& schemes suo"ted the oo" b( &"!ntin&

them !ccess to $in!nce !nd enh!nced "i'!te s!'in&s/ It -!s $ound th!t in the #on&9 "un the"e

h!'e been !n inc"e!se in s!'in&s $o" these mic"oc"edit bo""o-e"s !nd;o" !n inc"e!se in the

"!te !t -hich the( s!'e/ Th!t h!s !#so shed #i&ht on mic"oc"edit bein& ! too# $o" the econom(

to inc"e!se the #e'e# o$ c!it!# !ccumu#!tion/ In !ddition. !s ! "esu#t o$ the inc"e!se in s!'in&s

#e'e# it -!s "oosed th!t the Asi!n !nd A$"ic!n count"ies mi&ht e'!de #e'e#s o$ st!&n!tion/

Hence. the !e" conc#uded th!t count"ies c!n de'e#o due to the inc"e!sed #e'e# o$ s!'in&s

!s ! "esu#t o$ mic"oc"edit/ The cont"ibution o$ ! count"(2s $utu"e de'e#oment is hence

indeendent $"om the di$$e"ences in the count"(2s cu#tu"!#. economic. !nd o#itic!#

en'i"onment/

Hence. the studies $ound th!t MFIs h!'e ! ositi'e im!ct on income. em#o(ment. !nd

consumtion/ In !ddition. MFIs cont"ibuted to the !chie'ement o$ MDs !nd !##o-ed theoo" to &!in !ccess to schoo#s !nd he!#thc!"e se"'ices/ MFIs !#so !##o-ed the bo""o-e"s to

inc"e!se thei" #e'e# o$ s!'in&s !nd hence inc"e!sed the tot!# #e'e# o$ s!'in&s !nd in'estment in

the econom( in the #on&9"un/

(.&.(. !*erage+Minimal impact of microfinance

On the othe" h!nd. se'e"!# $ound th!t the im!ct o$ mic"o$in!nce on o'e"t( is

minim!#/ 3h!nd0e" 5)**;77 $o##o-9u su"'e( -e"e used to e'!#u!te the e$$ects o$

mic"o$in!nce on o'e"t( in "u"!# B!n!desh/ A !ne# d!t! !n!#(sis -!s then conducted to

estim!te the e$$ect o$ cu""ent !nd !st bo""o-in&. t!0in& into !ccount th!t consumtion &!ins

'!"( o'e" time/ A d(n!mic mode# -!s !#so used to estim!te $o" bo""o-e"s !nd non9bo""o-e"s

the time9'!"(in& bo""o-in& e$$ects on the #e'e# o$ consumtion/ The "esu#ts sho-ed th!t

mic"o$in!nce he#s the oo" bo""o-e"s !nd the econom( b( cont"ibutin& to o'e"t( "eduction.

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21/101

m!in#( to $em!#es/ Mic"o$in!nce inc"e!sed e" c!it! consumtion $o" those -ho !"e !nd !"e

not !"t o$ the mic"o$in!nce "o4ects/ The "esu#ts sho- th!t the th"ee e"cent!&e oints o$

!nnu!# o'e"t( "eduction !mon& the "o&"!m bo""o-e"s. mo"e th!n h!#$ o$ it -!s !ccounted

to mic"o$in!nce/ Desite th!t. !ddition!# bo""o-in& "o'ed to h!'e diminishin& "etu"ns. so

the inc"e!se in #o!n !mount -!s not enou&h to "educe o'e"t( #e'e#s !s e1ected/ So

mic"o$in!nce "o&"!ms inc"e!sed the "ob!bi#it( o$ the oo" esc!in& o'e"t( !nd bene$ited

the non9bo""o-e"s b( inc"e!sin& the &"o-th in thei" tot!# income !nd cont"ibuted to the

economic &"o-th o$ the econom(. but -e"e not 'e"( success$u# in "e!chin& the e1t"eme oo"/

Othe"s such !s Amin. R!i !nd To! 5)**?6 e'!#u!ted th"ou&h ! !ne# d!t!set. -hethe"

mic"oc"edit "o&"!ms "e!ch the oo" !nd 'u#ne"!b#e/ Month#( income !nd consumtion d!t!

o$ ))7 househo#ds #i'in& in t-o B!n!deshi 'i##!&es -e"e co##ected be$o"e the househo#ds

"ecei'ed the #o!ns/ The !e" tested -hethe" the househo#ds -ho 4oined ! MFI in +77+ -e"e

mo"e oo" !nd 'u#ne"!b#e in +77+9+77) com!"ed to those -ho didnt 4oin ! MFI/ This -!s

tested th"ou&h ! com!"ison o$ !'e"!&e consumtion !nd 'u#ne"!bi#it( o$ membe"s -ith

nonmembe" !nd estim!tion o$ "obit "e&"essions o$ mic"oc"edit membe"shi on 'u#ne"!bi#it(.

consumtion !nd househo#d ch!"!cte"istics/

The "esu#ts sho-ed th!t mic"oc"edit "o&"!ms !"e success$u# !t "e!chin& the oo". but

not the 'u#ne"!b#e?/ The"e is st"on& e'idence th!t those 4oinin& ! MFI -e"e oo"e" th!n those

-ho didnt 4oin. ho-e'e" the"e is -e!0 e'idence th!t those -ho 4oined -e"e mo"e 'u#ne"!b#e

th!n those -ho didnt/ Vu#ne"!b#e househo#ds in the oo" 'i##!&e -e"e e1c#uded $"om

"ecei'in& mic"oc"edit !nd in the "iche" 'i##!&es mic"oc"edit doesnt "e!ch the 'u#ne"!b#e due

to thei" otenti!##( hi&he" de$!u#t "is0/ In !ddition. ! ne&!ti'e "e#!tionshi e1isted bet-een

month#( consumtion !nd "ecei'in& ! #o!n !nd 'u#ne"!bi#it( !nd "ecei'in& ! #o!n/ A

#imit!tion o$ this !e" is th!t the 'u#ne"!bi#it( !nd !'e"!&e consumtion #e'e# used -e"e

const!nt th"ou&hout the e1!mined e"iod. ho-e'e" this is not cont"o##ed $o" due to #imited

d!t!/

Li0e-ise. Hiet!#!hti et !#/ 5)*+*6 %u!#it!ti'e#( e'!#u!ted the e$$ect o$ mic"oc"edit on

o'e"t( b( the ch!n&e in se'e"!# o$ the bo""o-e"s socio9economic ch!"!cte"istics/ Thei"

?The 'u#ne"!b#e !"e those -ho !"e most "one to destitution i/e/ the #e'e# o$ o'e"t( is soe1t"eme th!t the e"son #!c0s the me!ns to "o'ide $o" his;he"se#$/ Amin5)**?6 de$ined the

oo" !s those -ho en4o( #o- #e'e#s o$ consumtion. -hi#e the 'u#ne"!b#e !"e those -ho !"e

un!b#e to smooth consumtion i$ the( !"e $!ced -ith sudden income $#uctu!tions/

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22/101

stud( -!s c!""ied out in ! 'i##!&e in B!n!desh -e"e th"ee mic"o$in!nce "o&"!ms h!d been

oe"!tin& $o" mo"e th!n $i'e (e!"s/ St!tistic!# com!"isons bet-een ! "!ndom s!m#e o$

bo""o-e"s !nd non9bo""o-e"s 5cont"o# &"ou6 -ith simi#!" socio9economic conditions -e"e

then inte"'ie-ed on ho- the #o!n h!d !n im!ct on the #i$e o$ the househo#ds/ It -!s

conc#uded th!t MFIs h!'e !n !'e"!&e e$$ect on mu#tidimension!# o'e"t( "eduction. but do

not t!"&et the oo"est in the 'i##!&e/ Desite th!t the non t!"&eted oo" &"ou "e"esented !

'e"( sm!## e"cent!&e o$ househo#ds "esou"ce !##oc!tion -!s mo"e to househo#ds !bo'e the

o'e"t( #ine "!the" th!n be#o-/ Com!"ed to the cont"o# &"ou. mic"o$in!nce bo""o-e"s

socio9economic conditions im"o'ed. !nd in c!se the mic"o$in!nce socio9economic

conditions didnt im"o'e th!t -!s ! "esu#t o$ mism!n!&ement o$ the #o!n b( the househo#ds

"!the" th!n ! $!i#u"e o$ the MFI/ Fo" MFIs to !##e'i!te o'e"t( in bette" -!(s. techno#o&ic!#

suo"t. s0i##s t"!inin&. educ!tion !nd he!#th "e#!ted schemes shou#d be im#emented/ A

#imit!tion o$ this !e" is th!t the di$$e"ences in !n( o$ the t-o &"ous socio9economic

conditions du"in& the !st th"ee to $i'e (e!"s -e"e conside"ed to be on#( ! "esu#t o$ bein& !

membe" in ! MFI/

B( t"!c0in& the "o&"ess o$ bo""o-e"s. simi#!" "esu#ts -e"e "e!ched b( G(dic0s

5)**)6 stud( on )?7 bo""o-e"s o$ ! u!tem!#!n MFI -ho -e"e su"'e(ed in +77,/ These

bo""o-e"s -e"e "esu"'e(ed in +777 to monito" ch!n&es in the ente""ises !nd the bo""o-e"s2-e#$!"e !nd e1#o"e the bene$its !nd #imit!tions o$ mic"o$in!nce !s ! too# o$ economic

&"o-th/ The $indin&s indic!ted th!t !$te" the initi!# c"edit !ccess. the inc"e!se in the

em#o(ment #e'e# -ithin the s!m#e ente""ises is $o##o-ed b( ! e"iod o$ st!&n!tion in

em#o(ment &"o-th/ Em#o(ment !nd ente""ise "e'enue inc"e!sed subst!nti!##( !s ! "esu#t

o$ the c"edit "o&"!m/ At the be&innin&. !ccess to c"edit initi!ted "!id ente""ise &"o-th.

ho-e'e" the"e -!s "!id diminishin& "etu"ns to c"edit !ccess thus #imitin& si&ni$ic!nt#( thei"

#on&9"un &"o-th/ Une1ected#(. in the #on&9"un hi"ed $em!#e ent"e"eneu"s -e"e mo"e th!n

the hi"ed m!#e ent"e"eneu"s/ Gomen h!d &"e!te" ente""ise em#o(ment st!bi#it(. $e-e"

d"o9outs !nd hi&he" "!tes o$ em#o(ment/ Most o$ the bo""o-e"s s!id the( h!'e e1e"ienced

