The Handbook of Microfinance

Contents......Page 8
CERMi......Page 12
Biographical Notes......Page 14
Acknowledgments......Page 32
Introduction......Page 35
Introduction and Overview: An Inquiry into the Mismatch in Micro.nance Beatriz Armend´ariz and Marc Labie......Page 37
Part I Understanding Microfinance Practices......Page 49
1 Introduction: Why Evaluate?......Page 51
2 Definition of Microfinance......Page 54
2.1 Key characteristics of microfinance......Page 55
2.2 Liability structure of microfinance loans......Page 57
3 Types of Policies to Evaluate......Page 58
3.1.1 Product or process impact evaluations......Page 60
3.1.2 Policy evaluations......Page 63
4.1.1 Experimental credit scoring......Page 65
4.1.2 Randomized program placement......Page 67
4.1.3 Encouragement designs......Page 70
4.1.4 Ethical considerations of randomized evaluations......Page 71
4.2 Quasi-experimental methodologies for program evaluation......Page 72
4.3 Randomized controlled trials for product and process innovations......Page 76
4.4.1 Determining sample size......Page 78
(i) Dropouts......Page 79
(iii) Intensity of Treatment......Page 80
5.1 Enterprise income......Page 81
Consumption or income levels (poverty)......Page 82
5.1.2 Wider impacts......Page 83
5.1.3 Spillovers......Page 84
5.1.4 Impact on the MFI......Page 85
5.1.5 Timing of measurement......Page 86
6 Outstanding Issues for Evaluation......Page 87
References......Page 89
1 Introduction......Page 93
2 Theory......Page 96
3 Empirics......Page 101
4 Spanning the Chasm......Page 105
5 Conclusions......Page 107
References......Page 108
The Early German Credit Cooperatives and Microfinance Organizations Today: Similarities and Differences Timothy W. Guinnane......Page 111
1 Early Micro.nance Institutions......Page 112
2 The Formation of Germany’s Credit Cooperatives......Page 114
2.1.1 The credit cooperative’s balance sheet......Page 118
2.1.2 Lending policy......Page 120
2.1.3 Regional institutions for cooperatives......Page 121
2.1.4 The relationship among the several branches of the movement......Page 124
3 Cooperatives and Microfinance Today......Page 125
3.1 Group lending......Page 128
3.1.1 Financial cooperatives......Page 131
4 Conclusions......Page 132
References......Page 133
Understanding the Diversity and Complexity of Demand for Microfinance Services: Lessons from Informal Finance Isabelle Gu rin, Sol ne Morvant-Roux and Jean-Michel Servet......Page 135
1.1 Money: A source of tension between the individual and the group......Page 136
1.2 Informal finance: Diverse practices and landscapes......Page 137
2.1 Saving and credit: A false dichotomy......Page 139
2.2 ROSCAs: Individual projects and collective constraints......Page 141
2.3 The circulation of money and juggling practices......Page 142
2.4 Flexibility and negotiability......Page 143
3 The Role of Informal Financial Practices in the Appropriation of Microfinance......Page 145
3.1 Borrowing to onlend: Abuse or a normal part of the system?......Page 146
3.2 Group lending: Internal arrangements and the reproduction of pre-existing practices......Page 147
3.3 Substitution or leverage effect?......Page 149
4 Conclusion......Page 151
References......Page 152
1 Introduction......Page 157
2 Ethical Justifications of Microfinance......Page 159
3 Challenges of the Intrinsic Ethical Dimension of Microfinance......Page 161
4 Fair Interest Rates in Microcredit......Page 163
5 Rights-based Approach to Microfinance......Page 166
6 Policies and Practices Addressing Ethical Issues......Page 167
7 Conclusion......Page 169
References......Page 170
Part II Understanding Microfinance’s Macro-Environment and Organization Context......Page 173
1 Introduction......Page 175
2 The MicroBanking Bulletin Data......Page 177
3 Contracts......Page 179
4 Commercialization......Page 181
5 Regulation......Page 186
6 Competition......Page 187
References......Page 189
1 Introduction......Page 193
2 LestWe Forget: Why Regulate and Supervise Financial Institutions?......Page 194
3 Terminology Check: Why Distinguish Between Regulation and Supervision?......Page 195
4 The Informal Economy: What Is So Special About Microfinance Institutions?......Page 197
5 Menu of Choices: What Are Our Main Alternatives for MFI Oversight?......Page 200
6 The Proportionality Principle: How Can We Balance Conflicting Objectives?......Page 203
7 Conclusion......Page 204
1 Introduction......Page 207
2.1 Macroeconomic conditions......Page 209
2.1.1 The domestic financial system......Page 213
