Publication:
Microfinance Meets the Market

Loading...
Thumbnail Image
Files in English
English PDF (164.53 KB)
1,714 downloads
English Text (85.74 KB)
489 downloads
Date
2008-05
ISSN
Published
2008-05
Author(s)
Cull, Robert
Morduch, Jonathan
Abstract
Microfinance institutions have proved the possibility of providing reliable banking services to poor customers. Their second aim is to do so in a commercially-viable way. This paper analyzes the tensions and opportunities of microfinance as it embraces the market, drawing on a data set that includes 346 of the world's leading microfinance institutions and covers nearly 18 million active borrowers. The data show remarkable successes in maintaining high rates of loan repayment, but the data also suggest that profit-maximizing investors would have limited interest in most of the institutions that are focusing on the poorest customers and women. Those institutions, as a group, charge their customers the highest fees in the sample but also face particularly high transaction costs, in part due to small transaction sizes. Innovations to overcome the well-known problems of asymmetric information in financial markets were a triumph, but further innovation is needed to overcome the challenges of high costs.
Link to Data Set
Citation
Cull, Robert; Demirgüç-Kunt, Asli; Morduch, Jonathan. 2008. Microfinance Meets the Market. Policy Research Working Paper No. 4630. © World Bank, Washington, DC. http://hdl.handle.net/10986/6690 License: CC BY 3.0 IGO.
Report Series
Report Series
Other publications in this report series
  • Publication
    The Role of Firm Dynamics in Aggregate Productivity and Formal Job Flows in Zambia
    (Washington, DC: World Bank, 2024-04-18) Simbeye, Laban; Lungu, Eliya; Kumwenda, Andreya; Banda, Enda; Msoni, Jonathan; Kuo, Ryan
    Zambia’s private sector must deliver quality jobs at scale to keep up with its expanding working age population, contribute to economic transformation, and reduce poverty. This entails both the creation of high-quality jobs and productivity improvement among existing jobs and firms. This paper analyzes the dynamics of formal firms to identify the drivers and barriers to productivity, formal employment, and formal wage growth in Zambia. Leveraging firm and worker administrative tax data from Zambia, the paper decomposes labor productivity and wage growth among formal firms and workers in Zambia into within-firm, between-firm, inter-sectoral, and dynamic components. The findings show that the aggregate labor productivity of formal firms declined over 2014–21, driven by secular within-firm declines in the non-mining industry and service sectors. By contrast, labor productivity grew in agriculture and remained flat in mining over the same period. Real wage trends for formal workers have mostly mirrored labor productivity dynamics, declining 40-50 percent across non-agriculture sectors but growing slightly in agriculture, largely driven by within-firm shifts rather than between-firm or between-sector dynamics. The declines in labor productivity and wages reflect business environment challenges related to access to finance and electricity, as well as burdensome formal compliance requirements and competition with the informal sector. Within-firm labor productivity challenges also reflect low skills and capacity—including low technology adoption—among both firms and workers.
  • Publication
    Soft Skills, Competition, and Hiring Discrimination
    (Washington, DC: World Bank, 2024-04-18) Valencia, Christian; Janzen, Sarah; Ghorpade, Yashodhan; Abdur Rahman, Amanina
    This paper conducts a correspondence study to assess demand for soft skills in the context of hiring discrimination in Malaysia. No evidence of gender-based discrimination is found, including in science, technology, engineering, and mathematics occupations. However, in line with previous studies in the same context, there is evidence of ethnic discrimination. The paper then test the relevance of two soft skills: leadership and teamwork. These tests find some evidence that the labor market rewards simple signals of teamwork for the average applicant. Teamwork also plays an important role in the context of labor market discrimination, reducing the discrimination gap by 40 percent. In contrast, signaling leadership skills has no effect. Last, the paper considers the role of labor market competition. Companies facing competition in the labor market, measured by the number of competitors advertising similar positions, are 56 to 66 percent less likely to discriminate. On the supply side, discrimination increases with the relative quality of the pool of applicants. The results provide novel evidence that soft skills and labor market competition both play important roles in understanding hiring discrimination. This underlines potential pathways to overcome labor market discrimination and improve job matching.
  • Publication
    Disruptive Technologies and Finance
    (Washington, DC: World Bank, 2024-04-18) Cruz, Marcio; Pereira-Lopez, Mariana; Salgado, Edgar
    This paper investigates the relationship between disruptive technologies and access to finance for digital tech firms in Africa. Through textual analysis of data from Crunchbase and Pitchbook, the study explores how firms across different age cohorts incorporate disruptive technologies into their offerings in e-commerce, fintech, and information technology services. The findings reveal three key insights for African digital tech startups. First, African startups are less likely to incorporate disruptive technologies into their offerings compared to other regions, except for mobile payments. Second, incorporating these technologies is associated with more funding, but this link is weaker in Africa than in other regions. These results hold when excluding mobile payments and addressing potential endogeneity using instrumental variables. Third, firms that do incorporate disruptive technologies tend to secure funding earlier, with lower initial amounts, but are more likely to succeed in terms of exit or valuation growth than their peers.
  • Publication
    Why Look at Tasks When Designing Skills Policy for the Green Transition? A Methodological Note on How to Identify Green Occupations and the Skills They Require
    (Washington, DC: World Bank, 2024-04-17) Granata, Julia; Posadas, Josefina
    The coexistence of several definitions of green jobs and measurement instruments gives room for mismatches between those concepts and their application to research questions. This paper first presents an organizing framework for the existing definitions, measurement instruments, and policy frameworks. It then delves into discussing two appropriate approaches for identifying green occupations to guide skills development policy: the task-content and the skills approaches. In the process, it introduces a novel methodology with a dictionary of green terms for identifying green tasks and occupations. This methodology, utilizing text analysis, demonstrates superior performance compared to the well-known O*NET Green Economic Project classification, particularly for developing countries. Lastly, the paper applies this methodology to Indonesia, a middle-income country, and utilizes various data sources to showcase the utility of the dictionary and text analysis exercise.
  • Publication
    News Sentiment in Destination Countries and Migration Choices
    (Washington, DC: World Bank, 2024-04-17) Di Maio, Michele; Elmallakh, Nelly; Sciabolazza, Valerio Leone
    Changes in the sentiment of migration-related news published in destination countries affect the timing of migrants’ journeys to these countries. Using geo-localized data on migrants in Libya and the complete record of news articles in their country of destination, this paper shows that a worsening news sentiment leads to migrants staying longer in Libya, slowing down their journeys to their final destinations. The paper validates these results by showing that the effect is concentrated in locations with internet connections. The results indicate that changes in news sentiment have a significant impact only for some groups of migrants and under specific conditions, suggesting a limited effect on overall migrant movements. Finally, the paper provides suggestive evidence that a worsening news sentiment in the preferred destination induces substitution across destination countries, yet it does not make migrants return to their country of origin.
Journal
Journal Volume
Journal Issue
Associated URLs
Associated content
Citations