%u!#it!ti'e im!cts $"om the #o!n/ On the othe" h!nd. none o$ the ente""ises &"e- to be

medium9sied ente""ises no" did the "o#e o$ the ent"e"eneu"s ch!n&e o'e" time/ As the

numbe" o$ em#o(ees &"o-s. c"edit !ccess mi&ht be ! bindin& const"!int to the ente""ises

&"o-th/ A #imit!tion o$ this stud( is th!t the "esu#ts !"e count"( seci$ic !nd mi&ht not be

&ene"!#ied !c"oss de'e#oin& count"ies/

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23/101

Hence. mic"o$in!nce is on#( ! too# $o" o'e"t( "eduction. but is not the !n!ce!/ Those -ho

"ecei'ed #o!ns $"om MFIs -e"e bein& se#$9 se#ected !nd th!t is -h( the"e !"e ! $e- !e"s

$indin& the e$$ect o$ mic"o$in!nce on o'e"t(/ Hence. -e !#te"n!ti'e#( e1!mine mic"o$in!nce

indi"ect#( b( e1!minin& $in!nci!# inc#usion;out"e!ch "!the" th!n o'e"t( "eduction/

(.(. ,utreach and Efficiency of MIs

The !bo'e !e"s e1!mined the e$$ect o$ MFIs on o'e"t( !nd the e1tent o$ thei"

im!ct deends on thei" out"e!ch/ To inc"e!se out"e!ch ent!i#s t!"&etin& mo"e the oo" !nd

'u#ne"!b#e to -hom the cost o$ #endin& is the hi&hest. -hich con$#icts -ith e$$icienc(/ The

#ite"!tu"e e1#!ined the di$$e"ent t(es o$ e$$iciencies o$ MFIs !nd e1!mined -hethe" !

t"!deo$$ e1ists bet-een out"e!ch !nd e$$icienc( in !ddition to -hethe" subsidies to MFIs

inc"e!se out"e!ch !nd e$$icienc(/

To be&in -ith. B!"m!n. M!"thu" !nd 3!#"! 5)**76 conducted ! i#ot su"'e( in +)

Indi!n 'i##!&es on


24/101

be "!n0ed the"e$o"e b!sed on theDEA"!the" th!n $in!nci!# "!tios th!t $!## sho"t o$ e1#!inin&

some e1o&enous $!cto"s !$$ectin& e$$icienc(/

(.(.&. $radeoff bet#een efficiency and outreach

To dete"mine -hethe" ! t"!deo$$ e1ists bet-een out"e!ch to the oo" !nd MFI

e$$icienc(. He"mes. Lensin0 !nd Meeste"s 5)*++6 !#ied ! stoch!stic $"ontie" !n!#(sis/ D!t!

o$ ,?< MFIs -!s obt!ined $"om the Mi1M!"0et. ! ob!# -eb9b!sed mic"o$in!nce

in$o"m!tion #!t$o"m com"isin& mo"e th!n +.?** institution!#9 (e!" obse"'!tions $"om the

(e!"s +779)**/ The !utho"s2 conc#usion -!s th!t out"e!ch is ne&!ti'e#( co""e#!ted -ith

MFI e$$icienc(/ MFIs #endin& mo"e to -omen !nd;o" h!'e ! #o-e" !'e"!&e #o!n b!#!nce. i/e/

h!'e hi&he" #e'e# o$ out"e!ch. !"e #ess e$$icient/ Fu"the"mo"e. ! cost $unction -!s estim!ted

sho-in& th!t s!#!"( !nd &"oss #o!n "o$its !"e ositi'e !nd si&ni$ic!nt !nd th!t indic!ted !

hi&he" cost. -hi#e techno#o&ic!# ch!n&e #o-e"ed the cost/ The !'e"!&e m!"&in!# e$$ect o$ the

tot!# $in!nci!# e1enses o$ MFI2s e" do##!" o$ deosits -!s !#so ositi'e !nd si&ni$ic!nt/

"ou #endin& !#so #o-e"ed in$o"m!tion costs/ Fin!##(. e$$icienc( -!s inc"e!sed on#( !t the

e1ense o$ "e!chin& #ess to the oo"/

Simi#!"#(. H!"t!"s0!. Shen !nd Me"s#!nd 5)*+?6 !#ied ! st"uctu"!# !"o!ch to

c!tu"e MFIs e$$icienc(. out"e!ch !nd sust!in!bi#it(/ Usin& !ne# d!t! o$ 7>7 obse"'!tions onMFIs in @7 count"ies. inut "ice e#!sticit( !nd economies o$ sc!#e $o" #endin&9on#( !nd

deosit9mobi#iin& MFIs -e"e estim!ted/ A s(stem o$ e%u!tions o$ cost $unctions !nd cost

sh!"es -e"e used to estim!te the seemin( un"e#!ted "e&"essions 5SUR6/ The estim!ted

t"!ns#o& cost $unction sho-ed th!t ! t"!deo$$ e1ists bet-een sust!in!bi#it( !nd out"e!ch/

E$$icienc( !"oused $"om the &"o-th o" conso#id!tions o$ !## MFIs e1cet the "o$it!bi#it(9

$ocused deosit mobi#iin& MFIs. -ho do not h!'e inc"e!sin& "etu"ns to sc!#e/ Out"e!ch

"esu#ted $"om the hi&hest cost s!'in&s !nd sc!#e e$$icienc( -hich is met b( NO9MFIs -hen

the( !"e t"!ns$o"med into "e&u#!ted deosit9mobi#iin& MFIs/ As ! "esu#t o$ "e&u#!tion !nd

&o'e"n!nce. technic!# "o&"ess is "esent in #endin&9on#( MFIs but not in s!'in&9mobi#iin&

MFIs/ To inc"e!se sust!in!bi#it( !nd secu"e $undin&. MFIs shou#d st!"t to be mo"e

comme"ci!#ied !nd hence thei" mission -i## d"i$t/

A#te"n!ti'e#(. Osm!n. !0!"e(! !nd M!h"ous 5)**@6 em#o(ed the "inci!#

comonent $!cto" !n!#(sis 5CFA6 to de'e#o !n !ntio'e"t( t!"&etin& "o&"!m in E&(t/

Se'e"!# !sset o-ne"shi !nd socio9demo&"!hic indic!to" '!"i!b#es -e"e then used !s ! "o1(inde1 $o" househo#d -e!#th/ Those -ith '!#ues on the -e!#th inde1 th!t be#on& to the bottom

+@


25/101

)*8 o$ the ou#!tion -e"e c#!ssi$ied !s oo"/ A comosite o'e"t( indic!to" 5CI6 !nd

Recei'e" Oe"!tin& Ch!"!cte"istic 5ROC6 cu"'es -e"e used to me!su"e the e$$icienc( o$ the

estim!ted CIs once $o" E&(t !s ! -ho#e !nd once $o" "u"!# !nd u"b!n !"e!s/ The "esu#ts

sho-ed th!t "o&"!ms th!t seci$ic!##( t!"&et the oo" !e!"ed to be "e#!ti'e#( mo"e

e$$icient/ Ghen the oo" !nd 'u#ne"!b#e "e"esent the "e$e"ence &"ou. the e$$icienc( $o"

t!"&etin& the oo" is not "educed/ Ho-e'e". ! #imit!tion o$ this !e" is th!t the

mu#tidimension!# !sects o$ o'e"t( -e"e not t!0en into conside"!tion/

Cu##. Demi"&/93unt !nd Mo"duch 5)**


26/101

o'e"t( inde1 to me!su"e the sc!#e !nd out"e!ch o$ MFIs/ This o'e"t( out"e!ch inde1 -!s

used to me!su"e the deth o$ out"e!ch o$ MFIs !c"oss di$$e"ent "e&ions !nd test -hethe"

unsubsidied MFIs h!'e ! deee" out"e!ch th!n subsidied MFIs/


27/101

ob4ecti'es #e!d them to c"oss9subsidie -ithin the "esent &"ou o$ bo""o-e"s/ The !n!#(sis

o$$e"ed in this !e" indic!ted th!t cometition e#imin!ted "ents on "o$it!b#e bo""o-e"s !nd

-o"sened the "ob#em o$ !s(mmet"ic in$o"m!tion #e!din& bo""o-e"s to !c%ui"e se'e"!# #o!ns/

(. /ustainability of MIs

The mo"e e$$icient MFIs !"e. it is "oosed b( the #ite"!tu"e th!t. the mo"e sust!in!b#e

the( become/ MFIs h!'e to inc"e!se thei" out"e!ch in o"de" to be mo"e e$$icient !nd hence

mo"e sust!in!b#e !nd t!"&et the m!"&in!#ied/ It is !#so "oosed th!t the"e is dem!nd $o"

MFIs due to #imited $in!nce o$$e"ed to the oo" b( the $o"m!# secto"/

Ts!i 5)**,6 %u!#it!ti'e#( !n!#(ed -h( eo#e !"e t!"&etin& in$o"m!# $in!nce !s !

me!ns o$ "ecei'in& c"edit desite Chin! !nd Indi!s o#icies o$ #imitin& in$o"m!# $in!nce !nd

usu"(/ The st!tistics sho-ed th!t the dem!nd $o" c"edit is unmet b( mic"o$in!nce !nd $o"m!#

$in!nci!# institutions/ I$ #o!ns &i'en b( dono" $unds !nd subsidied "o&"!ms !"e 'ie-ed !s

de'e#oment!# side9!(ments thei" "e!(ment "!te -i## be #o-e" in com!"ison to MFIs th!t

ch!"&e sust!in!b#e inte"est "!tes/ Desite the hi&h "ob!bi#it( o$ b!n0"utc( in in$o"m!#

institutions &i'en the bud&et const"!ints o$ in$o"m!# $in!ncie"s. subsidies stimu#!te

mic"oc"edit !nd th!ts -h( mic"o$in!nce !nd in$o"m!# $in!nce !"e ime"$ect substitutes/ In

!ddition. de'e#oment!# outcomes o$ b!n0s. MFIs !nd subsidied #o!ns !"e sh!ed b( the

societ(s soci!#. o#itic!# !nd economic incenti'es !nd &"e!te" otenti!# $o" mic"o$in!nce

"o&"!ms -e"e "esent -hen these incenti'es !"e b"o0en !nd the "o&"!ms -e"e desi&ned

