Bank-moneylender linkage as an alternative to bank competition in rural credit markets

Varghese, Adel

doi:10.1093/oep/gpi014

Cited by 24 publications

(14 citation statements)

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“…While the existing lending capacity of the informal sector is supposedly limited, carefully designed government policies could help expand available resources and thus indirectly increase the volume of informal loans. Moneylenders could be linked to banks to enable the use of formal‐sector money for loans to the poor (Fuentes ; Varghese ). On the other hand, financial policies can limit the terms and availability of informal loans: subsidized programs may attract the best borrowers and leave the riskier clients with higher enforcement costs to nonsubsidized lenders (Morduch ; Hoff and Stiglitz ; Bose ; Jain ).…”

Section: Introductionmentioning

confidence: 99%

Informal Credit, Usury, or Support? A Case Study forVietnam

Cuong

Berg

2014

The Developing Economies

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The informal credit market remains an important source of finance for the poor in Vietnam. Yet, little if anything is known about the impact of informal loans on poverty and inequality, and the Vietnamese government has no policies towards the informal credit market. In the present study paper, we found that the effect of credit from friends and relatives on per capita expenditure is positive but not statistically significant. Meanwhile, the effect of credit from private moneylenders on per capita expenditure is positive and statistically significant. Borrowing from private moneylenders increases per capita expenditure of households by around 15%. Further, it reduced the poverty incidence of borrowers by around 8.5 percentage points in 2006 and significantly decreases the poverty gap index and the poverty-severity index. Borrowing from private moneylenders also reduces expenditure inequality, albeit at a very small magnitude.

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Section: Introductionmentioning

confidence: 99%

Informal Credit, Usury, or Support? A Case Study forVietnam

Cuong

Berg

2014

The Developing Economies

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“…The new round of rural financial system reform is by reducing the access threshold of rural financial market, encouraging private capital and even foreign capital to increase rural financial supply through the establishment of new rural financial institutions such as village and town bank and rural fund mutual aid [5]. Through the introduction of various rural financial institutions such as rural community bank , NGO loan company and cooperative , every financial institution has different market positioning and target customers [6].…”

Section: A Presentation Of Hypothetical Modelsmentioning

confidence: 99%

Commercial Funding and Government Funding Influencing the Innovative Behavior in Remote Areas of China -- Survey data based on the factors influencing the innovative behavior of the old revolutionary areas in Sichuan

He¹,

An²,

Zhen³

et al. 2018

Proceedings of the 2018 2nd International Conference on Education, Economics and Management Research (ICEEMR 2018)

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This paper aims to investigate the influencing factors of innovative behavior of Rural Management organizations. Through investigating the innovation behavior of the rural management organization in the old revolutionary area of Sichuan province, authors combed the literature and analyzed the data. This study examines how six aspects-market demand, competition environment, cooperation resources, government support, professional investment, financing influence the traditional innovation behavior of rural management organizations and establishing the model of influencing factors,the authors put forward the suggestion of commercial funding not government funding.

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“…Our framework is different from theirs in the sense that the MFIs‐bank linkage is self‐interest motivated on the part of the MFI. There is no incentive rent required for MFI to take its role (Fuentes, ; Varghese, ), nor other policies such as subsidies are required. Since MFI's money is directly involved in this linkage, the lending decision of MFI is itself a trustable endorsement of the borrower's reputation and repayment capacity.…”

Section: Introductionmentioning

confidence: 99%

Does Institutional Linkage of Bank‐MFI Foster Inclusive Financial Development Even in the Presence of MFI Frauds?

Mallick

2017

Scottish J Political Eco

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Growing reports indicate the presence of frauds in microfinance institutions (MFIs), as it can occur in any organization in countries where there are weak institutions, weak rule of law, and fraudulent behavior of MFI officers for personal gain. While there are increasing calls to launch financial governance of these NGO MFIs, there are concerns as to whether frauds of this nature can damage MFIs' contributions to the credit market, particularly in the bank-linkage program where the NGO MFIs act as third party intermediary. The purpose of this study was to analyze the collusion decisions faced by MFIs and their impact on the bank-linkage program, which has been offered as a solution to help overcome adverse selection and moral hazard problems in the credit market by harnessing local information via MFIs. Our results show that even when there is a chance of collusion between MFI and the borrower, the linkage between MFI and bank can still increase the probability that the borrower puts in full effort, and therefore decreases the probabilities of both credit rationing and strategic default. Such linkage in financing viable projects can make micro-financing more effective in achieving inclusive financial development and thereby poverty reduction in rural areas.

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Bank-moneylender linkage as an alternative to bank competition in rural credit markets

Cited by 24 publications

References 0 publications

Informal Credit, Usury, or Support? A Case Study forVietnam

Informal Credit, Usury, or Support? A Case Study forVietnam

Commercial Funding and Government Funding Influencing the Innovative Behavior in Remote Areas of China -- Survey data based on the factors influencing the innovative behavior of the old revolutionary areas in Sichuan

Does Institutional Linkage of Bank‐MFI Foster Inclusive Financial Development Even in the Presence of MFI Frauds?

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