competition and microfinance abstract competition between microfinance institutions mfis in developing countries has increased dramatically in the last decade we model the behavior of non profit lenders and show that their non standard client maximizing objectives cause them to cross subsidize within their pool of borrowers thus when competition eliminates rents on profitable borrowers it is likely to yield a new equilibrium in which poor borrowers are worse off as competition exacerbates asymmetric information problems over borrower indebtedness the most impatient borrowers begin to obtain multiple loans creating a negative externality that leads to less favorable equilibrium loan contracts for all borrowers

the microfinance promise in the past decade microfinance programs have demonstrated that it is possible to lend to low income households while maintaining high repayment rates even without requiring collateral the programs promise a revolution in approaches to alleviating poverty and spreading financial services and millions of poor households are served globally a growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success particularly the use of group lending contracts with joint liability for the most part however high repayment rates have not translated into profits and studies of impacts on poverty yield a mixed picture in describing emerging tensions the paper highlights the diversity of innovative mechanisms beyond group lending contracts the measurement of financial sustainability the estimation of economic and social impacts the costs and benefits of subsidization and the potential to reduce poverty through savings programs rather than just credit the promise of microfinance has pushed far ahead of the evidence and an agenda is put forward for addressing critical empirical gaps and sharpening the terms of policy discussion

where is the plus in credit plus the case of chiapas mexico abstractit has become common to try and increase the effectiveness of microfinance programmes by adding supplementary services to the financial product however the added value accruing from this credit plus approach has been little analysed we hypothesise that the extent of added value from credit plus depends on the ability of the credit supplier to cultivate trust or social capital amongst clients applying difference in difference estimation we exploit a natural experiment of two credit plus programmes in mexico the findings suggest that credit plus is not universally effective but that it is at its most effective especially with low income groups where bonding within group social capital exists

moneylenders and informal financial markets in malawi abstract after a background review of the institutional financial srvices available to small and medium enterprises in malawi and a survey of the literature on malawi s informal financial markets ifms this paper presents a detailed report on the character and operations of a katapila moneylender in lilongwe malai the moneylender market is then analyzed in terms of several themes from the literature on ifms in less developed countries for example calculations show that the interest charges on katapila loans are not justified by economic costs of doing business finally policy implications for promoting more efficient finance are discussed

the impact of microcredit programs on self employment profits do noncredit program aspects matter microcredit programs provide a two tiered approach to poverty alleviation credit for the purchase of capital inputs in order to promote self employment and noncredit services and incentives these noncredit aspects may be an important component of the success of microcredit programs however because they are costly to deliver and their contribution to the success of the programs is difficult to measure they may not be properly valued this paper uses primary data on household participants and nonparticipants in grameen bank and two similar microcredit programs to measure the total and noncredit effects of microcredit program participation on productivity the total effect is measured by estimating a profit equation and the noncredit effect by estimating the profit equation conditional on productive capital productive capital and program participation are treated as endogenous variables in the analysis i find large positive effects of participation and the noncredit aspects of participation on self em

scale economies and input price elasticities in microfinance institutions abstract we evaluate the efficiency of microfinance institutions mfis using a structural approach which also captures these institutions outreach and sustainability objectives we estimate economies of scale and input price elasticities for lending only and deposit mobilizing mfis using a large sample of high quality panel data the results confirm conjectures that improvements in efficiency can come from the growth or consolidations of mfis as we find substantial increasing returns to scale for all but profitability focused deposit mobilizing mfis our results support the existence of a trade off between outreach and sustainability all inputs are inelastic substitutes but we find differences in own price elasticities in lending only and deposit mobilizing mfis

interaction between the formal and informal financial sectors the asian experience abstract the nature of the interaction between the formal and informal financial sectors in developing countries is a subject with important policy implications it has implications for the future of informal finance as the formal sector expands in the long term will the informal sector wither away as the traditional view of financial dualism assumes or will it continue to play an important complementary role perhaps even growing in absolute size second the pattern of two major policy approaches often advocated toward the informal sector offering it stronger competition so as to induce it to improve its terms and promoting linkages with it so as to take advantage of its lower transactions costs in reaching smaller and poorer borrowers third the existence of a large informal sector has implications for the efficacy of monetary and credit policy in achieving stabilization objectives fourth the interaction between the formal and informal financial sectors also has implications for the effects of financial liberalization through removing restrictions on the deposit rate of interest this paper draws on the experience of asian countries to address these issues