!cco"din& to #oc!# needs/ So MFIs !"e unsust!in!b#e bec!use the( "e#( on subsidies !nd the

in$o"m!# secto" is ! e"$ect substitute to MFIs/

A simi#!" "esu#t -!s $ound b( o##in&e". Outh-!ite Co"de"o9um!n 5)**6 -ho

%u!ntit!ti'e#( !nd %u!#it!ti'e#( !n!#(ed "e#!tionshi9b!sed $in!ncin& !nd the #endin& "ocess

o$ MFIs in the U/S/ The( !n!#(ed d!t! $"om ! su"'e( o$ "e!#9-o"#d "!ctices o$ se'e"!#

MFIs. ut $o"-!"d the e#ements o$ ! mic"o #endin& mode# !nd estim!ted the b"e!09e'en "ice

o$ #o!ns/ In !ddition. the( e1!mined the "o#e o$ non"o$it o"&!ni!tions in "o'idin& c"edit to

sm!## businesses. ho- "icin& !$$ected sust!in!bi#it( !nd se#$9su$$icienc( o$ MFIs !nd -h!t

c!n be done to bette" st"uctu"e the c"edit m!"0et/ The "esu#ts sho-ed th!t MFIs need to

"ecei'e &"!nts;subsidies to o$$e" thei" "oducts !t ! subsidied "!te to mic"oente""eneu"s/

Subsidiin& c"edit mi&ht e1#!in -h( m!inst"e!m $in!nci!# institutions do not di"ect#( $und

mic"oente""ises !nd ne&!ti'e#( !$$ect the #on& te"m sust!in!bi#it( o$ the MFIs/ MFIs !"e

+7


28/101

sometimes const"!ined b( thei" dono"s to ch!"&e ! ce"t!in #e'e# o$ inte"est. !"e not

incenti'ied to 0no- thei" t"ue cost !nd m!1imie e$$icienc(/

On the othe" h!nd. C"!b 5)**>6 -"ote !n !"tic#e in the Mic"oB!n0in& bu##etin -hich

%uestioned -hethe" the mic"o$in!nce indust"( c!n de#i'e" its ob4ecti'es &i'en the inst!bi#it(

o$ the ob!# econom(/ MFIs t!0e #o!ns in #oc!# cu""encies !nd bo""o- $"om inte"n!tion!#

!&encies -o"#d-ide -hich e1ose them to e1ch!n&e "!te "is0/ The !utho" !"&ued th!t $o"ei&n

e1ch!n&e "!te "is0 m!n!&ement bec!me "e'!#ent the mo"e MFIs st!"ted to #end to c#ients/

This !e" used me!su"es o$ economic e1osu"e. !nnu!# d!t! $"om the Mic"o$in!nce

In$o"m!tion E1ch!n&e on )@ MFIs $"om )**+ to )**, !nd d!t! on e1ch!n&e "!tes $"om the

Inte"n!tion!# Fin!nci!# St!tistics o$ the Inte"n!tion!# Monet!"( Fund to me!su"e the e1tent o$

economic e1osu"e o$ some MFIs/ Sh!"ios me!su"e o$ economic e1osu"e o$ ! MFI -!s

then !#ied to test the e$$ect o$ ! cu""enc( $#uctu!tion on ! $i"ms '!#ue/ The $indin&s

con$i"med th!t the"e is no e'idence o$ MFIs e1osu"e to e1ch!n&e "!te "is0/ A ossib#e

4usti$ic!tion $o" th!t is the sm!## sie o$ MFIs -hich iso#!ted them $"om m!c"oeconomic

$!cto"s/ Anothe" ossib#e "e!son is th!t the MFIs c!it!# b!se is domin!ted in #oc!# "!the" th!n

$o"ei&n cu""enc(/ A #imit!tion o$ the !"tic#e is th!t the d!t! used is !nnu!# -hich mi&ht

obscu"e si&ni$ic!nt "is0/

To $u"the" suo"t. sust!in!bi#it( is ossib#e &i'en the e1istence o$ non9"o$it

o"&!ni!tions 5NOs6. !d'oc!te sh!"eho#de"s $i"ms 5SHFs6 !nd cooe"!ti'es 5COOs6/

Me"s#!nd 5)**76 o$$e"s ! theo"etic!# $"!me-o"0 to unde"st!nd the o-ne"shi costs in MFIs/

Ghi#e o#ic( m!0e"s !d'oc!te SHFs. most MFIs !"e eithe" NOs o" COOs/ Hence. this

!e" com!"ed !nd cont"!sted the o-ne"shi9cost o$ the th"ee t(es o$ MFIs !nd !#ied the

H!nsm!nn economic theo"( o$ o-ne"shi -hich com!"ed the cost9'!"i!b#es "e#!ted to

m!"0et cont"!cts to the cost '!"i!b#es "e#!ted to o-ne"shi/ Fu"the" suo"t is "o'ided b(

usin& desc"iti'e ob!# st!tistics $"om the MI )**@ Benchm!"0s/ The "esu#ts sho-ed th!t

the"e must be SHFs. NOs !nd cooe"!ti'es thei" coe1istence is necess!"( to m!1imie

custome" -e#$!"e/ The hi&h costs o$ m!"0et cont"!cts !"e ! "esu#t o$ th"ee m!"0et

ine$$iciencies cost o$ #imited cometition. cost o$ #oc09in m!"0et o-e" !nd !s(mmet"ic

in$o"m!tion/ A b#end o$ the di$$e"ent o-ne"shi t(es is ! necessit( $o" mic"o$in!nce to h!'e

! &"e!te" im!ct on custome"s/

)*


29/101

(.0. Regulation

In o"de" $o" MFIs to be mo"e e$$icient !nd sust!in!b#e. the #ite"!tu"e sho-s th!t MFIs

h!'e to be $u"the" "e&u#!ted. eseci!##( &i'en the cu""ent #o- #e'e#s o$ "e&u#!tion o$ MFIs/

A"un 5)**


30/101

Mi1M!"0et on ?? MFIs th!t oe"!ted on o" be$o"e )**,/ The m!in e"$o"m!nce indic!to"

-!s the oe"!tion!# se#$9su$$icienc(. -hich is the "!tio o$ !nnu!# $in!nci!# "e'enue to

!nnu!# tot!# e1enses/ The deendent '!"i!b#e in the OLS "e&"ession -!s the outcome o$ !

MFI in ! ce"t!in count"( du"in& ! ce"t!in (e!"/ Com#ement!"( bet-een the

m!c"oeconomic !nd mic"o9institution!# en'i"onment !nd the e"$o"m!nce o$ MFIs -!s

e'ident/

Fin!nci!##( deee" economies. &"e!te" m!c"oeconomic st!bi#it(. hi&he" #e'e#s o$

&"o-th !nd cometition !nd #o-e" #e'e#s o$ in$#!tion inc"e!sed the MFIs e$$icienc(.

sust!in!bi#it( !nd "etu"n. !nd !##o-ed MFIs to ch!"&e hi&he" inte"est "!tes/ "o-th !#so

"educed the cost on MFIs !nd the bo""o-e"s de$!u#t "!tes/ Mic"o9institution!# $!cto"s #i0e

#o- #e'e#s o$ co""ution. st!bi#it(. !nd !ccount!bi#it( im"o'ed the e"$o"m!nce o$ MFIs.

-hi#e !cti'e &o'e"nment o#icies !nd &ood "e&u#!tions mi&ht h!'e inc"e!sed the cost o$

oe"!tion on MFIs/ Di$$icu#t( in st!"tin& ! business. cont"!ct en$o"cements !nd "oe"t(

-e"e $ound to h!'e !n im!ct on MFI e"$o"m!nce/ So MFIs !"e inte"deendent -ith the

count"(s econom( the mic"o9institution!# !nd m!c"oeconomic e"$o"m!nce sh!e the

di"ection o$ the MFI !nd "e&u#!tion is ! necessit( $o" &ood MFIs e"$o"m!nce/ A #imit!tion

o$ the stud( is th!t desite th!t the ?? MFIs oe"!te in &eo&"!hic!##( distinct !"e!s. !

s!m#e bi!s estim!te mi&ht h!'e e1isted !nd the "esu#ts mi&ht not be &ene"!#ied to !##MFIs -o"#d-ide/

On !nothe" 'ein. Cu##. Demi"&uc93unt !nd Mo"duch 5)**76 th"ou&h the use o$ ob!#

su"'e(s on MFIs !nd c"oss9section!# d!t! $"om the Mic"o$in!nce In$o"m!tion E1ch!n&e !nd

the Mic"oB!n0in& Bu##etin i##ust"!ted the t"!deo$$s th!t MFIs. "e&u#!to"s !nd dono"s $!ce/

The d!t! in'o#'ed th"ee di$$e"ent t(es o$ custome"s o'e"t( !nd inc#uded d!t! on ?,@

institutions in @ count"ies $"om +777 to )**)/ To test $o" the mission d"i$t o$ MFIs. '!"i!b#es

me!su"in& out"e!ch -e"e "e&"essed -hi#e cont"o##in& $o" institution!# ch!"!cte"istics/T"!de9

o$$s !"ose !s ! "esu#t o$ cometition. "e&u#!tions. comme"ci!#i!tion. di$$e"ent cont"!ctin&

mech!nisms. #!c0 o$ co##!te"!#s. #!c0 o$ b!n0s monito"in& !nd d!t! co##ection !nd mo"e

imo"t!nt#( #!c0 o$ the b!n0s inte"est in #o- income &"ous/ The !utho"s %u!ntit!ti'e#( $ound

so#utions on ho- c!n the di$$e"ent mic"o$in!nce !cto"s e1!nd $in!nci!# !ccess. im"o'e

e$$icienc( !nd inc"e!se $!i"ness o$ c!it!# m!"0ets/ Fin!nci!# sust!in!bi#it( !nd out"e!ch !"e

not t-o oosin& $o"ces ho-e'e" ! t"!deo$$ e1ists bet-een soci!# &o!#s !nd m!1imiin&

"o$its/ Re&u#!to"( sue"'ision. !#thou&h cost#(. is c"itic!# $o" deosit t!0in& but m!( shi$t

))


31/101

the MFIs t!"&et se&ment to those -ho !"e -e##9o$$/ Fu"the" cometition $"om the $o"m!#9

secto" d"i'es MFIs to t!"&et mo"e the oo"/

L!c0 o$ "e&u#!tion -!s !#so $ound b( G!&ne" !nd Gin0#e" 5)*+?6 -ho e1#o"ed the

e$$ect o$ the $in!nci!# c"isis on the c"edit &"o-th o$ MFIs. since the c"edit &"o-th is ! 0e(

