Advanced Search
MyIDEAS: Login to save this paper or follow this series

Microfinance and Moneylenders: Long-run Effects of MFIs on Informal Credit Market in Bangladesh

Contents:

Author Info

  • Berg, Claudia
  • Emran, M. Shahe
  • Shilpi, Forhad

Abstract

Using two surveys from Bangladesh, this paper provides evidence on the effects of microfinance competition on village moneylender interest rates and households’ dependence on informal credit. The views among practitioners diverge sharply: proponents claim that MFI competition reduces both the moneylender interest rate and households’ reliance on informal credit, while the critics argue the opposite. Taking advantage of recent econometric approaches that address selection on unobservables without imposing the standard exclusion restrictions, we find that the MFI competition does not reduce moneylender interest rates, thus partially repudiating the proponents. The effects are heterogeneous; there is no perceptible effect at low levels of MFI coverage, but when MFI coverage is high enough, the moneylender interest rate increases significantly. In contrast, households’ dependence on informal credit tends to go down after becoming MFI member, which contradicts part of the critic’s argument. The evidence is consistent with a model where MFIs draw away better borrowers from the moneylender, and fixed costs are important in informal lending.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/49040/
File Function: original version
Download Restriction: no

File URL: http://mpra.ub.uni-muenchen.de/49519/
File Function: revised version
Download Restriction: no

File URL: http://mpra.ub.uni-muenchen.de/50803/
File Function: revised version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49040.

as in new window
Length:
Date of creation: 01 Aug 2013
Date of revision:
Handle: RePEc:pra:mprapa:49040

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Microfinance; Moneylenders; Microcredit; Interest Rates; Informal Borrowing; Long-run Effects; Bangladesh; Identification through Heteroskedasticity;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Richard Blundell & Monica Costa Dias, 2008. "Alternative approaches to evaluation in empirical microeconomics," CeMMAP working papers CWP26/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  2. Busso, Matias & DiNardo, John & McCrary, Justin, 2009. "New Evidence on the Finite Sample Properties of Propensity Score Matching and Reweighting Estimators," IZA Discussion Papers 3998, Institute for the Study of Labor (IZA).
  3. Maurer, Jürgen & Klein, Roger & Vella, Francis, 2007. "Subjective Health Assessments and Active Labor Market Participation of Older Men: Evidence from a Semiparametric Binary Choice Model with Nonadditive Correlated Individual-Specific Effects," IZA Discussion Papers 3257, Institute for the Study of Labor (IZA).
  4. Lídia Farré & Roger Klein & Francis Vella, 2013. "A parametric control function approach to estimating the returns to schooling in the absence of exclusion restrictions: an application to the NLSY," Empirical Economics, Springer, vol. 44(1), pages 111-133, February.
  5. M. Shahe Emran & Forhad Shilpi, . "The Extent of the Market and Stages of Agricultural Specialization," Working Papers 2008-11, The George Washington University, Institute for International Economic Policy.
  6. M. Shahe Emran & Zhaoyang Hou, 2013. "Access to Markets and Rural Poverty: Evidence from Household Consumption in China," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 682-697, May.
  7. Francis Vella & Lídia Farré & Roger Klein, 2009. "Does increasing parents' schooling raise the schooling of the next generation? Evidence based on conditional second moments," Working Papers. Serie AD 2009-11, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  8. Mallick, Debdulal, 2009. "Microfinance and Moneylender Interest Rate: Evidence from Bangladesh," MPRA Paper 17800, University Library of Munich, Germany.
  9. repec:taf:jnlbes:v:30:y:2012:i:1:p:67-80 is not listed on IDEAS
  10. Zeller, Manfred & Sharma, Manohar & Ahmed, Akhter U. & Rashid, Shahidur, 2001. "Group-based financial institutions for the rural poor in Bangladesh: an institutional- and household-level analysis," Research reports 120, International Food Policy Research Institute (IFPRI).
  11. Mallick, Debdulal & Nabin, Munirul, 2010. "Where NGOs go and do not go?," MPRA Paper 27185, University Library of Munich, Germany.
  12. Daniel L. Millimet & Rusty Tchernis, 2013. "Estimation Of Treatment Effects Without An Exclusion Restriction: With An Application To The Analysis Of The School Breakfast Program," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(6), pages 982-1017, 09.
  13. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-46, September.
  14. Beatriz Armendáriz & Jonathan Morduch, 2010. "The Economics of Microfinance, Second Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262513986, December.
  15. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 261-94, April.
  16. Hoff, Karla & Stiglitz, Joseph E., 1997. "Moneylenders and bankers: price-increasing subsidies in a monopolistically competitive market," Journal of Development Economics, Elsevier, vol. 52(2), pages 429-462, April.
  17. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
  18. Kanbur, S M, 1979. "Impatience, Information and Risk Taking in a General Equilibrium Model of Occupational Choice," Review of Economic Studies, Wiley Blackwell, vol. 46(4), pages 707-18, October.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:49040. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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