MICROFINANCE PUBLICATION ROUND-UP: Microfinance Microscope 2012; Impact of Financial Access in Bosnia and Herzegovina; Economic Opportunities and Financial Outcomes of Microfinance

“Global Microscope on the Microfinance Business Environment 2012;” by the Economist Intelligence Unit; published by The Economist; 72 pages; available at: http://www5.iadb.org/mif/en-us/home/knowledge.aspx?idPublication=64206

This report examines the regulatory and operating conditions of microfinance institutions (MFIs) in 55 countries in Asia, Eastern Europe, Latin America and the Caribbean, the Middle East and Africa. Evaluations took place over a one-year period ending in June 2012 and examined two categories: (1) regulatory framework and practices, such as legal recognition for MFIs, regulations and supervisory capacity, policies regarding deposits and market distortions; and (2) supporting frameworks, including financial reporting standards and transparency, credit bureaus, pricing, dispute resolution and rules for offering microfinance through agents. The authors also took into account general country conditions and political shocks and how they have affected the sector. Financial information from the US-based nonprofit data provider Microfinance Information Exchange (MIX) was also considered. The study indicates that the microfinance sector improved most in Peru as a result of strengthened regulatory frameworks and the promotion of price transparency and financial literacy. Bolivia and Pakistan held the second- and third- most improved sectors, with both countries improving regulations and the effectiveness of credit bureaus. Overall, 28 out of the 55 countries in the study experienced improved microfinance sectors, with the most common improvements being in credit bureaus and the use of agents where mobile banking has increased.

“Microfinance at the Margin;” by Britta Agusburg, Ralph De Haas, et al; published by the European Bank for Reconstruction and Development; September 2012; available at: http://www.ebrd.com/downloads/research/economics/workingpapers/wp0146.pdf

This document presents the results of a randomized controlled trial in Bosnia and Herzegovina analyzing the impact of access to credit on microentrepreneurs and poverty alleviation. EKI, a microfinance institution (MFI) in Bosnia and Herzegovina, provided microloans to a random selection of “marginal” applicants who were identified by loan officers as not normally being eligible for a loan from the MFI. All study participants were given a survey, and half received a loan while the second half, the control group, did not. A second survey was administered fourteen months later. The study found that access to credit increased the level of business activity and self-employment – borrowers were six percent more likely to own a business when compared with the control group. However, business creation did not necessarily lead to increased profits or household income. Borrowing households with preexisting businesses and higher levels of education invested their savings in their businesses while less-educated households lessened their consumption expenditures in favor of business investment. The third finding showed that borrowing households with low education levels had their teenaged children work in the household business rather than attend school. The authors state that the overall findings show a mixed impact of microcredit and that the program as a whole was not profitable. They suggest a future study examining a combination of credit and training to stimulate entrepreneurship.

“Do Micro-Credit, Micro-Savings and Micro-Leasing Serve as Effective Financial Inclusion Interventions Enabling Poor People, and Especially Women, to Engage in Meaningful Economic Opportunities in Low- and Middle-income Countries?”; by Ruth Stewart, Carina van Rooye, et al; published by Evidence for Policy and Practice Information and Co-ordinating Centre (EPPI-Centre); September 2012; 216 pages; available at: http://eppi.ioe.ac.uk/cms/Default.aspx?tabid=3352

This study seeks to analyze the impact of microfinance on poverty alleviation by examining the engagement of microfinance institution clients in economic opportunities and the financial outcomes of this engagement. The authors examine 17 relevant studies, including trial and systematic review databases, electronic bibliographic databases and organizations’ websites. Overall, the authors find evidence that microcredit does influence poor people’s engagement in economic opportunities, while microsavings does not significantly increase this activity. The evidence found on programs that combined microcredit and microsavings also do not show a significant impact on income. The study indicates that microsavings through a commitment account, in which restrictions are placed on the use of funds, increases the value of a client’s business but does not increase the client’s profits, while savings through an ordinary account has no impact on income. Microcredit seems to have a positive impact on income, although the authors say these data may be biased. The study finds no impact, either positive or negative, of microleasing. Overall, the authors state that there is not enough evidence to demonstrate whether microfinance has a positive impact at the individual, household or business levels.

By Charlotte Newman, Research Associate

About the European Bank for Reconstruction and Development
The European Bank for Reconstruction and Development (EBRD) is a development finance institution headquartered in London. The bank began operations in 1991 upon the agreement of 40 countries and is now owned by 61 countries as well as the European Investment Bank and the European Union. It aims to finance operations that are both commercially viable and assist development in 29 countries in Eastern Europe, Central Asia and more recently in Southern and Eastern Mediterranean region. It does this by providing loans, debt securities, equity investments, guarantees and technical assistance to micro- and small businesses via commercial banks and non-bank microfinance institutions (MFIs). In 2011, EBRD disbursed a total of EUR 6.7 billion (USD 8.3 billion).

Sources and Additional Resources:

“Global Microscope on the Microfinance Business Environment 2012,” http://www5.iadb.org/mif/en-us/home/knowledge.aspx?idPublication=64206

“Microfinance at the Margin,” http://www.ebrd.com/downloads/research/economics/workingpapers/
wp0146.pdf

“Do micro-credit, micro-savings and micro-leasing serve as effective financial inclusion interventions enabling poor people, and especially women, to engage in meaningful economic opportunities in low- and middle-income countries?” http://eppi.ioe.ac.uk/cms/Default.aspx?tabid=3352

MicroCapital.org story, October 3, 2012, “MICROFINANCE PUBLICATION ROUND-UP: Microfinance and Witch Hunts in India; Poverty Scorecard for Myanmar; Andhra Pradesh Clients Post-Microfinance Crisis,” https://www.microcapital.org/microfinance-publication-round-up-microfinance-and-witch-hunts-in-india-poverty-scorecard-for-myanmar-andhra-pradesh-clients-post-microfinance-crisis/

MicroCapital.org story, August 22, 2012, “MICROFINANCE PUBLICATION ROUND-UP: Microfinance Apexes; Confessions of a Microfinance Heretic; Selling Microinsurance,” https://www.microcapital.org/microfinance-publication-round-up-microfinance-apexes-confessions-of-a-microfinance-heretic-selling-microinsurance/

MicroCapital Universe Profile: European Bank for Reconstruction and Development http://microcapital.org/microfinanceuniverse/tiki-index.php?page=European+Bank+for+Reconstruction+and+Development+%28EBRD%29

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