$in!nci!# 'u#ne"!bi#it( indic!to"/ A$te" cont"o##in& $o" ! &"ou o$ MFI9#e'e#. st"uctu"!# !nd

m!c"oeconomic $!cto"s th!t !$$ect c"edit &"o-th in non9c"isis times. ! !ne# "e&"ession -!s

estim!ted to test -hethe" the c"isis ne&!ti'e#( !$$ected MFI c"edit &"o-th/ The "e&"ession -!s

b!sed on d!t! o$ c"edit &"o-th o$ )) MFIs in , de'e#oin& !nd eme"&in& m!"0et count"ies/

The d!t! is !nnu!#. $"om )***9)**7. !nd -!s obt!ined $"om Mi1M!"0et/ A c"oss9"e&"ession

!n!#(sis o$ ,? MFIs in ,7 count"ies -!s conducted to test -hethe" the deth o$ the c"edit

bust du"in& the time o$ the c"isis c!n be "edicted b( the sie o$ the c"edit boom "ecedin& the

c"isis/

The !e"2s $indin&s -e"e th!t the"e is #!c0 o$ "e&u#!tion o$ MFIs !nd o'e" time MFIs

bec!me mo"e 'u#ne"!b#e to $in!nci!# tu"moi# !nd du"in& the $in!nci!# c"isis c"edit &"o-th o$

MFIs dec#ined sh!"#(/ The mo"e inte&"!ted ! MFI is in the ob!# econom(. the &"e!te" its

use o$ domestic !nd inte"n!tion!# m!"0ets $o" $unds !nd hence the &"e!te" the se'e"it( o$ the

c"isis on the MFI/ The hi&he" the c"edit &"o-th in the "e9c"isis e"iod. the st"on&e" -!s the

$!## in c"edit &"o-th !s ! "esu#t o$ the c"isis/ MFIs oe"!tin& in count"ies -ith bette"

m!c"oeconomic conditions -e"e #ess !$$ected b( the c"isis/ The"e -!s #itt#e di$$e"ence in

c"edit &"o-th !tte"ns o$ the di$$e"ent t(es o$ MFIs. ho-e'e" $in!nci!# inc#usion !nd

'u#ne"!bi#it( -e"e e'ident !nd one o$ the "e!sons o$ the #!c0 o$ st!bi#it( is in!de%u!te

"e&u#!tion/

(.'. Determinants of loan repayment

Hence. the !bo'e section sho-ed the imo"t!nce o$ "e&u#!tion $o" MFIs to be

sust!in!b#e/ Not on#( !"e the "e&u#!tions imo"t!nt $o" MFIs to be sust!in!b#e. but the"e

!"e othe" $!cto"s th!t !$$ect "e!(ment "!tes !nd e$$icienc(/ These $!cto"s !"e m!in#(

di'ided into t-o m!in sections those th!t !"e "e#!ted to the bo""o-e"s ch!"!cte"istics on

the one h!nd !nd on the othe" h!nd those th!t !"e "e#!ted to the MFI/

)?


32/101

(.'.&. Borro#er1s characteristics that affect repayment

E1!minin& -h!t $!cto"s !$$ect the "e!(ment "!te. A"s(!d 5)**@6!ssessed Vi##!&e

C"edit Institutions. !#so 0no-n !s Lemb!&! e"0edit!n Des! 5LD6 in B!#i/ A #o&istic

mode# -!s b!sed on d!t! $"om the +7779)**+$in!nci!# "eo"ts o$ LDs. ou#!tion d!t!.

the numbe" o$ c#ient d!t!. !nd "oss Re&ion!# Domestic "oduct/ This time e"iod -!s

chosen !s it -!s ! e"iod o$ economic st!bi#it( in B!#i/ The "esu#ts o$ this !e" sho-ed

th!t hi&h "e!(ment "!tes o$ the LDs -e"e !$$ected b( the institution!# !""!n&ements th!t

!"e b!sed on the B!#inese soci!# customs 5s!nctions. soci!# no"ms !nd '!#ues6. $o"m!# !nd

in$o"m!# institutions/ In !ddition. the numbe" o$ st!$$. bo""o-e"s. s!'e"s !nd -e!#th did not

im!ct the "e!(ment "!te. but "!the" the c!!cit( !nd -i##in&ness o$ the bo""o-e" to "e!(

-e"e the ones th!t !$$ected the "e!(ment "!te/ The mode# sho-ed hi&h "e!(ment "!tes

!nd #o- de#in%uent bo""o-e"s "!tio 5those -ho didnt "e!( thei" #o!ns on time "e#!ti'e to

tot!# bo""o-e"s6. indic!tin& the c#ients -i##in&ness to !( the inte"est "!te e'en i$ the

in$#!tion "!te -!s si&ni$ic!nt#( sm!##e" th!n the inte"est "!te/ A #imit!tion is th!t the mode#

-!s b!sed on on#( t-o (e!"s. -hich mi&ht not be indic!ti'e o$ -h!t h!ened in B!#i

th"ou&hout the (e!"s since these t-o (e!"s -e"e ! e"iod o$ hi&h economic st!bi#it(/

As $o" the C!e Ve"de!n mic"oente""eneu"s !nd mic"oente""ises. B!tist!.

R!m!#ho !nd Si#'! 5)**@6 #oo0ed !t the ch!"!cte"istics o$ the mic"oente""eneu"s th!t

in$#uence the "ob!bi#it( o$ thei" need $o" e1te"n!# st!"t9u c!it!#/ The !"tic#e !#so "e#!ted

ho- '!"i!b#es such !s the bo""o-e"s socioeconomic b!c0&"ounds !nd MFI ch!"!cte"istics

c!n !$$ect the bo""o-e"s need o$ c!it!#/ One o$ the !utho"s dist"ibuted ! su"'e(

%uestionn!i"e in )**? to +)* mic"oent"e"eneu"s !nd !n!#(ed the ch!"!cte"istics o$ the

dem!nd side o$ mic"oc"edit in C!e Ve"de/ Then ! "!ndom s!m#e o$ mic"oente""ises -!s

se#ected $"om the d!t!b!se PFichei"o de Unid!des Est!tQstic!s/ The su"'e( sho-ed th!t in

C!e Ve"de the m!in ent"e"eneu"s -e"e -omen -ith 'e"( #o- #e'e#s o$ educ!tion -ho

'o#unt!"i#( st!"ted thei" t"!din& $i"m be$o"e the !&e o$ ,* !nd decided to -o"0 !#one o"

-ith on#( one em#o(ee/ Si&ni$ic!nt di$$e"ences e1isted bet-een "u"!# !nd u"b!n

mic"oente""ises mic"oente""ises in "u"!# !"e!s !"e sm!##e" th!n those in u"b!n !"e!s.

t!"&et mo"e -omen !nd the #ess educ!ted -ho 'o#unt!"i#( become se#$ em#o(ed in the

t"!din& secto"/ The deendent '!"i!b#es in the "e&"ession mode# 5!&e. educ!tion. &ende".

!nd "e!son $o" bein& se#$9em#o(ed6 -e"e $ound to be ositi'e#( si&ni$ic!nt in dete"minin&

the need $o" e1te"n!# c!it!#/ It -!s !#so $ound th!t mic"oente""ises se"'e !s ! too# $o"

),


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"educin& unem#o(ment. !##e'i!tin& o'e"t( !nd enh!ncin& economic &"o-th in C!e

Ve"de/

In !ddition. ome !nd S!nto" 5)**+6 e1#o"ed the dete"min!nts o$ se#$9

em#o(ment success $o" bo""o-e"s o$ mic"oc"edit. the economic "etu"ns to soci!# c!it!#

!ccumu#!tion !nd the e$$ect o$ mic"o$in!nce "o&"!ms on c#ients/ This -!s done usin& !

c"oss9section!# d!t! set $"om ! su"'e( b( the !utho"s. in !ddition to !dminist"!ti'e $i#es $o"

sm!##9sc!#e se#$9em#o(ed c#ients -ho !ccessed c"edit $"om C!n!d!s #!"&est non9"o$it

mic"o #endin& institution $"om the e"iod +77, to +77>/@The mode# demonst"!ted th!t !

ositi'e dete"min!nt o$ se#$9em#o(ment e!"nin&s is soci!# c!it!#/ Soci!# c!it!# !ided the

bo""o-e" in c!se o$ #!c0 o" #imited $in!nci!# co##!te"!# !nd the"e$o"e ositi'e#( !$$ected

indi'idu!# #!bo" m!"0et e"$o"m!nce/ In !ddition. midd#e9!&ed. m!#e. m!""ied !nd

C!n!di!ns e!"ned the most $"om se#$9em#o(ment !cti'ities/ Bo""o-e"s -ith the s!me

educ!tion!# #e'e# ho-e'e" did not h!'e e%u!# "o$its $"om thei" mic"oc"edit #o!n/

Fu"the"mo"e. the #oc!tion -!s "o'ed to be ! dete"min!nt o$ sm!##9sc!#e se#$9em#o(ment

success/

Fu"the"mo"e. Abd 3!"im !nd Ros#!n 5)**76 em#o(ed "obit !nd #o&it mode#s to e1!mine

-h!t !"e the $!cto"s th!t !$$ect #o!n "e!(ment $o" non9&"ou mic"oc"edit bo""o-e"s/ In )**.

