Essais sur Microfinance

par Yun Wu

Projet de thèse en Sciences économiques

Sous la direction de Ani Guerdjikova et de Estefania Santacreu-vasut.

Thèses en préparation à Cergy-Pontoise , dans le cadre de ED EM2P - Economie, Management, Mathématiques et Physique , en partenariat avec Théorie économique, modélisation et applications (laboratoire) depuis le 13-10-2011 .

  • Pas de résumé en français disponible.

  • Titre traduit

    Essays on Microfinance

  • Résumé

    Microfinance, as we call it today, specifically refers to the group lending model initiated by Mohammed Yunus in the rural Bangladesh back in the 1970s and the practice of ACCION in Latin America. It is a type of small-amount retail financial service provided to people whose financial needs have been previously rationed by formal financial institutions such as banks. This population has the following characteristics: (1) rural/urban population in a fragile financial situation, usually with low and unstable income stream, e.g. peasants, full time/ part time self-employed workers, and women; (2) lack of standard collateral acceptable for banks. In order to lend to this population, social collateral or interlinkage is leveraged to compensate for inadequate standard collateral and ameliorate information asymmetry. (Basu, 1997) Although microfinance is influential and has altered the lives of millions of poor people in the past 40 years, it is not an invention. The word “microfinance” was invented in 1990. In the history, non-bank saving and cedit groups offering small non-collateral interest-bearing loans with mutual liability to the poor have been observed in many countries with institutional forms tailored to the specific cultural and economic environments, for example, the "susus" of Ghana, "chit funds" in India, "tandas" in Mexico, "arisan" in Indonesia, "cheetu" in Sri Lanka, "tontines" in West Africa, "pasanaku" in Bolivia, the Green shoots policy in the 11th century in China (Wang, 2009), the Irish loan funds (Hollis and Sweetman, 1998a, 1998b, 2001), German credit cooperatives in the 19th century (Banerjee et al., 1994). They facilitated agricultural, manufactural and trade actitivities and smoothed consumption of the poor population. Some historical organizations ceased to exist due to competition from the banking sector or challenges in legislative and economic environment. Some are very successful. For example, chit funds continue to operate in India today and the once German cooperatives have been transformed into regulated banks. Nevertheless, the momentum and worldwide impact of microfinance since the 1970s is unprecedented. Its success should be understood under the background of globalization and urbanization. With the trend of globalization in the 20th century, international migration is more frequent as developing countries integrate into the global supply chain and lower the barrier of capital and labor flow. Richest people in developing countries emigrate into developed countries. Moreover, with the trend of urbanization, rural population has started to emigrate to cities. The richest and most capable rural people move to cities. Both trends excercebate poverty in rural areas. So, there has been a need to develop rural areas in many developing countries. Grameen was a pioneer and successful case in introducing the group lending scheme and building a sustainable bank for the poor. Its success inspired numerous earlier studies about the mechanism and advantage of group lending in terms of mitigating adverse selection and moral hazard in the credit cycle and enforcing repayment by means of peer pressure among the poor. (Stiglitz, 1990; Banerjee et al., 1994; Besley and Coate, 1995; Ghatak, 1999, etc.) On the other hand, group lending also has its limitations such as slow expansion for the lending institutions, collusion among borrowers with strong social ties (Laffont, 2003; Laffont and Rey, 2003; Ahlin and Townsend, 2007), insufficient risk taking due to excessive peer monitoring (Fischer, 2013). Grameen also gradually replaced group lending with more flexible lending schemes (Rai and Sjostrom, 2004; Bhole and Ogden, 2010). In contrast to unanimously positive view of group lending in the early studies, recent studies focus more on conditions of optimality of group lending, its impact evaluation and whether group lending is superior in terms of repayment performance and borrower welfare (Banerjee et al., 2013; Giné et al., 2010; Madajewicz, 2011; Fischer, 2013; Giné and Karlan, 2014; Attanasio O. et al., 2014). Empirical studies often reveal no substantial difference in repayment performance. Individual lending with enough institutional enforcement can also reach comparable repayment rate as group lending. Group lending provides informal insurance to its members. It seems to promote entrepreneurship, but its impact on consumption is ambiguous. In a word, group lending, although an effective tool to leverage social capital to mitigate risk for the lender, is not a miracle cure that works everywhere. Nevertheless, the inspirational experience of Grameen bank encouraged