rescuing gender from the poverty trap the new poverty agenda is seen as incorporating gender within a new broader concept of poverty lipton and maxwell 1992 capable of measuring evaluating and redressing gender bias along with poverty reduction policies based on labor intensive growth targeted social services and safety nets multilateral positions on gender and development gad for their part also stress the poverty of women as a primary justification for development interventions designed to improve the position of women it is argued here however that the concept of poverty cannot serve as a proxy for the subordination of women that antipoverty policies cannot be expected to improve necessarily the position of women and that there is no substitute for a gender analysis which transcends class divisions and material definitions of deprivation the instrumental interest in women as the means to achieve development objectives such as poverty reduction may ultimately undermine gad gender appears to have collapsed into a poverty trap this essay raises a call for help or at least a discussion about the relative benefits of captivity vs escape

strategic interaction in undeveloped credit markets abstract this paper studies the strategic interaction between informal and formal lenders in undeveloped credit markets in a model with adverse selection loan seniority market power and differences in the cost of lending it is shown that under general conditions a co funding equilibrium will be a nash outcome of the game we demonstrate that a collateral requirement in connection with formal loans always generates a new co funding equilibrium in which both lenders earn higher profits a government subsidy to the formal lender may have the opposite effect we relate our results to existing empirical evidence and the emerging discussion of how to best ensure financial viability and outreach of microfinance institutions

assessing the impact of microcredit a zambian case study expectations are high but evidence of the impact of microcredit remains in short supply this article estimates the impact of an urban credit programme in zambia on business performance and on a range of indicators of wellbeing borrowers who obtained a second loan experienced significantly higher average growth in business profits and household income inflexible group enforcement of loan obligations resulted in some borrowers especially amongst those who had taken only one loan being made worse off our methodological investigations suggest that the supply of rigorous impact studies can be increased by basing them on data collection that serves a wider range of purposes including market research

symbiosis vs crowding out the interaction of formal and informal credit markets in developing countries abstract it is a common observation in many developing countries that enterprises are active borrowers in both formal and informal credit markets we propose a model in which the formal sector s superior ability in deposit mobilization is traded off against the informational advantage that lenders in the informal sector enjoy the formal sector can screen borrowers by providing only partial financing for projects thereby forcing borrowers to resort to the informal sector for the remainder of the loan we use the model to predict how the market structure responds to changes in the environment and we consider the policy implications of various forms of government intervention

microfinance and poverty in bolivia both in its institutional range and in its penetration of financial markets the microfinance sector in bolivia rivals any in the world and has played a major part in extracting the macro economy from meltdown since the mid 1980s we seek specifically to assess its impact on poverty and do this through small sample surveys on four microfinance institutions two urban and two rural using a range of poverty concepts income generated both through the borrower s enterprise and through the labour market asset holdings and diversity and various measures of vulnerability all the institutions studied had on balance positive impacts on income and asset levels with income impacts correlating negatively with income on account of poor households choosing to invest in low risk low return assets microfinance may however augment vulnerability average debt service ratios of microfinance clients are disturbingly high and if the coping mechanisms used by borrowers fail borrowers may be forced out of the

informal credit markets in india informal financial markets those which are not regulated or monitored by the banking authorities account for much of business credit in developing countries these unregulated informal credit markets icm are important both in their own right as part of each country s financial system and because of their reciprocal relations with growing enterprises and the regulated financial sector in order to study the operations of some of these markets in detail in urban commercial settings we conducted an extended survey of some of the informal credit markets of india 2 based in some cases on centuries of operation these markets proved to be important in the functioning of the contemporary economy indigenous style bankers belonging to particular ethnic communities and castes formerly provided the full range of banking services to their clients 3 with the rise of modern western style banking the indigenous bankers either have transformed themselves to serve sectors such as wholesale trade not well served by the modern sector or provide services which the modern bankers cannot provide though any estimate is very approximate it seems that informal credit markets account for as much as 20 of commercial credit outstanding in the various markets surveyed we began by surveying the gujeratis some of whom still practice their traditional form of full service banking in their homeland of gujerat and adjoining bombay the shikarpuris or multanis originally full service bankers in sind who now provide commercial credit in various other centers the chettiars in south india the rastogis in uttar pradesh and the marwaris especially in eastern india 4 but our surveys revealed that a wide range of ethnic groups were now involved in informal credit markets and the more meaningful differentiations

