Syndicate content

access to finance

Regulating microfinance

Ryan Hahn's picture

In response to Janine's post on mobile money in Mongolia, David Lembo from the zzzeitgeist blog expresses some concern: "One question worth considering - do all these development finance programs (mobile banking, microfinance, crop insurance) get a free pass on regulation because they are seen as helping the poor? I sure hope not..."

More on the benefits of formalization

Mohammad Amin gave us a post on new results from a survey of informal firms. Good data from informal firms is indeed an exciting innovation.

I want to focus on his results from Côte d'Ivoire. It turns out that 95% of informal firms in Côte d'Ivoire believe that their access to credit would improve if they became formal firms. This result prompts Mohammad to ask “why don’t firms register then?”

The Access to Justice Programme in Pakistan

Mohammad Amin's picture

To reduce the enormous backlog of court cases, Pakistan enacted the “Access to Justice Programme” in 2002. Case-flow management techniques were taught to judges in 6 pilot districts out of 117, with the aim of facilitating rapid case disposal. Beyond this immediate aim, a more efficient judiciary can also have important economic effects by, for example, providing more secure property rights and better enforcement of creditor rights.

Weather insurance via SMS

Ryan Hahn's picture

And now for a more positive example of Dev 2.0 in action. Giulio Quaggiotto pointed me to a very cool use of technology in the service of private sector development - weather insurance via SMS. According to Eric Seuret of 3S Mobile, SMS technology has sufficiently brought down the cost of providing insurance for farmers in Kenya against droughts to make it a viable business model. (Apologies for the cheesy intro music - you can safely skip over the first 20 seconds.)

What are the benefits to firms from formalization?

Mohammad Amin's picture

The Enterprise Surveys recently launched an ambitious project to survey informal firms around the globe. Results from three surveys conducted in Ivory Coast, Madagascar and Mauritius are now available. Informal firms surveyed were asked if getting registered would help them or not through better access to finance, raw materials, less bribes, etc.

What are financial literacy programs good for?

Ryan Hahn's picture

Could they help us save the world from future financial crises? If we are to believe the work of economist Robert Shiller and the larger school of behavioral economics, then the answer is "yes", or at least a partial "yes." Households in OECD countries - particularly the U.S.

Do banks discriminate against women entrepreneurs?

Mohammad Amin's picture

Some studies such as Carter and Shaw (2006) show that the share of women among the self-employed is disproportionately small, that they run smaller businesses, that they are less likely to rely on venture capital and that their firms have lower debt-equity ratios. These differences in financing patterns could be due to two sorts of factors.

Do we need to worry about enforcement of laws?

Mohammad Amin's picture

It goes without saying that rules, laws and regulations are meaningless if they are not enforced. Yet, the bulk of the literature on the effects of various laws is completely silent on the enforcement issue. The implicit assumption is that measures based on laws on the books are a reasonably good proxy for actual enforcement of laws and so an explicit reference to enforcement is not required. Is there any reason to think this is a plausible assumption?