2.1.2 Formal institutions......Page 214
2.1.3 Political factors......Page 217
3 Methodology......Page 219
4 Data......Page 224
5 Results......Page 227
6 Conclusions......Page 232
References......Page 233
Microfinance in Bolivia: Foundation of the Growth, Outreach and Stability of the Financial System Claudio Gonzalez-Vega and Marcelo Villafani-Ibarnegaray......Page 237
1 Background......Page 238
2 Financial Deepening......Page 243
3 Differential Performance......Page 247
4 Instability: Credit and Liquidity Risks......Page 260
5 Exceptional Outreach......Page 268
6 Concluding Comments......Page 279
References......Page 281
Microfinance — A Strategic Management Framework Guy Stuart......Page 285
2 Authorizing Environment......Page 287
3 Public Value: A Strategic Management Framework......Page 292
4 A Manager’s Eye-View of a Policy Question: Sustainability and the Creation of Public Value for all the Poor......Page 294
5 Conclusion and Suggestions for Further Research......Page 299
References......Page 300
1 Introduction......Page 301
2 Framework for a Cross-Country Analysis......Page 302
3 Regulation and Its Impact on MFI Performance......Page 304
4 The Impact of Rating......Page 306
5 Other Control Mechanisms......Page 311
6 Conclusions......Page 312
References......Page 313
1 Introduction......Page 317
2 Why Governance Matters for the Microfinance Industry......Page 318
3 Reviewing the Literature on Microfinance Governance......Page 321
4 Beyond Agency Theory and Board Management......Page 323
5 A New Framework for Microfinance Governance......Page 325
6 A New Research Agenda......Page 328
References......Page 330
Part III Current Trends Toward Commercialization......Page 333
Corporate Responsibility Versus Social Performance and Financial Inclusion Jean-Michel Servet......Page 335
1 Microfinance Subject to a Twofold Ambiguous Movement......Page 336
2 Recognition of Social Responsibility......Page 338
3 Civic Responsibility as the Benchmark for Social and Environmental Performance......Page 341
4 Social Responsibility in Microfinance at the Centre of the Business of Financial Institutions......Page 345
5 Conclusion......Page 351
References......Page 354
The Importance of the Link Between Socially Responsible Investors and Microfinance Institutions Erna Karrer-R  edi......Page 357
1 The Link between Socially Responsible Investors and the Microfinance Sector......Page 358
2 The Link Fosters Social Impact......Page 360
3 The Link Plays a Critical Role in Achieving Sustainability......Page 362
4 The Link Increases the Efficiency of the Microfinance Value Chain......Page 363
5 The Link Enhances the Microfinance Mission......Page 366
6.1 Microfinance and the informal economy......Page 367
6.1.1 Stability of the link in economically challenging times......Page 369
References......Page 372
On Mission Drift in Microfinance Institutions Beatriz Armend  riz and Ariane Szafarz......Page 375
1 Introduction......Page 376
2 The Poverty Reduction Mission in Perspective......Page 379
3 Mission Drift from a Theoretical Standpoint......Page 385
4 The Absence of a Transaction Cost-Driven Mission Drift......Page 386
5 MFI Heterogeneity-Driven Mission Drift......Page 390
6 Contrasting Latin America and Asia......Page 395
7 Concluding Remarks......Page 396
References......Page 398
1 Introduction......Page 401
3 The Risk-Return-Outreach Trade-Off......Page 403
4 Quantifying the Risk-Return-Outreach Trade-Off......Page 406
5 Conclusion......Page 412
References......Page 413
Appendix: Methodology......Page 414
1 Introduction......Page 417
2 Efficiency in the Theory and Practice of Microfinance......Page 418
3 Efficiency Definition and Drivers......Page 419
4 Efficiency Indicators and their Measures......Page 422
5 Efficiency and Financial Sustainability: Recent Trends......Page 424
6 Efficiency and Public Policy: Which Incentives?......Page 426
References......Page 429
1 Introduction......Page 431
2.1 Efficiency......Page 433
2.2 Profitability and sustainability......Page 435
2.3 Social performance......Page 436
3.1 Sample and data......Page 438
3.2.1 Correlation analysis......Page 441
3.2.2 Principal components analysis......Page 444
3.2.3 Cluster analysis......Page 446
4 Final Thoughts......Page 448
References......Page 450
Part IV Meeting Unmet Demand: The Challenge of Financing Agriculture......Page 453
1 Introduction......Page 455
2.1 From the failure of the interventionist approach to the promises of the new paradigm in rural finance......Page 457