the inflation discipline of currency substitution abstract we examine the argument that currency substitution should be encouraged since it provides an inflation discipline in highly stylized games of national welfare maximization we find that as currency substitution increases currency survival comes to dominate all other considerations and inflation rates do indeed come down however we find no reason to think that these competitive inflation rates will be optimal the discipline embodied in currency substitution may be too weak or too strong it may be a poor substitute for direct coordination of monetary and fiscal policies we try to relate our analysis to recent u k proposals

parallel fragmented or black defining market structure in developing economies abstract in describing market structure development economists employ such terms as fragmented informal parallel and segmented to account for the observed distributions of prices of both goods and factors although these terms are used interchangeably do they mean the same thing focusing on the parallel markets approach the paper identifies government policies which create excess demand or supply in particular markets as the core determinant of the emergence of an official unofficial market structure the legality of unofficial transactions proves critical in assessing the consequences of the parallel market situation contrasting alternative characterizations of market structure the paper concludes that the parallel market is a distinct analytical concept

projects for women in the third world explaining their misbehavior abstract a large number of income generation projects for poor women in the third world designed during the women s decade 1975 85 have misbehaved that is their economic objectives have evolved into welfare action during implementation project misbehavior and the prevalence of welfare interventions can be explained by three factors first particular project characteristics define the typical intervention for women and facilitate the achievement of social rather than production aims second these characteristics are a result of the expertise in the welfare sector of women based institutions that execute women s projects finally the choice of women based implementing agencies and the more generalized preference for welfare action are determined by the comparatively lower financial and social costs derived from the implementation of welfare vs economic based policies for women in developing countries

a cautious price adjustment mechanism chaotic behavior abstract it is well known that adjustment processes like tatonnement can show erratic dynamic behavior the prices can make big jumps and vary over a wide range a discrete tatonnement process in a simple two goods economy is studied with only one price adjusted it is shown that the interval in which the price varies can be restricted to a neighborhood of an equilibrium price with big jumps excluded if the relative price adjustment is restricted by a maximal rate of increase or decrease of the price within the interval any type of erratic dynamics remains possible

performance and governance in microfinance institutions accepted version of article published in the journal journal of banking finance published version available on science direct http dx doi org 10 1016 j jbankfin 2008 11 009

the use of village agents in rural credit delivery using a simple principal agent model this article examines the incentive problems that arise when a formal financial institution such as a rural bank utilises a member of the rural community to act as an agent in screening potential borrowers and collecting repayment optimal compensation schemes are derived for the agent and their implications are discussed in addition i show that the norms and rules that govern village life may aid the financial institution by helping to constrain possible strategic behaviour by the agent

international currency substitution and the income velocity of money abstract this paper presents new empirical evidence on the degree to which international currency substitution destabilizes domestic money demand it also provides an explanation of some apparent discrepancies among previous empirical studies of currency substitution this explanation hinges on the distinction between the elasticity of currency substitution and the cross elasticity of money demand a large small value of one elasticity does not imply a large small value of the other a large cross elasticity is required for currency substitution to destabilize domestic money demand the empirical evidence presented here is consistent with the view that these cross elasticities are typically small

currency substitution and the demand for money some evidence for canada recently the possibility that foreign and domestic currencies are substitutes has received considerable attention see 1 2 3 10 19 21 currency substitution has important implications for the working of flexible exchange rates if the degree of currency substitution is high small changes in the money supply would induce large changes in the exchange rate furthermore currency substitution would transmit the effect of monetary disturbances from one country to another indeed significant currency substitution would seriously undermine the ability of flexible exchange rates to provide monetary independence this paper examines the empirical importance of currency substitution in the framework of the demand function for money if currency substitution is important the expected change in the exchange rate should be a significant determinant of the demand for home currency in section 2 we undertake such a test for the canadian demand for money during the recent flexible exchange rate period there is considerable evidence that the forward exchange rate is a good measure of the expected exchange rate our own tests confirm these results for canadian data since 1970

a note on controlling a chaotic tatonnement abstract the paper studies the possibility of targeting or controlling a chaotic tatonnement by suitable perturbations of the law of motion the analysis is in the context of a parametric class of exchange economies which are shown to constitute the logistic family of dynamical systems under the tatonnement process computer simulations suggest that the control method is effective in attaining neighborhoods of competitive equilibria for many members of this class of economies in a decentralized manner

