IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v28y2011i4p1907-1913.html
   My bibliography  Save this article

Assessing the potential impact of Microfinance with agent-based modeling

Author

Listed:
  • Rashid, Salim
  • Yoon, Youngeun
  • Kashem, Shakil Bin

Abstract

Recent empirical results have cast doubt on the value of Microfinance as a tool for reducing poverty. But, the difficulty lies in evaluating the impact of Microfinance in a world where the Microfinance institutions, their borrowers, and government policies are constantly changing. There is a need for a comprehensive and transparent framework to develop the theoretical grounds for believing in (or against) the efficacy of Microfinance, which can at the same time be used as a testing ground for policymakers. This paper presents a first attempt to develop an agent-based modeling (ABM) framework for pre-policy-implementation testing of the effects of Microfinance. Under the ABM paradigm, a set of behaviors for individual agents in the economy is used to construct a simulation whereby random interaction allows agents to change their state over time. Simulation of the model in different scenarios supported all our intuitions about Microfinance; in particular, there was positive impact of Microfinance on the wealth level of the poor. It was found that increase of available funds, easy access for producers and lower interest rates increase the effectiveness of Microfinance.

Suggested Citation

  • Rashid, Salim & Yoon, Youngeun & Kashem, Shakil Bin, 2011. "Assessing the potential impact of Microfinance with agent-based modeling," Economic Modelling, Elsevier, vol. 28(4), pages 1907-1913, July.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:1907-1913
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999311000873
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Marguerite S. Robinson, 2001. "The Microfinance Revolution," World Bank Publications - Books, The World Bank Group, number 28956, December.
    2. David Roodman & Jonathan Morduch, 2014. "The Impact of Microcredit on the Poor in Bangladesh: Revisiting the Evidence," Journal of Development Studies, Taylor & Francis Journals, vol. 50(4), pages 583-604, April.
    3. Mark M. Pitt & Shahidur R. Khandker, 1998. "The Impact of Group-Based Credit Programs on Poor Households in Bangladesh: Does the Gender of Participants Matter?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 958-996, October.
    4. Shahidur R. Khandker, 2005. "Microfinance and Poverty: Evidence Using Panel Data from Bangladesh," The World Bank Economic Review, World Bank, vol. 19(2), pages 263-286.
    5. Leigh Tesfatsion & Kenneth L. Judd (ed.), 2006. "Handbook of Computational Economics," Handbook of Computational Economics, Elsevier, edition 1, volume 2, number 2.
    6. Duffy, John, 2006. "Agent-Based Models and Human Subject Experiments," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 19, pages 949-1011, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Raihan, Selim & Osmani, S. R. & Khalily, M. A. Baqui, 2017. "The Macro Impact of Microfinance in Bangladesh: A CGE Analysis," Conference papers 332868, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Lahkar, Ratul & Pingali, Viswanath, 2016. "Expansion and welfare in microfinance: A screening model," Economic Modelling, Elsevier, vol. 53(C), pages 1-7.
    3. Sara Bourhime & Mohamed Tkiouat, 2018. "Rethinking Microfinance in a Dual Financial System: An Agent-based Simulation," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 65(1), pages 13-29, March.
    4. Polyzos, Stathis & Samitas, Aristeidis & Katsaiti, Marina-Selini, 2020. "Who is unhappy for Brexit? A machine-learning, agent-based study on financial instability," International Review of Financial Analysis, Elsevier, vol. 72(C).
    5. Raihan, Selim & Osmani, S.R. & Khalily, M.A. Baqui, 2017. "The macro impact of microfinance in Bangladesh: A CGE analysis," Economic Modelling, Elsevier, vol. 62(C), pages 1-15.
    6. Tanjinul Hoque Mollah & Sharmin Shishir & Wahid Ullah & Takaaki Nihei, 2019. "Assessing NGOs micro-credit programs: a geo-spatial and socio-economic scenario from rural Bangladesh," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 66(2), pages 79-99, June.
    7. Mallick, Debdulal & Nabin, Munirul H., 2018. "Cost effectiveness or serving the poor? Factors determining program placement of NGOs in Bangladesh," Economic Modelling, Elsevier, vol. 69(C), pages 281-290.
    8. Cong, Rong-Gang & Smith, Henrik G. & Olsson, Ola & Brady, Mark, 2014. "Managing ecosystem services for agriculture: Will landscape-scale management pay?," Ecological Economics, Elsevier, vol. 99(C), pages 53-62.