2.2 Supply continues to be insufficient or not adapted to smallholders’ financial needs......Page 458
3 Financing Agriculture: the Need for Innovations......Page 460
3.1 Product innovations......Page 461
3.2.1 Experiences from Latin America......Page 462
3.2.2 Experiences in Asia and Africa......Page 465
4 Conclusion......Page 468
References......Page 469
1 Introduction......Page 471
2 Credit Market in Rural Serbia......Page 473
2.1 Latent demand......Page 474
3 Evaluating Demand from a Choice-Based Conjoint Analysis......Page 475
3.1 Design of choice based conjoint analysis......Page 476
3.2 Estimation strategy......Page 478
3.3 Results......Page 479
3.4 Interaction effects with individual characteristics......Page 480
3.5 What is the demand for existing credit sources and microfinance in rural Serbia?......Page 483
4 Conclusion......Page 485
References......Page 486
Appendix......Page 488
1 Introduction......Page 495
2.1.1 Systems of exchange and livelihood opportunities......Page 498
2.1.2 Rural microfinance......Page 500
2.1.3 Value chains......Page 509
2.1.4 A transformative value chain approach to microfinance: “Finance plus”......Page 513
3.1 National context......Page 515
3.1.1 FDL and Nitlap  n response......Page 517
3.1.2 Dairy-meat cattle value chain......Page 521
4 Concluding Remarks......Page 529
References......Page 531
Part V Meeting Unmet Demand: Savings, Insurance, and Aiming at the Ultra Poor......Page 535
1 Introduction......Page 537
2 Why Have ROSCAs Prevailed Alongside MFIs?......Page 539
3 Demand for Commitment: Can it Be Met by MFIs?......Page 542
4 The Challenge......Page 544
5 Concluding Remarks......Page 546
References......Page 548
1 The Dominance of the Instalment Plan......Page 551
2 But the Poor Need to Intermediate, Too......Page 553
3 The Instalment Plans of the Poor......Page 554
4 Adding Value to the Plan: Reliability......Page 556
5 Adding Value to the Plan: Flexibility......Page 560
6 Adding Value to the Plan: Using Liquidity to Boost Savings......Page 562
References......Page 567
Borrowing......Page 568
Costs......Page 569
Insurance for the Poor: Definitions and Innovations Craig Churchill......Page 571
1 Introduction......Page 572
2 The Emergence of Microinsurance......Page 573
3 What is Microinsurance?......Page 577
4 Microinsurance and Microfinance......Page 581
5.1 Supply challenges......Page 585
5.2 Demand challenges......Page 587
6.1 Product innovations......Page 588
6.2 Innovative institutional models and delivery channels......Page 593
7 Conclusions......Page 594
References......Page 595
1 Introduction1......Page 597
2 The Context of the Targeting the Ultra Poor (TUP) Programme......Page 598
3 The Evolution of the TUP Programme......Page 601
4 The Present Status of the TUP......Page 605
5 The Achievements of the TUP......Page 607
6 Concerns about TUP......Page 612
7 Learning from the TUP......Page 613
8 Design Features......Page 614
9 The TUP Process......Page 616
10 Conclusion......Page 617
References......Page 618
Part VI Meeting Unmet Demand: Gender and Education......Page 621
Introduction......Page 623
1 The Gender of Finance......Page 624
2.1 Roscas: The scopes and limits of female “solidarity” and lessons for group lending......Page 626
2.2 The gender of saving in kind: Lessons for the mobilisation of saving......Page 634
3 Conclusion......Page 638
References......Page 641
Taking Gender Seriously: Towards a Gender Justice Protocol for Financial Services Linda Mayoux......Page 647
1.1 Framework......Page 650
2 Why a Gender Justice Protocol for Financial Services?......Page 651
3 Organisational Gender Policy: The Commercial Bottomline......Page 655
4 Equality of Access as Integral Part of Product and Service Development, Including Technological Innovation......Page 657
5 Financial Services Contribute to Women’s Empowerment through Appropriate Design of Products, Non-Financial Services Including Financial Literacy and Gender Action Learning......Page 659
6 Gender Indicators Are an Integral Part of Social Performance Management......Page 665
7 Consumer Protection and Regulatory Policies Integrate Gender Equality of Opportunity and Empowerment......Page 667
8 Gender Justice Advocacy......Page 668
10 Promoting an Enabling Environment for Gender Justice in Financial Services: Role of National Networks, Government and Donors......Page 670
References......Page 673
1 Introduction1......Page 677
2 Grameen Bank and Education......Page 678
3 Higher Education Loan......Page 684
4 Conclusion......Page 691
References......Page 692
Index......Page 695