currency substitution and the optimal inflation tax abstract there exist conflicting results on the optimal inflation tax in open economies subject to currency substitution this paper reconciles the different results and concludes that except in very special cases the optimal inflation tax is positive

on the indeterminacy of equilibrium exchange rates in this paper we consider a particular international economic policy regime the laissez faire regime the distinguishing features of which are unrestricted portfolio choice and floating exchange rates and as we show this regime although favored by many economists is not economically feasible it does not have a determinate equilibrium that is an implication of an overlapping generations model more basically it is an implication of the notion that money is wanted only in order to accomplish trades

economic exchange during hyperinflation historical evidence indicates that hyperinflations can disrupt individuals normal trading patterns and impede the orderly functioning of markets to explore these issues we construct a theoretical model of hyperinflation that focuses on individuals and their process of economic exchange in our model buyers must carry cash while shopping and some transactions take place in a decentralized setting in which buyer and seller negotiate over the terms of trade of an indivisible good since buyers face the constant threat of incoming younger hence richer customers their bargaining position is weakened by inflation allowing sellers to extract a higher real price however we show that higher inflation also reduces buyers search increasing sellers wait for customers as a result the volume of transactions concluded in the decentralized sector falls at high enough rates of inflation all agents suffer a welfare loss

the impact of formal finance on the rural economy of india india has systematically pursued a supply led approach to increasing agricultural credit its objectives have been to replace moneylenders to relieve farmers of indebtedness and to achieve higher levels of agricultural credit investment and output india s success in replacing moneylenders has been outstanding between 1951 and 1971 their share of rural credit appears to have dropped from more than 80 percent to 36 percent it may have dropped to as low as 16 percent by 1981 but that estimate is disputed still institutional credit is far from reaching all farmers only about a quarter of cultivators borrow and no more than 2 percent take out long term loans most small farmers have little access to credit and long term credit goes mostly to large farmers overall farm debt has probably not increased sharply in real terms as formal credit has primarily substituted for credit from other sources moreover with the rapid growth of commercial banks in the 1970s the system mobilized more deposits than it lent in rural areas in 1981 of course enhanced deposit services are a useful service of the rural population but one must ask what has been the impact of heavy rural credit and better financial services on agricultural investment production and rural incomes the authors econometric results suggest that the rapid expansion of commercial banks in rural areas has had a substantially positive effect on rural nonfarm employment and output the availability of better banking facilities appears to have overcome one of the obstacles to locating nonfarm activities in rural areas expanded rural finance has had less of an effect on output and employment in agriculture than in the nonfarm sector the effect on crop output has not been great despite the fact that credit to agricluture has greatly increased the use of fertilizer and private investment in machines and livestock there has been more impact on inputs than on output so the additional capital investment has been more important in substituting for agriclutural labor than in increasing crop output but overall rural credit and expansion of the rural financial system have had a positive effect on rural wages creating nonfarm jobs has apparently added more to total employment than the substitution of capital for labor has subtracted it in agriculture so wages have risen even for agricultural workers albeit modestly the supply led approach to agricultural credit that has been pursued for three decades has clearly benefited current borrowers and farm households formerly indebted to moneylenders it has also spurred fertilizer use and investment in agriculture it has been less successful in generating viable institutions and has failed to generate agricultural employment the policy s costs to india s government have been high as portfolio losses associated with poor repayment ultimately have to be borne by the government or one of its institutions under optimistic assumptions the benefits of the agricultural income are at best no more than 13 percent higher than the cost to the government of the extra agricultural credit if assumptions about the cost of supplying the credit and about repayment rates are less optimistic the social costs and the costs to the government of providing the credit would have exceeded the benefits in agricultural income the expansion of commercial banks to rural areas paid off in nonfarm growth employment and rural wages the question is could these benefits have been achieved without imposing agricultural credit targets on the commercial banks and credit cooperatives or did the commercial banks expand only because they were forced to lend to agriculture the authors could not answer these questions with the data at hand

