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An Impact Analysis of Microfinance in Bosnia and Herzegovina

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  • Valentina Hartarska

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  • Denis Nadolnyak

    ()

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    Abstract

    This paper applies the financing constraint approach to study whether microfinance institutions improved access to credit for microenterprises in Bosnia and Herzegovina. According to this approach, microenterprises with improved assess to credit rely less on internal funds for their investments. Thus, we compare investment sensitivity to internal funds of micorenterprises in municipalities with significant presence of MFIs to that of micorenterprises in municipalities with no (or limited) presence of MFIs using Living Standards Measurement Survey and MFI branch location data. Results indicate that MFIs alleviated microbusinesses’ financing constraint. This approach is applicable to evaluating microfinance impact in other countries.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp915.pdf
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    Bibliographic Info

    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp915.

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    Length: pages
    Date of creation: 01 Dec 2007
    Date of revision:
    Handle: RePEc:wdi:papers:2008-915

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    Keywords: microfinance; impact study; Microfinance Institutions; financing constraints; Eastern Europe; Bosnia and Herzegovina;

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    1. Sajjad Zohir & Imran Matin, 2004. "Wider impacts of microfinance institutions: issues and concepts," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(3), pages 301-330.
    2. Xavier Gine & Pamela Jakiela & Dean Karlan & Jonathan Morduch, 2006. "Microfinance Games," Working Papers 2102, The Field Experiments Website.
    3. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    4. Morduch, Jonathan, 2000. "The Microfinance Schism," World Development, Elsevier, vol. 28(4), pages 617-629, April.
    5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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    7. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    8. Cleary, Sean & Povel, Paul E M & Raith, Michael, 2004. "The U-Shaped Investment Curve: Theory and Evidence," CEPR Discussion Papers 4206, C.E.P.R. Discussion Papers.
    9. R. Glenn Hubbard, 1997. "Capital-Market Imperfections and Investment," NBER Working Papers 5996, National Bureau of Economic Research, Inc.
    10. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," NBER Working Papers 8852, National Bureau of Economic Research, Inc.
    11. Coleman, Brett E., 1999. "The impact of group lending in Northeast Thailand," Journal of Development Economics, Elsevier, vol. 60(1), pages 105-141, October.
    12. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    13. Valentina M. Hartarska & Martin Holtmann, 2006. "An overview of recent developments in the microfinance literature," Agricultural Finance Review, Emerald Group Publishing, vol. 66(2), pages 147-165, September.
    14. Budina, Nina & Garretsen, Harry & de Jong, Elke, 2000. "Liquidity constraints and investment in transition economies - the case of Bulgaria," Policy Research Working Paper Series 2278, The World Bank.
    15. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    16. Michal Matul & Caroline Tsilikounas, 2004. "Role of microfinance in the household reconstruction process in Bosnia and Herzegovina," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(3), pages 429-466.
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