Repayment behavior in peer‐to‐peer microfinancing: Empirical evidence from Kiva

Based on a sample of microloans (to individuals and to groups) that were refinanced through the peer-to-peer microfinancing platform Kiva, we study the determinants of the repayment behavior of micro-entrepreneurs whose loans are available to international charitable lenders. We perform binary regressions and account for influential factors such as the time required for funding or the type of entrepreneurial activity. The screening and monitoring quality of the microfinance institution which selects the borrowers is a main driver of credit default. We find evidence that the loan size, the loan term and the length of a possible grace period influence the probability of default. Moreover, women demonstrate better repayment behavior which is, however, not the case for groups of women.     

Can flexible agricultural microfinance loans limit the repayment risk of low diversified farmers?

Using a unique data set from a commercial microfinance institution in Madagascar, this article investigates the credit risk of microfinance loans with flexible repayment schedules for crop farmers. Flexible repayment schedules allow a redistribution of principal payments during periods with low agricultural returns to periods when agricultural returns are high through predefined grace periods. We apply propensity score matching to investigate how different numbers of grace periods reflecting different levels of production diversification affect the credit risk of crop farmers. In this attempt, three delinquency categories reflecting various levels of credit risk are assessed. Moreover, we consider the specifics of the regions where loans were disbursed. Our results reveal that loans with predefined grace periods show significantly higher delinquencies. This effect is significant over all three delinquency categories for loans disbursed to low diversified crop farmers. For the more diversified farmers, this effect is only significant for the lowest delinquency category. Hence, predefined grace periods might bridge periods with low agricultural returns but come at the cost of higher credit risk for the lender. The magnitude of these effects is, however, small.     

Microfinance and child mortality

Microfinance institutions (MFIs) offer targeted opportunities for the poor to generate additional income with a range of financial services including credit, insurance, savings accounts and money transfers. Aside from reducing poverty, microfinance can potentially improve health because it is the poor who are usually more constrained from health investments due to limited budgets. Furthermore, microfinancing specifically targets women, who are more likely to spend additional income on children’s well-being. Finally, several MFIs have also begun to offer health-related services, such as health education, health-care financing, clinical care, training community health workers, health micro-insurance and linkages to public and private health providers. Using a new data set, this article conducts the first multi-country study of the effect of microfinance on child mortality, the health outcome, which is most sensitive to the effects of absolute deprivation. Our findings confirm that an increase in the proportion of MFI clients in a country is significantly associated with lower under-five and infant mortality rates. We conclude that if MFIs’ educational and health services have indeed caused improvements in health outcomes at the community level, then it may be important for governments to complement these activities with similar campaigns, particularly in remote areas where MFI penetration is low.     

Developing a microfinance model to break the cycle of poverty

Multigenerational poverty is common in developing countries. Illiteracy, poor health, and unemployment compound a person’s ability to break the cycle of poverty. In this article, we break down the process of designing, testing, and implementing a microfinance model to help end multigenerational poverty in an impoverished refugee village in Uganda. We describe key decisions in developing the model and assess its effectiveness as an instrument in achieving this service objective. We believe our grassroots primary research can benefit many NGOs that might be contemplating lending programs in developing nations, as well as other collegiate institutions interested in implementing sustainable programs that allow students the opportunity to work on global issues in developing nations.     

The megamarketing of microfinance: Developing and maintaining an industry aura of virtue

The current socio-economic climate is marked by an increased focus on corporate responsibility and the role of business in society. In this climate, megamarketing – efforts to develop and sustain an industry or market by gaining the cooperation and support of various stakeholders and publics – is an increasingly relevant approach. Current research in megamarketing focuses on understanding how various industry actors and stakeholders establish the legitimacy of a given industry by accommodating prevailing regulatory, normative, and cultural-cognitive structures. In contrast, this paper examines megamarketing efforts that go beyond such attempts to establish legitimacy towards establishing an industry as a virtuous entity displaying qualities that surpass minimal accepted standards and ‘business-as-usual.’ Inspired by work on virtue ethics in organisational studies, we develop the concept of industry aura: a ‘halo’ of unique and authentic virtues that characterise an industry. We explore the development of industry aura by surveying the discursive megamarketing tactics through which microfinance has been established as a virtuous industry. We conducted qualitative and quantitative analyses of 589 articles about microfinance appearing in five selected newspapers between 1986 and 2016. Our findings reveal three sets of megamarketing discursive tactics: 1) diagnostic framing and social mission framing, deployed to establish microfinance as a virtuous entity; 2) virtue anchoring and frame bridging, used to defend the industry’s aura in times of authenticity crisis; and 3) diagnostic and social-mission reframing aimed at recovering the tarnished aura of microfinance. Our paper enriches megamarketing research by charting relevant terrain that stretches beyond the established vectors of legitimacy theorizing and offers important implications for megamarketing practitioners.     

中国地方性小额信贷商业化——小额贷款公司发展问题初探

小额信贷在中国的发展已近30年,虽然发展趋势良好,但是它的作用远没有发挥出来。实现小额信贷的商业化,我们可以得到一个"双赢"的局面,即政策性的目标与商业性目标的统一。近年来,小额贷款公司试验的成功说明了"双赢"的可能性,那么分析其发展进程中的问题,寻找中国特色的小额信贷的新路子将是未来发展的迫切需要。本文将主要以山东济南的小额贷款公司经营状况为例来分析小额贷款公司发展中遇到的一系列问题。     

Profit status of microfinance institutions and incentives for earnings management

We theorize that for-profit microfinance institutions (MFIs) have higher incentives to use earnings management techniques when compared to their not-for-profit counterparts. Indeed, we show empirically that, when facing a distress period, for-profit MFIs are more likely to recognize impairment loan loss provisions than not-for-profit ones in about 0.8% of assets. This is consistent with the notion that those institutions are employing “big bath” accounting practices. Finally, using the 2008 crisis as an exogenous shock and country-level recessions as an exogenous measure of distress, we replicate our results.     

Microfinance institutions,financial intermediation and the role of deposits

Microfinance institutions (MFIs), widely regarded as bankers to the poor, have extended their financial functions beyond lending to managing deposits. We empirically examine the influence of MFI deposit-taking on MFI financial performance. Using data of 1,301 MFIs worldwide, we find that an MFI's deposit level is an important determinant of its financial viability. However, the relationship is influenced by MFIs’ institutional type (for-profit or nonprofit) and the legal environment (common law or civil law). The results suggest that the positive financial impact of deposits has not been fully realised, reflecting the need to further improve cost management and revenue generation.     

中国福利性微型金融财务可持续评估研究

基于福利性微型金融财务可持续过程中所面临的不确定性,改进传统的AHP方法,建立基于不确定型层次分析法(UTAHP)的福利性微型金融财务可持续评估模型,考量中国扶贫基金会小额信贷项目财务可持续能力。结果表明:在2004~2012年期间,中国扶贫基金会小额信贷项目财务可持续能力不断提升,其贷款能力、运营能力、盈利能力和发展能力均保持上升态势,只有个别年份出现了短暂的下降波动。