international currency substitution and seigniorage in a simple model of money i introduction currency substitution describes the change in the holdings of domestic and foreign real balances in response to fluctuations in the relative prices of these currencies so far the empirical evidence on the strength of currency substitution has been mixed miles 1978 finds evidence in favor of strong currency substitution between the canadian dollar and the u s dollar bordo and choudhri 1982 criticize miles on the ground that miles has a misspecified model and their estimates of a canadian money demand function indicate little currency substitution in a recent paper rogers 1992 finds that dollarization in a high inflation economy such as mexico s is quite strong and statistically significant imrohoroglu 1994 on the other hand estimates the extent of currency substitution between the canadian dollar and the u s dollar using a gmm approach and finds that the elasticity of currency substitution in canada is quite low between 0 29 and 0 43 depending on the instruments used furthermore the estimate of the share of u s dollar denominated deposits in producing canadian liquidity services is on the order of 1 percent to 3 percent the policy implications of currency substitution have been extensively analyzed most of these studies concentrate on the impact of currency substitution on the volatility of exchange rates and the autonomy of domestic monetary policy under a flexible exchange rate regime 1 recently researchers have started to explore whether currency substitution alters the results in the optimal inflation tax literature for example vegh 1989 shows that it may be optimal to resort to the inflation tax under currency substitution since it reduces the distortion introduced by an exogenously given positive foreign interest rate in his model a positive foreign interest rate creates a distortion because it acts as an indirect consumption tax kimbrough 1991 analyzes a small open economy under currency substitution where domestic agents are required to use domestic real balances to purchase the domestic nontraded good foreign real balances to purchase the imported good and either domestic or foreign real balances to purchase the exportable good he finds that it is optimal to follow the friedman rule of a zero nominal interest rate in this setup since money serves as an intermediate good guidotti and vegh 1993 however argue that kimbrough s 1991 result only applies under very restrictive assumptions on the transactions technology and that in general the optimal inflation rate is positive under currency substitution aizenman 1992 considers a multi country money in the utility function model in a common currency area where there are collection costs associated with income taxation he shows that in the absence of a cartel agreement on how to share the seigniorage revenue the optimal inflation rate for individual countries will exceed the optimal inflation rate under a cooperative solution canzoneri and diba 1992 study the role of currency substitution in a two country money in the utility function model under a flexible exchange rate regime where there are collection costs of lump sum taxes they show that the outcome of a noncooperative seigniorage maximization or welfare maximization game is characterized by the friedman rule the cooperative outcome on the other hand includes the inflation tax as part of an optimal tax package since lump sum taxes are costly to collect the theoretical literature summarized above suggests that currency substitution may have important economic implications most of the attention has been on the role of the elasticity of currency substitution the share of foreign real balances in the residents domestic portfolio has largely been ignored laney radcliffe and willett 1984 and joines 1985 emphasize the distinction between the elasticity of substitution and the cross elasticity of money demand and argue that a high cross elasticity is necessary for currency substitution to have a major destabilizing impact on domestic money demand

giving women credit the strengths and limitations of credit as a tool for alleviating poverty abstract poor women in developing countries often turn to self employment as a way to support themselves and their families but these small scale activities rarely yield enough income to lift them out of poverty recently ngos and donor agencies have sought to assist these women by providing credit which is otherwise largely unavailable to them the broad aims of these programs vary as do the strategies which range from simply offering credit a minimalist approach to providing training and technical assistance as part of the credit package a credit plus approach the channels used bank schemes intermediary programs parallel programs or poverty focused development banks also vary so far the last three channels have been more effective than the first in improving women s access to credit however not enough is known about which strategies have the greatest economic impact for particular groups of women and further evaluation is needed

financial performance and outreach a global analysis of leading microbanks microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries but high repayment rates have not translated easily into profits for most microbanks profitability though is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy the authors examine why this promise remains unmet for most institutions using a data set with unusually high quality financial information on 124 institutions in 49 countries they explore the patterns of profitability loan repayment and cost reduction the authors find that institutional design and orientation matter substantially lenders that do not use group based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially for these individual based lenders one key to achieving profitability is investing more heavily in staff costs a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost

microenterprise finance is there a conflict between growth and poverty alleviation abstract microenterprise finance has generated enormous enthusiasm among aid donors and nongovernment organizations ngos as an instrument for reducing poverty in a manner that is financially self sustaining although something of a consensus has emerged concerning the principles by which such institutions should be designed however we know little about their impact the paper reports on a research project which estimated the impact of 13 microfinance institutions in seven developing countries on poverty and other target variables and attempted to relate such impact to the institutions design features for each of the institutions studied the impact of lending on the recipient household s income tended to increase at a decreasing rate as the recipient s income and asset position improved a relationship which can easily be explained in terms of the greater preference of the poor for consumption loans their greater vulnerability to asset sales forced by adverse income shocks and their limited range of investment opportunities there are significant outliers to this general pattern in particular very poor people who have been able to achieve significant loan impact but they are the exception rather than the rule and the relationship is significant at the 1 level for all the institutions studied except the malawi mudzi fund this relationship defines in the short term an impact frontier which serves as a tradeoff lenders can either focus their lending on the poorest and accept a relatively low total impact on household income or alternatively focus on the not so poor and achieve higher impact the position and slope of the estimated impact curve vary however with the design of the institution for well designed schemes impact at all levels of income is higher than for ill designed schemes hence for many lender institutions the tradeoff can often be moved by appropriate innovations in institutional design in particular modifications to savings loan collection and incentive arrangements for borrowers and staff