! "!ndom s!m#e su"'e( -!s conducted on )@?* bo""o-e"s $"om >@ b"!nches o$ A&"ob!n0. !

comme"ci!# b!n0 in M!#!(si! th!t #end m!in#( to those -o"0in& in the !&"icu#tu"e secto"/ The

deendent '!"i!b#e o$ the mode# too0 ! '!#ue o$ + in c!se o$ ! #o!n de$!u#t !nd * othe"-ise/

The dete"min!nts o$ "e!(ment -e"e di'ided into th"ee c!te&o"ies: ch!"!cte"istics o$ the

bo""o-e". ch!"!cte"istics o$ the #o!n !nd ch!"!cte"istics o$ the "o4ect/ The "esu#ts sho-ed th!t

the t(e o$ business. #o!n du"!tion !nd !mount. t"!inin&. !nd &ende" o$ the bo""o-e" !"e !##

si&ni$ic!nt $!cto"s th!t !$$ect the "ob!bi#it( o$ #o!n "e!(ment/ The "ob!bi#it( o$ de$!u#t $o"

men -!s hi&he" th!n th!t $o" -omen since -omen !"e h!"d -o"0e"s. $in!nci!##( disci#ined

!nd become economic!##( emo-e"ed !$te" t!0in& ! mic"o#o!n/ In !ddition. #ess "is0 -!s

$ound in the se"'ices secto" com!"ed to the "oduction secto" #e!din& to #o-e" de$!u#t "!tes

$o" those in'o#'ed in the se"'ices secto"/ The hi&he" the #o!n !mount. the sho"te" the

"e!(ment "!te !nd the "o'ision o$ t"!inin& !## cont"ibuted ositi'e#( to #o-e" "ob!bi#it( o$

@A "educed9$o"m hum!n c!it!# e!"nin&s e%u!tion !u&mented -ith soci!# c!it!# !nd

nei&hbo"hood e$$ects -!s then estim!ted usin& ! su"'e( on @+) &"ou bo""o-e"s !nd on the

othe" h!nd


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de$!u#t "!tes/ A&e. educ!tion. "io" em#o(ment. "!ce !nd the numbe" o$ deendenc( -e"e

!mon& the $!cto"s th!t did not in$#uence the "ob!bi#it( o$ de$!u#t/

A#(in& the s!me method. Mo0ht!". N!"te! !nd !n 5)*+)6 em#o(ed ! #o&istic to

dete"mine the $!cto"s !$$ectin& "e!(ment in Indi!/ The mode# em#o(ed the #o!n "e!(ment

"ob#em !s the deendent '!"i!b#e th!t is ! $unction o$ the bo""o-e" ch!"!cte"istics. business

ch!"!cte"istics !nd mic"oc"edit #o!n ch!"!cte"istics/ The #o!n "e!(ment "ob#ems -e"e eithe"

! "esu#t o$ the #o!n ch!"!cte"istics o" the bo""o-e"s socio9economic ch!"!cte"istics/ The

deendent '!"i!b#e too0 ! '!#ue o$ * i$ the bo""o-e" !#-!(s !id on time !nd ! '!#ue o$ + i$

he;she did not "e!( mo"e th!n $ou" times du"in& ! e"iod o$ t-o (e!"s/ This in$o"m!tion -!s

co##ected $"om ! su"'e( %uestionn!i"e -e"e ,) bo""o-e"s $"om di$$e"ent dist"icts h!d to

!ns-e" ho- m!n( times did the( de$!u#t/

The m!in $indin&s -e"e th!t some o$ the bo""o-e"s ch!"!cte"istics such !s &ende".

!&e !nd t(e o$ business in'o#'ed cont"ibute to the #o!n "e!(ment "ob#ems o$ MFIs. in

!ddition to some #o!n ch!"!cte"istics such !s the mode o$ "e!(ment !nd the "e!(ment

!mount/ The "esu#ts sho-ed th!t $em!#es h!d hi&he" "e!(ment "!tes com!"ed to men/

Bo""o-e"s -ho -e"e in'o#'ed in sm!## business !cti'ities h!d #o-e" de$!u#t "!tes com!"ed

to bo""o-e"s -ho -o"0ed in the !&"icu#tu"!# secto"/ The bi&&est !&e &"ou !nd the #o-est !&e

&"ou h!d #o!n "e!(ment "ob#ems !nd o#de" bo""o-e"s de$!u#ted mo"e com!"ed to the

(oun&/ Mo"e $"e%uent #o!n "e!(ment e"iods me!nt mo"e #o!n "e!(ment $!i#u"es/ Hence.

di$$e"ent #o!n "e!(ment methods; mo"e $#e1ib#e cont"!cts shou#d be "esent to suite the

"e'enue c(c#e o$ e!ch "o4ect !nd the #e'e# o$ e1e"ience !nd s0i##s o$ e!ch bo""o-e"/

(.'.( MI characteristics affecting repayment

(.'.(.&. Impact of interest rates on loan repayment

E1!minin& -hethe" inte"est "!tes c!n ne&!ti'e#( !$$ect "e!(ment "!tes. As#i

Demi"&/93unt. Cu## !nd Mo"duch 5)**@6 &!the"ed d!t! on +), institutions oe"!tin& in

,7 count"ies to see the "o$it!bi#it(. #o!n "e!(ment !nd cost "eduction !tte"ns o'e" the

(e!"s +777 to )**)/ D!t! -!s &!the"ed $"om the Mic"o$in!nce In$o"m!tion E1ch!n&e !nd

the Mic"oB!n0in& Bu##etin/ Se'e"!# "e&"ession mode#s -e"e then estim!ted -ith the

deendent '!"i!b#es bein& the $in!nci!# se#$9su$$icienc( 5FSS6 "!tio. oe"!tion se#$9

su$$icienc( 5OSS6 !nd "etu"n on !ssets 5ROA6/ Some o$ the indeendent '!"i!b#es inc#uded

the MFIs histo"(. (ie#d. "e&ion. cost. o"ient!tion !nd #endin& t(e/ The "esu#ts sho-ed th!t

)@


35/101

institution!# desi&n !nd o"ient!tion !"e 0e( #!(e"s $o" !n( MFI/ ositi'e si&ni$ic!nt

co""e#!tions e1isted bet-een FSS. ROA !nd OSS/ Desite the ne&!ti'e "etu"n on !ssets $o"

!## the MFIs combined. mo"e th!n h!#$ o$ the MFIs h!d ositi'e "o$its/ The co""e#!tions

"o'ided #itt#e e'idence on the e1istence o$ ! t"!deo$$ bet-een out"e!ch !nd "o$it. !&enc(

"ob#ems !nd mission d"i$t/ A#so the co""e#!tions sho-ed th!t "!isin& inte"est "!tes didnt

#o-e" "e!(ment "!tes !nd "o$it!bi#it(. no" ne&!ti'e#( !$$ected the MFIs soci!# mission/

B( conductin& ! #!b e1e"iment. Abbin0. I"#enbusch !nd Renne" 5)**@6 studied the

beh!'io"!# im!ct o$ the "e!(ment bu"den. dete"mined b( the inte"est "!te. on the

"e!(ment "!te o$ the bo""o-e"s/ The !e" in'esti&!ted ho- $"ee9"ide"s beh!'io" ch!n&es

-ith di$$e"ent &"ou #o!n "e!(ment !mounts/ Fou" t"e!tments -e"e c!""ied out !nd the

$i"st th"ee t"e!tments -e"e c!""ied out -e"e the "e!(ment deended on#( on the &"ou

so#id!"it(. but e!ch o$ the $ou" #!(e"s o$ the &"ou in'ested in ! se!"!te "is0( "o4ect/

V!"(in& the "e!(ment bu"den imosed on the &"ou. the( tested -hethe" hi&he" bu"dens

#e!d to !n im"o'ed "e!(ment disci#ine/ The cont"ibution "!tes in the th"ee b!sic

t"e!tments -e"e simi#!" desite the di$$e"ent inte"est "!tes/ A #o!n c!n be $u##( "e!id e'en

i$ not !## the $ou" #!(e"s "e!( i$ th"ee o" #ess "e!( the $u## !mount then $u"the" #o!ns c!n

be t!0en $"om the MFI/

The $ou"th t"e!tment -!s conducted !nd t-o oosin& e$$ects -e"e e'ident the

hi&he" the "e!(ment "!te the hi&he" the incenti'e $o" bo""o-e"s to $"ee9"ide !nd on the

othe" side. #o!ns -ith hi&h inte"est "!tes #o!ns me!nt th!t bo""o-e"s -e"e #ess to#e"!nt

to-!"ds intention!# de$!u#te"s/ So the hi&h inte"est "!tes c!n enh!nce "e!(ment

disci#ines inste!d o$ encou"!&in& $"ee "idin& o" ne&!ti'e#( !$$ect the -i##in&ness to !(/ In

this e1e"iment. &"ou membe"s -ho h!d to !( hi&h inte"est "!tes -e"e not !b#e to t!0e

se'e"!# #o!ns hence #o!ns h!'e to be o$$e"ed !t "ices th!t !"e suit!b#e $o" the bo""o-e"s to

!chie'e sust!in!bi#it(/

Mo"eo'e". 3!"#!n. Mu##!in!th!n !nd Mo"duch 5)*+*6 !n!#(ed -h( the t!0e9u

"!tes o$ $in!nci!# &oods !nd se"'ices !"e #o- is it ! dem!nd9sided "ob#em o" su#(9

sided/ The !e" de$ined th!t the t!0e9u "!te o$ ! "oduct o" se"'ice is -he"e the dem!nd

meets the su#(/ Mic"o$in!nce enet"!tion "!te -!s me!su"ed usin& d!t! $"om MFIs !nd

census d!t!/ Othe" t!0e9u me!su"ements "e#ied on d!t! $"om househo#d su"'e(s th!t -e"e

obt!ined $"om the Go"#d B!n0s Li'in& St!nd!"ds Me!su"ements Su"'e(s/ In !ddition. t-o

su"'e(s !nd thi"teen "o4ects -e"e used to "o'ide ! c#e!" ictu"e o$ the t!0e9u "!tes o$

)


36/101

$in!nci!# se"'ices/ The d!t! im#ic!ted th!t t!0e9u "!tes $o" mic"o$in!nce "oducts 5c"edit.

s!'in&s. !nd insu"!nce6 -e"e #o-/ The m!in "e!sons $o" so is th!t eo#e do not #i0e to be

in debt !nd !"e &ene"!##( uns!tis$ied -ith the te"ms o$ c"edit o$$e"ed in the c"edit m!"0et/

These MFIs !nd thei" "oducts did not se"'e the oo" !nd the c"edit-o"th(/ Conse%uent#(.

mo"e th!n h!#$ o$ the e#i&ib#e househo#ds to !"tici!te in mic"o$in!nce did not !nd

"e$e""ed to "eso"t to in$o"m!# sou"ces o$ $in!ncin& such !s mone(#ende"s. $!mi#ies !nd

$"iends/ MFIs shou#d the"e$o"e monito" the t!0e9u "!tes o$ di$$e"ent $in!nci!# "oducts so

th!t ! #!"&e" m!"0et se&ment c!n be "e!ched/ Inte"est "!tes shou#d not be hi&h. !s th!t

"esu#ted in #o-e" "!tes o$ "e!(ment/ A #imit!tion o$ the !e" is th!t ! sm!## s!m#e sie

