https://www.nber.org/system/files/working_papers/w15275/w15275.pdf

Finance and Inequality: Theory and Evidence

Although the chosen and conventional approaches to tackling poverty and other millennium development goals (MDGs) are useful and necessary, they are not sufficient to address the challenge Financial inclusion (FI) offers incremental and complementary solutions to tackle poverty, to promote inclusive development and to address the MDGs This treatise is advanced in the following ways: (i) based on the FI-poverty reduction (PR)-MDG nexus, and supported by field research and related literature, the key pillars of FI are outlined; (ii) several international cases are discussed to extract lessons learned; and (iii) explanatory FI models are presented Given the current global financial crisis, the need to scale-up FI efforts is now more imperative than at any other time in recent history This paper also offers potentially useful approaches to planning, policy-making and programming in order to strengthen the FI-PR-MDG nexus

https://link.springer.com/content/pdf/10.1057%2Fejdr.2008.17.pdf

Financial Inclusion, Poverty Reduction and the Millennium Development Goals

The concept of microcredit was first introduced in Bangladesh by Nobel Peace Prize winner Muhammad Yunus. Professor Yunus started Grameen Bank (GB) more than 30 years ago with the aim of reducing poverty by providing small loans to the country’s rural poor (Yunus 1999). Microcredit has evolved over the years and does not only provide credit to the poor, but also now spans a myriad of other services including savings, insurance, remittances and non-financial services such as financial literacy training and skills development programmes; microcredit is now referred to as microfinance (Armendariz de Aghion and Morduch 2005, 2010). A key feature of microfinance has been the targeting of women on the grounds that, compared to men, they perform better as clients of microfinance institutions and that their participation has more desirable development outcomes (Pitt and Khandker 1998). Despite the apparent success and popularity of microfinance, no clear evidence yet exists that microfinance programmes have positive impacts (Armendariz de Aghion and Morduch 2005, 2010; and many others). There have been four major reviews examining impacts of microfinance (Sebstad and Chen, 1996; Gaile and Foster 1996, Goldberg 2005, Odell 2010, see also Orso 2011). These reviews concluded that, while anecdotes and other inspiring stories (such as Todd 1996) purported to show that microfinance can make a real difference in the lives of those served, rigorous quantitative evidence on the nature, magnitude and balance of microfinance impact is still scarce and inconclusive (Armendariz de Aghion and Morduch 2005, 2010). Overall, it is widely acknowledged that no well-known study robustly shows any strong impacts of microfinance (Armendariz de Aghion and Morduch 2005, p199-230). Because of the growth of the microfinance industry and the attention the sector has received from policy makers, donors and private investors in recent years, existing microfinance impact evaluations need to be re-investigated; the robustness of claims that microfinance successfully alleviates poverty and empowers women must be scrutinised more carefully. Hence, this review revisits the evidence of microfinance evaluations focusing on the technical challenges of conducting rigorous microfinance impact evaluations.

/pdf/what-is-the-evidence-of-the-impact-of-microfinance-on-the-1jgf385h7x.pdf

What is the evidence of the impact of microfinance on the well-being of poor people?

What is the impact of microfinance on poor people?: a systematic review of evidence from sub-Saharan Africa

This paper reviews the theoretical and empirical literature on the role of financial sector development, with a view to deepening understanding of the rationale of development assistance to the financial sector of developing countries. The review leads to the following broad conclusions: (i) there are convincing arguments that financial sector development plays a vital role in facilitating economic growth and poverty reduction, and these arguments are supported by overwhelming empirical evidence from both cross-country and country-specific studies; (ii) there are however disagreements over how financial sector development should be sequenced in developing countries, particularly the relative importance of domestic banks and capital markets and, in developing the banking sector, the relative importance of large and small banks; (iii) while broadening the access to finance by microenterprises, small and medium-sized enterprises (SMEs), and vulnerable groups is recognized as critically important for poverty reduction, it is also widely believed that microfinance and SME credit programs need to be well designed and targeted to be effective. In particular, these programs need to be accompanied by other support services such as provision of training and capacity building, assistance in accessing markets and technologies, and addressing other market failures; and (iv) financial sector development and innovation will bring risks, and it is therefore essential to maintain sound macroeconomic management, put in place effective regulatory and supervisory mechanisms, and carry out structural reforms in developing the financial sector. The paper argues that these conclusions provide a strong justification for development assistance to target financial sector development as a priority area, and that, like any public sector intervention, such assistance should be designed to address market and nonmarket failures. The paper also highlights several areas where more research is urgently needed, in particular, how to sequence financial sector development, how to balance the need for financial innovation and that for economic and financial stability, and how to make microfinance and SME credit programs work better to reduce poverty.