village banking and maternal and child health evidence from ecuador and honduras abstract many microcredit institutions bundle credit with health education or other programs this paper reviews arguments on such tie ins and concludes that net benefits are possible but requires empirical testing quasi experimental data from project hope s health banks and credit only village banks are then examined the paper presents evidence that health practices do not improve automatically with greater wealth in honduras results show that health bank participation is robustly associated with reduced subsequent conditional child diarrhea probability but in no specification does credit only bank participation have this effect in ecuador results suggest a larger effect of credit only banks in both countries health bank participation significantly raises subsequent healthcare over credit only participation and at least reduces the tendency to switch from breast feeding to bottle feeding as income rises effects on expenditures are ambiguous there is no clear link between tie ins and bank performance

the currency substitution hypothesis and relative money demand in mexico and canada the author estimates demand for dollars relative to domestic currency in mexico and canada using 1 a multivariate model with a relative money demand equation and 2 single equation models including an error correction representation he also analyzes the models encompassing properties the anomalous correlation between the mexican dollarization ratio and expected peso depreciation implies that convertibility risk was associated with holding mexidollars under this interpretation higher expected depreciation coincides with a drop in relative demand for dollars because there is the possibility that the government will forcibly convert mexdollars when these central bank liabilities rise and foreign reserves run low several testable alternative explanations are rejected copyright 1992 by ohio state university press

currency substitution and seigniorage maximizing inflation the case of cambodia this article contributes a new empirical study on currency substitution in cambodia in our analysis a model of money in the utility function is adopted the empirical results indicate that the elasticity of substitution between foreign and domestic real currency balances in cambodia is high moreover the high share of foreign real balances in providing domestic liquidity services in cambodia is also confirmed by empirical analysis given these findings the effects of the currency substitution on the government ability to gain from seigniorage revenue are also examined the analysis from simulated results shows that the cambodian government has little opportunity to gain from seigniorage revenue

a little at a time the use of regularly scheduled repayments in microfinance programs abstract informal lenders appear to be thriving even in regions where microfinance institutions mfis such as the grameen bank have established lending programs we suggest that an explanation for this well documented observation lies in the ubiquitous use of regularly scheduled repayments by mfis borrowers are typically required to repay their loans in tightly structured installments beginning soon after loan disbursement this little remarked aspect of the repayment schedule is usually explained as inculcating fiscal discipline among borrowers we argue that an alternative rationale for this loan repayment structure lies in the difficulty of monitoring borrowers actions the potential for moral hazard leads mfis to use innovative mechanisms such as regularly scheduled repayments which indirectly coopt the better informed informal lenders conversely this installment repayment structure allows informal lenders to survive further we show that this linkage can not only expand the volume of informal lending but may also raise the interest rate in the informal sector

statistical dynamics and walras law abstract much interest has been shown on identifying the chaotic behavior generated from t tonnement process recently the aim of this article is to direct the research in exploring its statistical dynamical properties two typical types of ergodic t tonnement processes restricted t tonnement and unrestricted t tonnement have been studied their long run statistical characteristics such as time average of price excess demand and inflation rate are discussed in theory and by computer simulations

microfinance and investment a comparison with bank and informal lending summary comparing the impact of different types of credit on households investment in bangladesh we find that loans from microfinance institutions are likely to be channeled toward non agricultural activities while both informal and bank lending are associated to a higher expenditure in agricultural inputs estimated effects are net of the differences in the amount borrowed interest rates and collateral results suggest that features which are specific to microfinance such as tight repayment schedules and land based eligibility rules may reduce the suitability of this source of funds for the farming sector