-!s used !nd ! #!"&e" s!m#e shou#d h!'e been em#o(ed/

(.'.(.(. Impact of inno*ation of financial ser*ices

Re!(ment is di"ect#( !$$ected b( the bo""o-e" ch!"!cte"istics !nd #o!n

ch!"!cte"istics inc#udin& "e&u#!tions !nd inte"est "!te/ Re!(ment is most#( in$#uenced b(

in$o"m!tion !s(mmet"ies. oo" e"$o"m!nce o$ the MFIs. #o- #e'e#s o$ educ!tion !nd

!d'e"se shoc0s to the bo""o-e"/ A#thou&h the '!"i!b#es th!t !$$ected "e!(ment -e"e

s#i&ht#( di$$e"ent $"om one !e" to !nothe" th!t cou#d be ! "esu#t o$ the e'idence bein&

count"( seci$ic/ Hence. -e e1!mine -hethe" $!cto"s othe" th!n the bo""o-e" !nd #o!n

ch!"!cte"istics h!d !n im!ct on #o!n "e!(ment/

od%uin 5)**,6 !ns-e"ed the %uestion o$ -hethe" mic"o$in!nce inno'!tions such

!s non$in!nci!# se"'ices. &"ou #endin& !nd d(n!mic incenti'es !$$ected the "!te o$

"e!(ment/ Usin& househo#d d!t!. "e&"ession mode#s -e"e estim!ted t!0in& #o!n sie to be

!n endo&enous '!"i!b#e once !nd "e!(ment e"$o"m!nce to be !nothe"/ Inst"ument!#

'!"i!b#es -e"e then !dded to co""ect $o" the #o!n sie/ A#so Smith !nd B#ude##s e1o&enit(

test -!s !#ied to estim!te the bo""o-e"s c!!cit( to h!'e c!sh th!t -i## en!b#e him;he"

to "e!( the #o!n be$o"e the "e!(ment "!te/ It c!n be deduced $"om the mode# th!t

non$in!nci!# se"'ices ositi'e#( !$$ect the "e!(ment "!te -hi#e &"ou homo&eneit( !nd

soci!# ties do not necess!"i#( me!n ! bette" e"$o"m!nce/ The $in!nci!# inno'!tions o$ the

MFIs #endin& methodo#o&ies h!'e he#ed in o'e"t( !##e'i!tion in ! sust!in!b#e m!nne"/

Ho-e'e" since these inno'!tions !"e cost#(. ! cost9bene$it !n!#(sis h!s to be const"ucted

on -hethe" these $in!nci!# se"'ices shou#d be "o'ided o" not/ In !ddition. MFIs dedic!ted

#!"&e" #o!ns to &"ous -hose bo""o-in& e"iods !"e #on&e" ho-e'e" this #e!d to ! ne&!ti'e

im!ct on the "e!(ment "!te/

)>


37/101

(.'.(.. ,ther determinants

Othe" dete"min!nts -e"e $ound b( E#9!m!#. E#93omi. 3!"#!n !nd Osm!n5 )*+)6

-ho conducted ! #!bo"!to"( e1e"iment in the $ie#d to test the e"$o"m!nce o$ ! mic"o$in!nce

mode#. B!n09Insu"ed "ot!tin& s!'in&s !nd c"edit !ssoci!tion 5RoSCA6. !&!inst ! "!meen

mic"oc"edit mode#/ The !im o$ the e1e"iment -!s to e1!mine -hethe" c"edit unions in the

mus#im count"ies c!n n!""o- the &! bet-een the oo" !nd the m!in $in!nci!# secto"/ This

e1e"iment -!s c!""ied out in ) E&(ti!n &o'e"no"!tes 5Beh!("! !nd F!(oum6. -e"e the oo"

mus#im bo""o-e"s m!( "e4ect con'ention!# $o"ms o$ mic"o$in!nce. but -i## not "e4ect the

&u!"!nteed RoSCA/ The se%uenti!# st"uctu"e o$ the e1e"iment m!de the sub4ects mo"e !-!"e

o$ the &!me/ A$te" !#(in& b!n0 en!#ties !nd e1!minin& the e"cent!&e o$ those -ho ot

out. the e"cent!&e o$ those -ho de$!u#ted !nd the e"cent!&e o$ &ood e%ui#ib"ium. the se"ies

o$ "!ndomied cont"o##ed t"i!#s sho-ed th!t the"e -e"e hi&he" t!0e u !nd "e!(ment "!tes $o"

the b!n09insu"ed RoSCA com!"ed to the "!meen mic"oc"edit mode#/ A#thou&h this !e"

too0 into !ccount the "ob!bi#it( o$ the sub4ects de$!u#tin& !s ! "esu#t o$ mo"!# h!!"d. the

!e" $e## sho"t o$ !ccountin& the "ob!bi#it( o$ the sub4ects de$!u#tin& !s ! "esu#t o$ "!ndom

"etu"ns/

Loo0in& !#so !t mus#ims -ho do not en&!&e in t"!dition!# mic"o$in!nce cont"!cts !s ! "esu#t

o$ the !(ment o$ inte"est "!tes -hich is "e#i&ious#( "ohibited. E#93omi 5)*+)6

e1e"iment!##( tested the dem!nd $o" Is#!mic9com#i!nt mic"o$in!nce "oducts/ The"e !"e

th"ee di$$e"ent cont"!ctu!# !&"eements 5inte"est. "o$it9sh!"in& !nd 4oint 'entu"e6 unde" -hich

! bo""o-e" t!0es mone( !nd in'ests in ! "is0( "o4ect -he"e the outcome is un0no-n/

Cont"o##in& $o" !d'e"se se#ection !nd #oo0in& !t mo"!# h!!"d. the e1e"iment !imed !t

identi$(in& the bo""o-e"s -ho -i##in( com#( -ith the cont!ct te"ms/ The "esu#ts sho-ed

th!t "o$it9sh!"in& !nd 4oint 'entu"e cont"!cts e"$o"med bette" th!n inte"est cont"!cts/ In

!ddition. the t!0e u "!tes $o" Is#!mic 9com#i!nt mic"o$in!nce "oducts -e"e hi&he" th!n th!t

$o" the t"!dition!# mic"o$in!nce "oducts th!t !"e inte"est9 b!sed/ It -!s !#so $ound th!t the

com#i!nce "!te -!s hi&he" $o" -omen th!n $o" men/ A #imit!tion o$ this !e" -!s th!t it -!s

not c!""ied out in the $ie#d on mic"oente""eneu"s/

A RoSCA. !bb"e'i!ted $o" Rot!ted S!'in&s !nd C"edit Associ!tions. is ! &"ou o$ eo#e -ho !(

!n !mount o$ mone(. usu!##( month#(. !nd in e!ch "ound 5month6 one o$ the &"ou membe" "ecei'es

the tot!# !mount o$ mone( !id b( the -ho#e &"ou/ RoSCAs !"e in$o"m!#s!'in&s !nd c"editinstitutions th!t $!ci#it!te d!(9 to9 d!( $in!nci!# t"!ns!ctions 5V!"!dh!"!4!n. )**,6/

)7


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To sum u. it c!n be deduced $"om the #ite"!tu"e th!t the bo""o-e"2s ch!"!cte"istics

!nd #o!n ch!"!cte"istics !"e 'e"( imo"t!nt dete"min!nts $o" mic"o#o!n "e!(ment/ The"e

-e"e ho-e'e" othe" '!"i!b#es th!t cont"ibuted to "e!(ment such !s $in!nci!# inno'!tions !nd

"e&u#!tion/ The "esu#ts !#so sho-ed th!t the"e is no consensus on -h!t $!cto"s !$$ect

"e!(ment/ Some !e"s $ound th!t &ende" !$$ects "e!(ment. -ith men2s "ob!bi#it( o$

de$!u#tin& bein& hi&he" th!n th!t o$ -omen2s. -hi#e othe"s $ound no di$$e"ence/ A#thou&h !##

the !bo'e !e"s $ound th!t the "e!(ment mode cont"ibutes to #o!n "e!(ment. the"e -!s no

consensus on the #o!n !mount cont"ibutin&/ S!me !#ies $o" &ende" hence -e c!n in$e" th!t

the "e!(ment dete"min!nts !"e count"( seci$ic/

(.2. 3roup *ersus Indi*idual 4ending

A$te" touchin& uon the bo""o-e"s !nd MFI ch!"!cte"istics th!t !$$ect "e!(ment

"!tes. o$ e%u!# imo"t!nce in dete"minin& "e!(ment "!te is the method o$ #endin& o$ MFIs

5&"ou 'e"sus indi'idu!# #endin&6/ Fu"the" testin& o$ -hethe" &"ou #endin& h!d ! bette" e$$ect

on "e!(ment "!tes. C!son. !n&!dh!"!n !nd M!it"! 5)**76 conducted ! #!bo"!to"(

mic"o$in!nce e1e"iment to com!"e ee" monito"in& t"e!tments -ith #ende" monito"in& in

the "esence o$ cost#( ee" monito"in& !nd mo"!# h!!"d/ )7 sessions -e"e c!""ied out in

Aust"!#i! !nd Indi! -ith +) sub4ects in e'e"( session !nd e!ch session consistin& o$ $o"t(

e"iods/ The e1e"iment sho-ed th!t -hen the monito"in& costs !"e the s!me. e"$o"m!nce o$

both t(es o$ monito"in& is !#most the s!me/ The bene$its o$ &"ou #endin& out-ei&hed the

bene$its o$ indi'idu!# #endin& "esu#tin& in &"e!te" #o!n $"e%uencies !nd "e!(ment "!tes !nd

mo"e monito"in& i$ the cost o$ ee" monito"in& is #ess th!n #ende" monito"in&/ "ou #endin&

is mo"e success$u# bec!use ee" monito"in& t!c0#es the in$o"m!tion!# !nd en$o"cement

"ob#ems th!t "est"!in $o"m!# secto" c"edit in de'e#oin& count"ies/ Lon&9te"m "e#!tionshis

!mon& bo""o-e"s !nd soci!# c!it!# !"e 'it!# $o" the success o$ &"ou b!sed #endin& !nd ee"

monito"in&. but dont e1ist in u"b!n s#ums/ Soci!# ties. se#$9se#ection !nd &"ou #endin& !"e

necess!"( but insu$$icient conditions $o" mic"oc"edit "o&"!ms/ A #imit!tion o$ this

e1e"iment is th!t its sub4ects !"e &"!du!te !nd unde"&"!du!te ine1e"ienced uni'e"sit(

students -ho m!0e decisions $o" "e#!ti'e#( #o- st!0es/

Abbin0. I"#enbusch !nd Renne" 5)**@6 studied the beh!'io"!# im!ct o$ the "e!(ment

bu"den. dete"mined b( the inte"est "!te. on the "e!(ment "!te o$ the bo""o-e"s/ B(

conductin& ! #!b e1e"iment. the !e" e1!mined ho- $"ee9"ide"s beh!'io" ch!n&es -ith

di$$e"ent &"ou #o!n "e!(ment !mounts/ Fou" t"e!tments -e"e c!""ied out !nd b( '!"(in& the

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"e!(ment bu"den imosed on the &"ou the( tested -hethe" hi&he" bu"dens #e!d to !n

im"o'ed "e!(ment disci#ine/ The cont"ibution "!tes in the th"ee b!sic t"e!tments -e"e

simi#!" desite the di$$e"ent inte"est "!tes/ The oosin& e$$ects -e"e e'ident the hi&he" the

"e!(ment "!te the hi&he" the incenti'e $o" bo""o-e"s to $"ee9"ide !nd on the othe" side #o!ns

-ith hi&h inte"est "!tes #o!ns me!nt th!t bo""o-e"s -e"e #ess to#e"!nt to-!"ds intention!#

de$!u#te"s/ So the hi&h inte"est "!tes c!n enh!nce "e!(ment disci#ines inste!d o$

encou"!&in& $"ee "idin& o" ne&!ti'e#( !$$ectin& the -i##in&ness to !(/ In this e1e"iment.