/pdf/financial-sector-development-economic-growth-and-poverty-4yza025snv.pdf

Financial Sector Development, Economic Growth, and Poverty Reduction: A Literature Review

Using data from 1299 micronance institutions (MFIs) in 84 countries and following different approaches, it was found the lending interest rate is determined by the funding cost, the loan size, and the efciency level of MFIs. With respect to competition, results are mixed. Only in Asia is a negative correlation between competition and lending interest rates detected. For other subsamples, it was found the competition is more likely to be negatively correlated with the size of loans.

The Lending Interest Rates in the Microfinance Sector: Searching for its Determinants

Taking into account the potential benefits formal lending could provide, there is a growing interest among policymakers to formulate policies that may help increase the participation of the poor in formal credit markets. One of the challenges to achieve such goal has been the high real interest rates financial institutions charge to micro and small enterprises. Further, these high interest rates affect the probability that financing spurs growth. In lieu of this, governments have tried to induce a reduction in such rates but have had little success. One of the possible reasons for such failure is the lack of empirical studies that show what the main determinants of such interest rates are. Using a cross section-time series panel data for microfinance institutions operating in Africa, Asia and America, we examine in this paper which factors may help explain the interest rate that microfinance institutions charge.

What Drives Lending Interest Rates in the Microfinance Sector

This paper analyses the impact of infrastructure on the growth rate of the Mexican manufacturing sector. For such purpose, two mea- sures of infrastructure are used: highways and electricity. Further, we also estimate the degree of returns to scale and the markup. We pooled two digit industries to obtain the estimates of the whole manufacturing sec- tor. For the entire manufacturing sector, our results do not show evidence of increasing returns but the existence of market power cannot be re- jected. We find that both types of public infrastructure have a significant effect on manufacturing growth and its inclusion reduces the estimated values of returns to scale and market power. Once we use sectoral data, we obtain mixed results: public infrastructure affects significantly only some sectors. Resumen: Este trabajo analiza el impacto de la infraestructura en la tasa de crecimiento del sector manufacturero mexicano. Con tal fin, se utilizan dos medidas de infraestructura: carreteras y electricidad. Adicionalmente, se estima el nivel de retornos a escala y el markup. Se agrupan las indus- trias a nivel de dos digitos para poder obtener estimaciones para todo el sector manufacturero. Para el total del sector manufacturero, nuestros resultados no muestran evidencia de retornos crecientes, pero la existencia de poder de mercado no puede ser rechazada. Se encuentra que ambos tipos de infraestructura tienen un impacto significativo sobre el creci- miento manufacturero y su inclusion en las regresiones reduce el nivel de estimacion del indice de retornos a escala y el nivel de poder de merca- do. Al utilizar datos sectoriales, se obtienen resultados mixtos: la infraes- tructura afecta de manera significativa solo a algunos sectores.

/pdf/the-impact-of-infrastructure-on-mexican-manufacturing-growth-228uptk6zs.pdf

The Impact of Infrastructure on Mexican Manufacturing Growth

Resumen: La industria mexicana de las microfinanzas se esta transformando. Antes estaba constituida por organizaciones que no perseguian el lucro y que no estaban supervisadas. Hoy, muchas de las entidades que la conforman estan sujetas a una inspeccion gubernamental y/o de mercado. Aun cuando tal transformacion acarrea beneficios, existe la preocupacion de que la supervision las induzca a cambiar su nicho de mercado y se orienten a sectores de mayores ingresos. Un panel de datos nos permite examinar tal preocupacion y nos da informacion de como minimizar el conflicto que parece existir entre la rentabilidad financiera y el objetivo social. Palabras clave: microfinanzas, rentabilidad, nicho de mercado, Mexico.

/pdf/rentabilidad-y-tamano-de-prestamo-de-las-microfinanzas-en-1r10ut2i6n.pdf

Rentabilidad y tamaño de préstamo de las microfinanzas en México. Un estudio de caso

La penetracion bancaria en Mexico es de las mas bajas de America Latina. Asimismo, la importancia relativa del credito comercial es muy alta. Estos dos hechos llevan a muchos a interpretar que el desproporcionado peso del credito de proveedores es reflejo de una banca que presta muy poco. Al mismo tiempo se considera que es esta la razon por la cual los principales usuarios del credito de proveedores son las empresas pequenas, informales y con bajo acceso al financiamiento bancario. Con base en los datos de una encuesta nacional se muestra que estos estereotipos no necesariamente son los correctos

/pdf/credito-de-proveedores-tamano-de-empresa-e-informalidad-3mewzslpsr.pdf

Crédito de proveedores, tamaño de empresa e informalidad

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