stability and complex dynamics in a discrete tâtonnement model abstract in this paper we study the dynamics of discrete price adjustment processes we show that gross substitutability leads to a kind of stability of the process it guarantees that all prices converge to some bounded region that contains the unique equilibrium price the dynamics inside this region is by no means trivial we demonstrate that as the speed of adjustment increases the process undergoes several bifurcations and the dynamics may become quite complex our approach differs from other literature on t tonnement processes in that our systems are not necessarily one dimensional

on financial innovations and credit market evolution abstract this paper examines the role of financial innovations in the economic development process it discusses the place of policy intervention in the financial development of developing countries and through a case study of an innovative bank illustrates the nature and characteristics of the financial innovations necessary for financing small enterprises and mobilizing resources from low and middle income groups such financial innovations are shown to reduce transaction costs and risk and as a result to bring about widening deeping and intergration of capital markets this process accelerates economic development through a favorable impact on savings investment and output

foreign inflation transmission under flexible exchange rates and currency substitution the dynamic and steady state effects of a permanent unanticipated increase in foreign inflation on a small open economy are analyzed under flexible exchange rates and currency substitution the velocity of domestic money and consequently the domestic inflation rate may rise along the transition path to steady state but only if demand for foreign currency is sufficiently elastic such that the substitution from foreign to domestic money on impact is large higher foreign inflation is transmitted negatively when demand is inelastic all else constant a higher initial level of foreign real balances increases the magnitude of the transmission effects copyright 1990 by ohio state university press

statistical dynamics and economics abstract it is shown in this paper how complex economic dynamics can be characterized using the statistical or distributional theory of dynamical systems the basic concepts of the latter are summarized then applications to supply and demand adjustments in competitive markets aggregate business fluctuations and economic growth in the very long run are briefly reviewed

collateral guaranties and rural credit in developing countries evidence from asia abstract the paper reviews the theory of the impact of loan collateral and in particular land collateral in institutional and non institutional rural credit markets evidence from three asian developing countries is presented showing extensive use of land collateral among institutional lenders in countries where such collateral is legal the use of land collateral is more common than other forms of security except in places where legal inhibitions on mortgaging agricultural land exist non institutional lenders are less inclined to use land collateral however lenders who do not have links to borrowers in matters other than finance are more likely to use loan securities estimates of instutional credit supply and demand in rural thailand confirm that the pledging of land collateral affects the supply of credit more than group guaranty it is also shown that larger farmers are more likely to utilize land collateral the conclusion is that land collateral is preferred by institutional lenders as it reduces creditworthiness assessment costs attempts to ban or limit collateral use by decree are motivated by equity cinsiderations but they will cause loss of efficiency simplification of ownership verification and other policies reducing the transaction cost of collateral pledging will mitigate the negative equity implications of collateral

gmm estimates of currency substitution between the canadian dollar and the u s dollar this paper investigates the empirical strength of currency substitution between the canadian dollar and the u s dollar euler equations implied by a small open economy money in the utility function model are estimated and tested by hansen s generalized method of moments procedure the major empirical finding is that both the elasticity of currency substitution and the share of u s currency in the production of canadian liquidity services are economically small even though the combined domestic and u s real balances appear to provide statistically significant economizing on transactions costs copyright 1994 by ohio state university press

the effects of religion on development efforts evidence from the microfinance industry and a research agenda author s version of an article in the journal world development also avaliable from the publisher at http dx doi org 10 1016 j worlddev 2012 05 030

optimal taxation and inflation in an open economy abstract this paper examines the role of the inflation tax in the optimal revenue raising tax package for a small open economy where money is held because it serves to reduce transacttions costs associated with purchasing goods consumers choose whether domestic money or foreign money will serve as the medium of exchange for various goods purchases so as to minimize such costs results are derived regarding the appropriate role of taxes on domestic and foreign money in the optimal tax structure it is demonstrated that with a sufficiently rich tax structure friedman s rule which calls for a monetary policy that drives the nominal interest rate to zero is a component of the optimal tax policy

do microfinance institutions benefit from integrating financial and nonfinancial services this article examines the impact of microfinance plus i e coordinated combination of financial and nonfinancial services on the performance of microfinance institutions mfis using a global data set of mfis in 77 countries we find that the provision of nonfinancial services does not harm nor improve mfis financial sustainability and efficiency the results however suggest that the provision of social services is associated with improved loan quality and greater depth of outreach