&"ou membe"s -ho h!d to !( hi&h inte"est "!tes -e"e not !b#e to t!0e se'e"!# #o!ns hence

#o!ns h!'e to be o$$e"ed !t "ices th!t !"e suit!b#e $o" the bo""o-e"s to !chie'e sust!in!bi#it(/

In !ddition. Bes#e( !nd Co!te 5+77


40/101

The "esu#ts sho-ed th!t &"ou #endin& is "e$e""ed o'e" indi'idu!# bo""o-in&

cont"!cts !s indi'idu!#s in the &"ou beh!'e in ! #ess "is0ie" de&"ee due to the th"e!t o$ bein&

e1c#uded $"om the &"ou. in!bi#it( to !ccess c"edit $"om othe" institutions in c!se o$ de$!u#t o"

bein& s!nctioned in c!se o$ c!it!# mis!##oc!tion/ These s!nctions !"e e'idence th!t sc"eenin&

o$ bo""o-e"s is !n e19ost "ocess to &"ou $o"m!tion/ ee" monito"in&. soci!# cohesion !nd

the s!$et( net o$ int"!&"ou c"edit insu"!nce dec"e!sed some o$ the "is0( in'estment beh!'io"/

This is sho-n desite th!t the"e is no si&ni$ic!nt "e#!tionshi bet-een soci!# ties on

int"!&"ou c"edit insu"!nce/ In !ddition. ! t"!deo$$ bet-een ee" monito"in& !nd the th"e!t o$

soci!# s!nctions e1isted in ! e"$ect B!(esi!n e%ui#ib"ium/ Hence. desite the hi&he" cost to

&"ou bo""o-e"s. &"ou #endin& is !"eto e$$icient $o" both bo""o-e"s !nd #ende"s/

Since the bene$its o$ &"ou #endin& out-ei&h the costs. B"uce 5+7776 "esented !n

emi"ic!# test on -h!t m!0es &"ou #endin& in de'e#oin& count"ies success$u#/ Is it ee"

monito"in&. &"ou "essu"e to "e!( #o!ns. o" soci!# ties bet-een membe"s A bi'!"i!te

#o&it mode# -!s !#ied !#on& -ith #i0e#ihood "!tio tests on "im!"( d!t! co##ected $"om !

su"'e( b( G(dic0 !nd one o$ the &"ou #endin& institutions on +? "u"!# !nd u"b!n

u!tem!#!n bo""o-in& &"ous in +77,/ This mode# !n!#(ed the e$$ect o$ soci!# cohesion

on the miti&!tion o$ mo"!# h!!"d. su#(in& int"!9&"ou insu"!nce !nd o'e"!## &"ou

"e!(ment e"$o"m!nce/ The "esu#ts sho-ed th!t &"ou "essu"e h!s ! sm!## e$$ect inmiti&!tin& mo"!# h!!"d !nd soci!# ties -e"e st!tistic!##( insi&ni$ic!nt/ Desite th!t. ee"

monito"in& h!d ! si&ni$ic!nt e$$ect on &"ou #o!n "e!(ment th"ou&h stimu#!tin& int"!9

&"ou insu"!nce/ Hence. the success o$ &"ou #endin& is not ! "esu#t o$ the institutions

!bi#it( to ut to use !#"e!d( e1istin& soci!# ties. but "!the" ee" monito"in& !nd the &"ous

-i##in&ness !nd !bi#it( to inte"n!##( "essu"e i""esonsib#e membe"s/ Re!(ment is

en$o"ced in di$$e"ent -!(s in di$$e"ent &eo&"!hic!# #oc!tions in u"b!n &"ous. "e!(ment

"!tes inc"e!sed m!in#( th"ou&h stimu#!tin& int"!9&"ou insu"!nce 'i! ee" monito"in& !nd

in "u"!# !"e!s mo"!# h!!"d dec"e!sed b( !#(in& soci!# "essu"e/

(.5. %onclusion

This ch!te" "esents !n o'e"'ie- o$ the emi"ic!# #ite"!tu"e on mic"o$in!nce/ It -!s

$ound th!t MFIs cont"ibute to o'e"t( !##e'i!tion. hi&he" #e'e#s o$ income. em#o(ment.

consumtion. s!'in&s !nd in'estment/ On the othe" h!nd. the #ite"!tu"e sho-ed th!t MFIs c!n

h!'e ! ne&!ti'e im!ct on o'e"t( b( dec"e!sin& the bo""o-e"s2 #e'e# o$ consumtion !ndimme"sin& them mo"e into thei" o'e"t(/ Hence. it c!n not be conc#uded th!t mic"o$in!nce is

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41/101

the so#ution to the o'e"t( "ob#em it c!n on#( be ! too#/ The ch!te" !#so discusses the

e1istence o$ ! t"!deo$$ bet-een out"e!ch !nd e$$icienc( !nd th!t e$$icienc( is ositi'e#(

co""e#!ted -ith the #e'e# o$ "e&u#!tion o$ MFIs/ In !ddition. to inc"e!se e$$icienc(. one c!n

e1!mine #o!n "e!(ment !nd its dete"min!nts 5bo""o-e" ch!"!cte"istics. #o!n ch!"!cte"istics.

$in!nci!# inno'!tion. "e&u#!tion !nd othe"s6/ It is !#so e'ident th!t the mic"o#o!n "e!(ment

dete"min!nts !"e count"(9 seci$ic !nd the"e$o"e the "est o$ this !e" -i## e1!mine -h!t !"e

the "e!(ment dete"min!nts $o" E&(ti!n mic"o$in!nce institutions/

??


42/101

%hapter $hree

Methodology and Data

To test $o" the e$$icienc( o$ MFIs. this emi"ic!# !e" -i## %u!#it!ti'e#( !nd

%u!ntit!ti'e#( dete"mine the $!cto"s !$$ectin& #o!n "e!(ment $o" E&(ti!n MFIs/ This ch!te"

!ims to e1#!in the t(e o$ "ese!"ch methodo#o&( !#ied. its !d'!nt!&es. dis!d'!nt!&es !nd

ho- is it !#ied/ Then the ch!te" o$$e"s !n e1#!n!tion o$ ho- the d!t! used in the emi"ic!#

mode# -!s &!the"ed. !#on& -ith the MFI #endin& o#icies o$ the d!t! sou"ces/ Then the

ch!te" desc"ibes the d!t! !'!i#!b#e $"om the t-o MFIs $o##o-ed b( !n i##ust"!tion o$ the

economet"ic mode# th!t this !e" -i## be &uided b(. !nd ho- the '!"i!b#es -i## be

inco"o"!ted in the mode#/

.&. Research Methodology

The mi1ed method !"o!ch is the "ese!"ch methodo#o&( th!t this !e" !#ies/ The

mi1ed method !"o!ch em#o(s both ! %u!#it!ti'e !nd %u!ntit!ti'e !"o!ch in !n !ttemt to

!ns-e" the "ese!"ch %uestion "oosed/ This !e" uti#ies both !"o!ches !s the "ese!"ch

%uestions c!##s $o" "e!#9#i$e conte1tu!# unde"st!ndin&s th!t ! %u!ntit!ti'e mode# !#one c!nnot

c!tu"e 5Meissne". )*+*6/ Soci!# no"ms. cu#tu"!# in$#uence. the bo""o-e"s #i'es !nd

e1e"iences !"e me!su"es th!t &i'e insi&ht into the "e!(ment "ob#ems but c!n on#( be

c!tu"ed th"ou&h ! %u!ntit!ti'e !"o!ch/

Be(ond the "i&o" o$ %u!ntit!ti'e mode#in&. this !e" inc#udes ! ch!te" on "e!#9#i$e

c!ses o$ success$u# !nd unsuccess$u# bo""o-e"s -ithin ! c"itic!# com!"!ti'e conte1t on ho-

thin&s h!en on the &"ound/ The %u!#it!ti'e !n!#(sis &i'es !n in9deth !sect to the co"e

"e!(ment "ob#ems/ A#thou&h the "e!(ment dete"min!nts c!n be out#ined usin& !n

economet"ic mode# o" !n inte"'ie- -ith !n MFI b"!nch m!n!&e". inte"'ie-in& the bo""o-e"s

#e!ds to insi&hts to the di$$e"ent sto"ies behind the bo""o-e"s2 "e!(ment/

A#on& -ith e1#!inin& the bo""o-e"s2 "e!sons $o" de$!u#tin&. the %u!#it!ti'e ch!te"

se"'es not on#( to com#ement the $indin&s o$ the mode# seci$ied. but it !#so se"'es to

inc#ude '!"i!b#es th!t !"e not inc#uded in the #ite"!tu"e o" th!t !"e count"(9seci$ic/ Fo"

inst!nce. the inte"'ie-s h!'e un'ei#ed th!t one o$ the "oot c!uses $o" #!c0 o$ time#(

"e!(ment is the )


43/101

m!c"oeconomic shoc0 such !s the "e'o#ution on #o!n "e!(ment/ The"e$o"e. the $indin&s o$

the %u!ntit!ti'e section !"e to some e1tent bui#t on the $indin&s o$ the %u!#it!ti'e section/

