MICROFINANCE PUBLICATION ROUND-UP: Microcredit in Mexico, Impact Investing and Microfinance, Microinsurance and Preventing Child Labor

 “Win Some Lose Some? Evidence from a Randomized Microcredit Program Placement Experiment by Compartamos Banco;” by Manuela Angelucci, Dean Karlan and Jonathan Zinman; published by Innovations for Poverty Action; May 2013; 68 pages; available at: https://poverty-action.org/sites/default/files/ipa_winsomelosesome_release_0.pdf

This paper presents an analysis of whether microcredit products are counterproductive to promoting economic empowerment, especially when such products are offered at high interest rates. The authors use a clustered randomized trial and household surveys of eligible borrowers and their small businesses to estimate impacts from an expansion of group lending by Mexico-based microlender Compartamos Banco. Eighteen to 34 months after disbursal, the authors find that the loans, which carry annual interest rates of 110 percent, do “some good and little harm” when it comes to improving the economic situation of borrowers.

“Can Microinsurance Help Prevent Child Labor? An Impact Evaluation From Pakistan;” by Andreas Landmann and Markus Frolich; published by Microinsurance Innovation Facility, International Labour Office, European Development Research Network; May 2013; 42 pages; available at: http://www.ilo.org/public/english/employment/mifacility/download/repaper32.pdf

In this paper the authors attempt to illustrate how reducing vulnerability can reduce child labor and increase school enrollment rates. Their analysis was based upon data gathered through a randomized controlled trial including household panel surveys during an extension of a health and accident insurance scheme by an unspecified Pakistani microfinance institution (MFI). The MFI offered microinsurance services to customers including assistance with claim procedures. The authors conclude that higher rates of microinsurance coverage do correlate with lower incidences of child labor and fewer days of school missed by children.

“Where Do Impact Investing and Microfinance Meet?;” by Mayada El-Zoghbi and Henry Gonzalez; published by CGAP (Consultative Group to Assist the Poor); 2013; 4 pages; available at: http://www.cgap.org/sites/default/files/Brief-Where-Do-Impact-Investing-and-Microfinance-Meet-June-2013.pdf

This paper presents an analysis of the practice of impact investing, reviewing the historical and recent trends of individuals and firms involved in investment strategies that seek both financial returns and social returns, which can include improvements in social, economic and environmental situations. The authors note that the scope and size of impact investments has increased since the term was coined in 2007. As of January 2013, investors that were polled indicated that they invested approximately USD 8 billion collectively in impact investments during 2012. Approximately 70 percent of this amount was allocated to microfinance. The authors note that several challenges face impact investors: low levels of transparency and accountability; inflated projections of social impact; and low “absorption capacity” of projects with high potential for social returns. The authors conclude that although impact investing shows promise, the practice must be scrutinized and subjected to the same methodical steps as have helped the microfinance industry to enhance its impact and financial stability, including developing investment “pipelines” for funds and the development of investment-ready firms to “narrow the gap between investors’ appetite and absorption capacity.”

By Makai McClintock, Research Associate

Sources and Additional Resources

“Where Do Impact Investing and Microfinance Meet,” http://www.cgap.org/sites/default/files/Brief-Where-Do-Impact-Investing-and-Microfinance-Meet-June-2013.pdf

“Win Some Lose Some? Evidence from a Randomized Microcredit Program Placement Experiment by Compartamos Banco,” https://poverty-action.org/sites/default/files/ipa_winsomelosesome_release_0.pdf

“Can Microinsurance Help Prevent Child Labor? An Impact Evaluation From Pakistan,” http://www.ilo.org/public/english/employment/mifacility/download/repaper32.pdf

MicroCapital, 8 April 2013: “MICROCAPITAL BRIEF: Opportunity International, MicroEnsure Launch Savings-Linked Education Insurance Program, EduSave, in Malawi,” https://www.microcapital.org/microcapital-brief-opportunity-international-microensure-launch-savings-linked-education-insurance-program-edusave-in-malawi/

MicroCapital, 23 February 2013: “MICROCAPITAL PAPER WRAP-UP: ‘Microinsurance Product Development for Microinsurance Providers’,” https://www.microcapital.org/microfinance-paper-wrap-up-microinsurance-product-development-for-microinsurance-providers-by-michael-j-mccord-published-by-microfinance-centre-microinsurance-centre-internatio/

MicroCapital, 23 February 2013: “MICROCAPITAL PAPER WRAP-UP: The Debate on Outreach & Impact: What Do We Know and How Do We Know It,” https://www.microcapital.org/microfinance-paper-wrap-up-the-debate-on-outreach-impact-what-do-we-know-and-how-do-we-know-it-by-david-s-gibbons-published-by-global-microcredit-summit/

MicroCapital, 10 April 2012: “MICROFINANCE PUBLICATION ROUND-UP: Microinsurance and Child Labor; Benin Poverty Scorecard; Effect of Recession on Microcredit Sector,”  https://www.microcapital.org/microfinance-publication-round-up-microinsurance-and-child-labor-benin-poverty-scorecard-effect-of-recession-on-microcredit-sector/

MicroCapital, 6 April 2012: “MICROFINANCE PUBLICATION ROUND-UP: Microinsurance Donor Trends; Health Insurance Participation in Kenya; Risk Preference and Demand for Insurance Under Price Uncertainty in Cote d’Ivoire,”  https://www.microcapital.org/microfinance-publication-round-up-microinsurance-donor-trends-health-insurance-participation-in-kenya-risk-preference-and-demand-for-insurance-under-price-uncertainty-in-cote-divoire/

MicroCapital Universe Profile: Microinsurance Innovation Facility (MIF)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microinsurance+Innovation+Facility+%28MIF%29

MicroCapital Universe Profile: Innovations for Poverty Action (IPA)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Innovations+for+Poverty+Action

MicroCapital Universe Profile: CGAP (Consultative Group to Assist the Poor)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP+%28Consultative+Group+to+Assist+the+Poor%29

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/

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