Outreach, sustainability and leverage in monitored and peer-monitored lending

Conning, Jonathan

doi:10.1016/s0304-3878(99)00036-x

Cited by 268 publications

(196 citation statements)

References 14 publications

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“…Examples on this type of approach abound. See, for example, Stiglitz (1990), Banerjee-Besley-Guinnane (1994), Besley-Coate (1995), Armendáriz (1999), Armendáriz-Gollier (2000), Ghatak (1999), Ghatak (2000), Conning (1999), Jain and Mansuri (2003), and Tedeschi (2006), among many others.…”

Section: Mission Drift From a Theoretical Standpointmentioning

confidence: 99%

On Mission Drift in Microfinance Institutions

Pérez‐Armendáriz

Szafarz

2011

The Handbook of Microfinance

172

151

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This paper sheds light on a poorly understood phenomenon in microfinance which is often referred to as a "mission drift": A tendency reviewed by numerous microfinance institutions to extend larger average loan sizes in the process of scaling-up. We argue that this phenomenon is not driven by transaction cost minimization alone. Instead, poverty-oriented microfinance institutions could potentially deviate from their mission by extending larger loan sizes neither because of "progressive lending" nor because of "cross-subsidization" but because of the interplay between their own mission, the cost differentials between poor and unbanked wealthier clients, and region-specific characteristics pertaining the heterogeneity of their clientele. In a simple one-period framework we pin-down the conditions under which mission drift can emerge. Our framework shows that there is a thin line between mission drift and crosssubsidization, which in turn makes it difficult for empirical researchers to establish whether a microfinance institution has deviated from its povertyreduction mission. This paper also suggests that institutions operating in regions which host a relatively small number of very poor individuals might be misleadingly perceived as deviating from their mission. Because existing empirical studies cannot tear apart between mission drift and crosssubsidization, these studies should not guide donors and socially responsible investors pertaining resource allocation across institutions offering financial services to the poor. The difficulty in tearing apart cross-subsidization and mission drift is discussed in light of the contrasting experiences between microfinance institutions operating in Latin America and South Asia. ABSTRACTThis paper sheds light on a poorly understood phenomenon in microfinance which is often referred to as a "mission drift": A tendency reviewed by numerous microfinance institutions to extend larger average loan sizes in the process of scaling-up. We argue that this phenomenon is not driven by transaction cost minimization alone. Instead, poverty-oriented microfinance institutions could potentially deviate from their mission by extending larger loan sizes neither because of "progressive lending" nor because of "cross-subsidization" but because of the interplay between their own mission, the cost differentials between poor and unbanked wealthier clients, and region-specific characteristics pertaining the heterogeneity of their clientele. In a simple one-period framework we pin-down the conditions under which mission drift can emerge. Our framework shows that there is a thin line between mission drift and cross-subsidization, which in turn makes it difficult for empirical researchers to establish whether a microfinance institution has deviated from its poverty-reduction mission. This paper also suggests that institutions operating in regions which host a relatively small number of very poor individuals might be misleadingly perceived as deviating from their mission. Because existing empirical stu...

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Section: Mission Drift From a Theoretical Standpointmentioning

confidence: 99%

On Mission Drift in Microfinance Institutions

Pérez‐Armendáriz

Szafarz

2011

The Handbook of Microfinance

172

151

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“…There is a debate between those who emphasise MFIs' financial aspects, and those who empha sise their social aspects. These two groups are known as institutionists and welfarists; Conning (1999), Woller et al (1999).…”

Section: Introductionmentioning

confidence: 99%

Social efficiency in microfinance institutions

Nieto

Serrano‐Cinca

Molinero

2009

Journal of the Operational Research Society

220

174

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Microfinance Institutions (MFIs) are a special case in the financial world. They have a double financial and social role and need to be efficient at both. In this paper we try to measure the efficiency of MFIs in relation to financial and social outputs using Data Envelopment Analysis. For the analysis of financial efficiency we rely on existing literature for traditional financial institutions. To this we have added two indicators of social performance: impact on women, and a poverty reach index. A series of hypotheses on MFIs have been entertained, that concern the relationship between social and financial efficiency, and the relationship between efficiency and other indicators, such as profitability. Other aspects studied are the relation between social efficiency and type of institution -Non-Governmental Organisation (NGO), non-NGO-, and the importance of geographical region of activity. The results reveal the importance of social efficiency assessment. JEL Classification: G290

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“…For instance, Conning (1999); McIntosh and Wydick (2005); Ghosh and Van Tassel (2008) ;Armendáriz and Szafarz (2011) propose models built on socially-oriented objective functions.…”

Section: Introductionmentioning

confidence: 99%

Subjectivity in credit allocation to micro-entrepreneurs: evidence from Brazil

Agier

Szafarz

2012

Small Bus Econ

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This paper estimates the impact of loan officers' subjectivity on microcredit granting by exploiting an exceptionally detailed database from a Brazilian microfinance institution. Loan officers collect field data, meet with applicants, and make recommendations to the credit committee that in turn has the final say on both loan approval and loan size. The loan officers' subjectivity is captured through the lens of disparate treatment based on gender. Indeed, our estimations show that an unfair gender gap is observed in loan size, and that this gap is almost exclusively attributable to the loan officers. We interpret this finding as evidence that, despite monitoring and wage incentivization, microcredit officers keep letting their subjective preferences interfere with loan granting. We conclude by suggesting alternative means to curb subjectivity in credit allocation to micro-entrepreneurs. AbstractThis paper estimates the impact of loan o cers' subjectivity on microcredit granting by exploiting an exceptionally detailed database from a Brazilian micro nance institution. Loan o cers collect eld data, meet with applicants, and make recommendations to the credit committee that in turn has the nal say on both loan approval and loan size. The loan o cers' subjectivity is captured through the lens of disparate treatment based on gender. Indeed, our estimations show that an unfair gender gap is observed in loan size, and that this gap is almost exclusively attributable to the loan o cers. We interpret this nding as evidence that, despite monitoring and wage incentivization, microcredit o cers keep letting their subjective preferences interfere with loan granting. We conclude by suggesting alternative means to curb subjectivity in credit allocation to micro-entrepreneurs.

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Outreach, sustainability and leverage in monitored and peer-monitored lending

Cited by 268 publications

References 14 publications

On Mission Drift in Microfinance Institutions

On Mission Drift in Microfinance Institutions

Social efficiency in microfinance institutions

Subjectivity in credit allocation to micro-entrepreneurs: evidence from Brazil

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