non-government organizations (NGOs), charities, and local governments to actively engage themselves in promoting group lending microfinance scheme in poverty alleviation programs. As a result, microfinance institutions (MFI) worldwide have grown in number to over two thousand in 2010, serving over 100 million borrowers and more than 70 million savers. However, since MFIs are hybrid organizations with both social and financial objectives (Santacreu-Vasut et al., 2013), there is a tradeoff between outreach and operational efficiency. From the social perspective, it is an effective and sustainable instrument of income redistribution, an alternative to direct philanthropic transfer to the poor. From the financial perspective, it is a specialized credit intermediary to complement the formal banking system in developing countries and to provide affordable financial services to the poor. An MFI focusing more on the social objective would choose to lend to poor clients at a reasonable interest rate level. Correspondingly it chooses to be an NGO in order to control costs, such as personnel salary, financing cost and tax burden. (Serrano-Cinca and Gutierrez-Nieto, 2013) However, the non-profit status also threatens its operational sustainability and the financial objective due to uncertain donation funding, staff incentive problem, and also the low quality of governance and operational efficiency. (Servin et al., 2012) In reponse to this challenge, MFIs apply several strategies. The first is to broaden its clientele to serve richer borrowers, seemingly contradictory to its objective of poverty alleviation, in order to conduct cross-subsidization among its clients and maintain its operational sustainability. But this strategy is prone to criticism of mission drift, i.e. reaching out to unbanked wealthier clients while crowding out poor clients, since it is hard to tell mission drift apart from cross-subsidization (Armendáriz and Szafarz, 2011). The second strategy is commercialization, or transformation into for-profit and shareholder owned organizations. This is supposed to broaden funding opportunity and improve governance efficiency, however it turns out that it sacrifices the social objective. With insufficient regulation and improper staff incentive scheme, for-profit MFIs could be worse than moneylenders since they take advantage of being financial intermediaries to lend recklessly and expand rapidly, which is one major cause of borrower over-indebtedness (CSFI, 2012; Schicks, 2010; Gonzalez, 2008). The IPO of SKS Microfinance Limited on Bombay Stock Exchange in 2010, and later on the repayment crisis in Andhra Pradesh of India put microfinance under public spotlight and questioned about its legitimacy (Davel, 2013; Madden, 2013). Accompanying the trend of commercialization is the increasing competition in this sector in the last decade. Many empirical studies examine the relationship between competition and the performance of MFIs. Competition has some positive impacts such as decreasing interest rates and operating expenses (Ahlin et al., 2011). It is negatively associated with outreach, but the impact on repayment performance is ambiguous (Schäfera et al., 2010; Assefa, Hermes, and Meesters, 2013). Theoretical analyses reveal that competition between non-profit and for-profit MFIs crowds out poor borrowers (Navajas et al., 2003). In addition, the market structure has an impact on lender's choice between individual lending and group lending (De Quidt, Fetzer, and Ghatak, 2012). Finally, as a response to the increasing number of MFIs and competition in the market, MFIs start to form associations/networks on local, regional, and international levels. These networks play different roles. As argued by Bloch (2002), most networks embody both a collusive and a cost-reducing aspect. Some local networks facilitate information exchange among member MFIs, while others act as apex organizations, and regulate operation and competition (Schmidt, 2008). International networks improves efficiency by reducing financing and operational costs so that MFIs do not have to compromise the social mission of poverty relief. The role of networks on the development of microfinance industry and how this impact interacts with the local environment is an interesting question that remains to be explored. After reviewing the evolution of the microfinance industry and relevant literature, this dissertation attempts to address several questions of interest to the development of this industry and fill in the gap in the literature. The first chapter discusses the role of multiple borrowing where group loan is involved on the repayment performance. This provides insights to the discussion of competition in microfinance. The second chapter is dedicated to a historical comparative analysis of rural microcredit in China, where the role of government matters for the success of a microcredit scheme. The third chapter is about the role of microfinance networks and macro environment, typically language gender sensitivity. These two could shed light on regulation of today's micrecredit programs.