women and repayment in microfinance a global analysis notice this is the author s version of a work that was accepted for publication in world development changes resulting from the publishing process such as peer review editing corrections structural formatting and other quality control mechanisms may not be reflected in this document changes may have been made to this work since it was submitted for publication a definitive version was subsequently published in world development 39 5 758 772 http dx doi org 10 1016 j worlddev 2010 10 008

the competitive externalities and the optimal seignorage this study analyzes the inflation tax in an economy with several competing decisionmakers who can effectively print more money via the central bank the author derives the sequential rational expectation equilibrium and shows that the presence of competing decisionmakers increases the inflation rate and may put the economy on the wrong side of the inflation tax laffer curve the analysis is interpreted for a country consisting of several states or provinces where the centralized government system is weak similar results apply to the case of competing ministers in an economy where the central bank is weak copyright 1992 by ohio state university press

ergodic fluctuations in deterministic economic models abstract nonperiodic business fluctuations are shown to exist with positive measure generically and to behave like stationary stochastic processes in the standard dynamic macro model the implication is that so called chaotic fluctuations are probable for random initial conditions in a large class of recursive economies

microenterprise lending to female entrepreneurs sacrificing economic growth for poverty alleviation abstract this research compares the performance of female and male entrepreneurs in a microenterprise credit program in guatemala previous research and field practice has suggested that targeting credit at female borrowers allows for greater increases in household welfare but that male entrepreneurs may more aggressively expand enterprises when given access to credit in this paper we develop a model that shows that increases in value of home time during childbearing years for women may substantially account for gender differences in responses to credit access empirical results from guatemalan survey data yield estimations consistent with the predictions from our model

human and financial capital for microenterprise development evidence from a field and lab experiment microenterprises constitute an important source of employment and developing such enterprises is a key policy concern in most countries but what is the most efficient tool for microenterprise development we study this question in a developing country context tanzania where microenterprises are the source of employment for more than half of the labor force and we report from a field experiment that jointly investigated the importance of a human capital intervention business training and a financial capital intervention business grant using data from three survey rounds a lab experiment and administrative records of the microfinance institution we present evidence on business performance management practices happiness business knowledge and noncognitive abilities our study demonstrates strong effects of the combination of the two interventions on male entrepreneurs while the effects on female entrepreneurs are much more muted the results suggest that long term finance is an important constraint for microfinance entrepreneurs but that business training is essential to transform financial capital into productive investments our study also points to the need for more comprehensive measures to promote the businesses of female entrepreneurs data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 1933 this paper was accepted by john list behavioral economics

the financial power of the powerless socio economic status and interest rates under partial rule of law in advanced economies interest rates vary inversely with the borrower s socio economic status which itself depends inversely on default risk these relationships depend on the impartiality of the law where the law is markedly biased in favour of certain groups the latter will pay a surcharge for capital legal power as measured by privileges before the law thus undermines financial power the capacity to borrow cheaply developing this argument this paper also tests it through judicial records from ottoman istanbul 1602 1799 three privileged ottoman groups men muslims and titled elites all paid relatively high interest rates conditional on various loan characteristics this article is protected by copyright all rights reserved

interactions between institutional and informal credit agencies in rural india in an attempt to expand rural credit and displace the village moneylender india created a system of rural cooperatives in the 1950s and expanded branch banking into rural areas in the 1970s this article examines how these measures affected the rural market it begins with the question of how large the expansion of institutional credit has been and the extent to which it has dislodged the village and nonresident moneylenders a detailed comparison of three major surveys of the indian rural credit market suggests that in various guises the moneylender is still a major source of loans the article also examines the weak evidence on intermediation between the formal and informal sectors a formal model of the interaction between the informal moneylender and institutional lender is constructed under a variety of assumptions about the exclusivity of loan contracts and the competitive structure of the informal sector the conclusions are drawn together in the form of five proposals for public policy

multiple equilibria and chaotic tâtonnement applications of the yamaguti matano theorem abstract this paper demonstrates sufficient conditions for the discrete time t tonnement process to lead to chaos in the competitive economy with only two commodities to prove that we use yamaguti matano theorem

the optimal inflation tax in the presence of currency substitution abstract an important result in the optimal inflation tax literature is that if money is modeled as reducing transactions costs the optimal nominal interest rate is zero this paper examines this issue in the context of a small open economy where both domestic and foreign currency circulate as media of exchange it is shown that the presence of foreign money enables the government to reduce the distortion introduced into the economy by a positive foreign nominal interest rate by setting a positive domestic nominal interest rate