So desite th!t ! %u!ntit!ti'e !"o!ch does not !id in unde"st!ndin& the settin& in

-hich eo#e beh!'e. %u!#it!ti'e "ese!"ch does/ On the othe" h!nd. the %u!#it!ti'e !"o!chmi&ht #e!d to bi!sed !n!#(sis o" h!st( &ene"!#i!tions th!t !"e not !#ic!b#e to the -ho#e

s!m#e. %u!ntit!ti'e "ese!"ch o$$sets this dis!d'!nt!&e/ Hence. the -e!0ness o$ e!ch

!"o!ch is o$$set b( the st"en&th in the othe" !"o!ch 5Meissne". )*+*6/

The !d'!nt!&e o$ this %u!#it!ti'e "ese!"ch is th!t $ocuses on hum!n #i'es !nd

e1e"iences th"ou&h the use o$ inte"'ie-s $o" the u"ose o$ inducti'e "ese!"ch/ The

%u!#it!ti'e d!t! !#so "esents int"ic!te in$o"m!tion !bout the bo""o-e"s b( e1#!inin& thei"

#i'in& conditions !nd con'e(in& thei" mess!&es th"ou&h %uotes/ On the othe" h!nd. the

%u!#it!ti'e !sect se"'es to est!b#ish ! me!su"!b#e c!use !nd e$$ect "e#!tionshi bet-een the

deendent !nd indeendent '!"i!b#es usin& ! s!m#e d!t! th!t cou#d be &ene"!#ied to

"e"esent the -ho#e ou#!tion 5Meissne". )*+*6/

Mo"eo'e". the %u!ntit!ti'e !n!#(sis $ocuses on !ns-e"in& P-h!t $!cto"s !$$ect

"e!(ment. -hi#e the %u!#it!ti'e $ocus on P-h( !nd Pho- do these $!cto" !$$ect "e!(ment/

Acco"din(. usin& ! %u!#it!ti'e o" %u!ntit!ti'e method !#one is deemed in!de%u!te in

de'e#oin& mu#ti#e e"secti'es !nd in o$$e"in& ! cohesi'e unde"st!ndin& o$ the co"e

"e!(ment dete"min!nts $o" E&(ti!n MFIs/

The dis!d'!nt!&es o$ the %u!#it!ti'e !"o!ch ho-e'e" #ie in the di$$icu#t( o$

!ccessin& the homes; -o"0in& #!ce o$ the bo""o-e"s/ In !ddition. communic!tion "ob#ems

o" #!n&u!&e b!""ie"s h!'e been "esent since the bo""o-e"s used some e1"essions th!t I did

not tot!##( unde"st!nd/ Fu"the"mo"e. some inte"'ie-ees "e$used to !ns-e" %uestions th!t -e"e

"e#!ted to income. "e'enues. e1enses !nd househo#d !#i!nces/

In !ddition. d!t! co##ection h!s its #imit!tions in th!t the s!m#e sie chosen mi&ht not

be "e"esent!ti'e o$ the -ho#e ou#!tion. so !ccess to !dminist"!ti'e "eco"ds ose !

#imit!tion on d!t! co##ection/ Anothe" dis!d'!nt!&e is th!t the mi1ed method !"o!ch is

mo"e time consumin& !nd inc"e!ses the com#e1it( o$ the e'!#u!tion/ Disc"e!ncies mi&ht

!#so !"ise bet-een the %u!#it!ti'e $indin&s !nd the %u!ntit!ti'e $indin&s !nd these

disc"e!ncies mi&ht be h!"d to "eso#'e 5Go"#d B!n0. )**+6/

Desite these dis!d'!nt!&es. the %u!#it!ti'e !nd %u!ntit!ti'e methods !"e used

simu#t!neous#( to miti&!te the -e!0nesses o$ !n( sine !"o!ch/ The mi1ed method

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!"o!ch is !#so used to est!b#ish ! mo"e cohe"ent ictu"e o$ the "e!(ment "ob#ems b(

i##ust"!tin& the conte1ts o$ the bo""o-e"s2 #i'es !nd "e!sons $o" 5un6success$u# #o!n "e!(ment

!nd '!#id!tin& the "esu#ts b( "o'idin& e1e"iences !#on& -ith outcomes 5C#!"0. )*+*6/ The

%u!ntit!ti'e !n!#(sis !ssesses the si&ni$ic!nce !nd m!&nitude o$ ! #o!n "e!(ment "ob#em.

-hi#e the %u!#it!ti'e !sect &i'es ! bette" unde"st!ndin& o$ such ! "ob#em !nd ossib#(

d"!-s o#ic( im#ic!tions on ho- to so#'e these "ob#ems 5Meissne". )*+*6/

The"e$o"e. this !e" !#ies the mi1ed method !"o!ch to st"en&then the '!#idit( o$

the $indin&s !s the m!in !d'!nt!&e o$ the mi1ed methods !"o!ch is the ossibi#it( o$

t"i!n&u#!tion i/e/ e1!minin& the s!me henomenon th"ou&h di$$e"ent !nes 5uion. )*+?6/

The %u!#it!ti'e !"o!ch consists o$ in9deth inte"'ie-s -ith +) bo""o-e"s #i'in& in A#9

!#(oubi! !nd A#9 Mono$i! &o'e"no"!te/ The inte"'ie- "ocess. method o$ se#ection o$ thebo""o-e"s !nd "esu#ts o$ the inte"'ie- -i## be e1#!ined in det!i# in ch!te" $i'e/

.(. MI lending policies

As $o" the %u!ntit!ti'e !"o!ch. the estim!tion mode# used deends on the d!t!

&!the"ed $"om ) E&(ti!n MFIs Res!#! !nd Mis" E#9 3hei" 5ME36/ Se'e"!# othe" MFIs -e"e

!"o!ched ho-e'e" these -e"e the on#( t-o MFIs th!t !&"eed to &i'e me !ccess to thei"

d!t!/ The"e is no d!t! !'!i#!b#e on #o!n "e!(ment $o" E&(ti!n MFIs/ Hence. "im!"( d!t!

must be co##ected/ Be$o"e e1#!inin& the d!t! I -!s &i'en. !n o'e"'ie- -i## be &i'en on e!ch

o$ the MFIs #endin& o#icies/

Fi"st. both o$ these MFIs !"e NO9 MFIs/ Res!#! !nd Mis" E# 3hei" "e#( on mone(

$"om hi#!nth"oists o" &"!nts !s ! sou"ce o$ $undin& to thei" #o!ns/ It is -ide#( !ssumed th!t

$o" !n NO to be ! MFI then it must dedic!te !## o$ its "esou"ces in o$$e"in& $in!nci!#

se"'ices/ A#thou&h these NOs mi&ht en&!&e in non9$in!nci!# de'e#oment !cti'ities. so #on&

!s the( !"e su#(in& $in!nci!# se"'ices to the oo" the( !"e c!##ed MFIs 5Mic"o$in!nce

!te-!(. )*+,6/ The di$$e"ence ho-e'e" is th!t thei" ob4ecti'e is not to obt!in "o$it !nd th!t

is -h( the( do not ch!"&e thei" #ende"s !n( inte"est "!te/ The( h!'e ! &"e!te" socio9 economic

e#ement com!"ed to $o"9"o$it MFIs/

Du"in& No'embe" )*+?. I inte"'ie-ed the he!d o$ mic"o"o4ects !t one o$ Res!#!s

b"!nches to 0no- on -h!t b!sis the( choose thei" bo""o-e"s. the !im o$ the mic"o"o4ects !nd

the "e!sons behind unsuccess$u# #o!n !(ments/ A#on& -ith inte"'ie-in& the he!d o$

mic"o"o4ects. I !s0ed se'e"!# #o!n o$$ice"s !bout the "ocess o$ choosin& the c#ients. the

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method o$ #endin& !nd o$ co##ectin& inst!##ments/ In !ddition. I inte"'ie-ed ! cou#e o$

bo""o-e"s -ho -e"e !#(in& to ! #o!n !t the time o$ the inte"'ie-s to be $!mi#i!" -ith ho-

Res!#! e"cei'es its otenti!# bo""o-e"s !nd on -h!t c"ite"i! !"e the( chosen/Acco"din& to the inte"'ie-s. #endin& in Res!#! is on !n indi'idu!# b!sis. -ith h!"d#(

!n( &"ou #endin&/ The e#i&ibi#it( c"ite"ion $o" "ecei'in& ! #o!n $o" ! mic"o"o4ect is th!t the

!#ic!nt shou#d be in need o$ the #o!n in o"de" to h!'e ! sust!in!b#e $#o- o$ income/ The

!#ic!nt must !#so h!'e the h(sic!# !nd ment!# !bi#it( to c!""( out the "o4ect/ I$ the

!#ic!nt is in need o$ mone( but is not !b#e to c!""( out ! "o4ect. then Res!#! o$$e"s him;he"

! 4ob so th!t the bo""o-e" c!n h!'e ! sust!ined sou"ce o$ income/The mic"o$in!nce te!m 5he!d o$ mic"o"o4ect !nd #o!n o$$ice"6 "ese!"ches -hethe" the

!#ic!nts $o" ! mic"o"o4ect !"e in need o$ the #o!n/ A membe" o$ the te!m 'isits the

!#ic!nts2 homes !nd e1!mines thei" -e!#th conditions/ I$ the otenti!# bo""o-e" is deemede#i&ib#e $o" the #o!n. ! membe" $"om Res!#! st!"ts to o$$e" the e%uiments 5m!chine"(. c#oth.

"oducts...6 needed/ No c!sh is &i'en !nd no co##!te"!# is "e%ui"ed/ Res!#!2s o#ic( in

"o'idin& the e%uiment to the bo""o-e" "!the" th!n &i'e him;he" c!sh is to ensu"e th!t the

#o!n is di"ected to-!"ds the "o4ect "!the" th!n bein& di"ected to-!"ds othe" u"oses such !s

consumtion/ The !mount th!t Res!#! !(s to bu( the e%uiment -i## be "e!id b( the

!#ic!nt o'e" the bo""o-in& time e"iod/ The "e!(ment e"iod '!"ies !cco"din& to the #o!n

sie !nd t(e o$ "o4ect/

A$te" the #o!n is !"o'ed. Res!#! !""!n&es -ith NOs to o$$e" t"!inin& sessions to

som

Documents

Reem Nabil Hashad - Thesis