    9. Samitas, Aristeidis & Polyzos, Stathis & Siriopoulos, Costas, 2018. "Brexit and financial stability: An agent-based simulation," Economic Modelling, Elsevier, vol. 69(C), pages 181-192.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. João Paulo Coelho Ribeiro & Fábio Duarte & Ana Paula Matias Gama, 2022. "Does microfinance foster the development of its clients? A bibliometric analysis and systematic literature review," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-35, December.
    2. Dilruba Khanam & Muhammad Mohiuddin & Asadul Hoque & Olaf Weber, 2018. "Financing micro-entrepreneurs for poverty alleviation: a performance analysis of microfinance services offered by BRAC, ASA, and Proshika from Bangladesh," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 8(1), pages 1-17, December.
    3. Hermes, Niels & Lensink, Robert, 2011. "Microfinance: Its Impact, Outreach, and Sustainability," World Development, Elsevier, vol. 39(6), pages 875-881, June.
    4. Hisaki KONO & Kazushi TAKAHASHI, 2010. "Microfinance Revolution: Its Effects, Innovations, And Challenges," The Developing Economies, Institute of Developing Economies, vol. 48(1), pages 15-73, March.
    5. Asad K. Ghalib & Issam Malki & Katsushi S. Imai, 2012. "Microfinance and its role in household poverty reduction: findings from Pakistan," Global Development Institute Working Paper Series 17312, GDI, The University of Manchester.
    6. Simon Zaby, 2019. "Science Mapping of the Global Knowledge Base on Microfinance: Influential Authors and Documents, 1989–2019," Sustainability, MDPI, vol. 11(14), pages 1-21, July.
    7. Thath, Rido, 2018. "Microfinance in Cambodia: Development, Challenges, and Prospects," MPRA Paper 89969, University Library of Munich, Germany.
    8. Debadutta Kumar Panda, 2017. "Impact assessment of group-based credit–lending projects with controlled project placement bias and self-selection bias," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 44(3), pages 227-238, September.
    9. Mathilde Maîtrot & Miguel Niño-Zarazúa, 2017. "Poverty and wellbeing impacts of microfinance: What do we know?," WIDER Working Paper Series wp-2017-190, World Institute for Development Economic Research (UNU-WIDER).
    10. Anzoategui, Diego & Demirgüç-Kunt, Asli & Martínez Pería, María Soledad, 2014. "Remittances and Financial Inclusion: Evidence from El Salvador," World Development, Elsevier, vol. 54(C), pages 338-349.
    11. Antonello Zanfei, 2011. "Multinational Firms and the Pursuit of Social Benefits," Review of Economics and Institutions, Università di Perugia, vol. 2(3).
    12. Orso, Cristina, 2011. "Microcredit and poverty. An overview of the principal statistical methods used to measure the program net impacts," POLIS Working Papers 154, Institute of Public Policy and Public Choice - POLIS.
    13. Swamy, Vighneswara, 2014. "Financial Inclusion, Gender Dimension, and Economic Impact on Poor Households," World Development, Elsevier, vol. 56(C), pages 1-15.
    14. Maren Duvendack & Richard Palmer-Jones, 2012. "High Noon for Microfinance Impact Evaluations: Re-investigating the Evidence from Bangladesh," Journal of Development Studies, Taylor & Francis Journals, vol. 48(12), pages 1864-1880, December.
    15. Timothy Powell‐Jackson & Mohammad Enamul Hoque, 2012. "Economic Consequences Of Maternal Illness In Rural Bangladesh," Health Economics, John Wiley & Sons, Ltd., vol. 21(7), pages 796-810, July.
    16. M. Shahe Emran & A. K. M. Mahbub Morshed & Joseph E. Stiglitz, 2021. "Microfinance and missing markets," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 34-67, February.
    17. Prof dr Erik Stam & Felix Meier zu Selhausen, MSc MA, 2014. "Husbands and Wives. The powers and perils of participation in a microfinance cooperative for female entrepreneurs," Working Papers 2014/20, Maastricht School of Management.
    18. Ghulam Hussain, A.K.M. & Nargis, Nigar & Ashiquzzaman, S.M. & Khalil, Fahad, 2019. "The employment impact of microcredit program participation in Bangladesh: Evidence from a longitudinal household survey," World Development Perspectives, Elsevier, vol. 13(C), pages 34-49.
    19. Dahoun, Dieudonné Bleossi & Manlan, Olivier & Vodonou, Cosme & Mongan, Saint-Martin & Mededji, Damien & Alofa, Janvier P., 2013. "Microcrédit, pauvreté et autonomisation des femmes au Bénin," PEP Working Papers 160426, Partnership for Economic Policy (PEP).
    20. Ana C Rostran Molina & Anindya Banerjee & Federico Lampis, 2015. "Micro-Finance and Credit Access in the Agricultural Sector of Nicaragua," Discussion Papers 15-04, Department of Economics, University of Birmingham.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:1907-1913. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.