In recent years, microfinance sector has witnessed exponential growth. However, the sector, to a disturbing degree, has been replete with unethical practices, thus necessitating the need to recognize and protect the rights of microfinance clients. This study systematically reviews extant literature on efforts being made by microfinance institutions (MFIs), their regulators, microfinance networks and associations towards protecting clients in accordance with existing, applicable regulations. The researchers found that only a few studies have empirically analysed the level of implementation of the client protection principles (CPPs) in Africa. Information asymmetries still exist to the disadvantage of microfinance clients and issues of client protection vis-a-vis microfinance regulations remain topical. Privacy of client data, mechanisms for complaint resolution, fair and respectful treatment of clients, and transparent pricing are areas that require critical attention. The study recommends that regulatory agencies should ensure full adherence to client protection, and enforce appropriate regulations. MFIs and financial consumer protection agencies also need to educate individuals and/or clients, through financial literacy, and entrench the culture of protecting microfinance client base.
This paper presents some of the results of a research carried out in the Kumasi area (Ashanti region, Ghana) and compares them with the results of a similar research carried out in the Accra area. The aim was to assess the presence among samples of businesspeople and the population at large of certain characteristics that are typical of an entrepreneurial personality. It is possible to consider the diffusion of these entrepreneurial traits in a given population as a proxy for the entrepreneurial potential of that population. The stronger or weaker diffusion of 'grassroots entrepreneurship' within a given population has significant implications for the development perspectives of an area. The presence of selected entrepreneurial characteristics was measured. From the results, it appears that the entrepreneurial traits are in fact present among business owners (although not all of them strongly so) and that there is a clear difference between business owners and non-business owners in the intensity of the presence of these traits. These differences are greater in the Accra sample than in the Kumasi one.
In this paper, we examine the macroeconomic determinants of bank performance in Nigeria. Our results reveal that economic growth, trade and interest rate stand out as the important macroeconomic predictors of bank performance in Nigeria. We find that growth and trade promote bank performance as against high interest rate which impedes bank performance. The main take away from this study is that growth, trade and interest rate are important determinants of bank performance in Nigeria. These results have direct policy implications. First, to unlock superior performance in the banking sector, government needs to continually favour policies that improve growth and foster trade. Second, incessant increases in interest rates need be minimized; increases in rates should be restricted only to instances where tighter monetary policy is indeed optimal.
This paper adds nuance to our understanding of how precipitation shocks impact the financial performance of Microfinance Institutions (MFI). Using a unique longitudinal dataset of agricultural MFIs in Peru, Ecuador, and Mexico, the paper first shows that rainfall shocks have a statistically significant effect on indicators of credit risk and profitability. Next, it tests if such effects are influenced by the funding costs. The analysis is guided by the equilibrium conditions of a theoretical model that suggests that MFIs with a comparatively higher cost of access to extra funds are more resilient to this kind of systemic events. The econometric estimates are consistent with the theoretical implication by showing that the extent of the effect of precipitation shocks on the profitability and quality of the loan portfolio is lower for those institutions that had access to relatively higher funding costs.
Mandatory directed credit program (DCP) or priority sector lending (PSL) program, which is part of the regulatory framework for commercial banks/ financial institutions in many countries, presently focusses mainly on achieving the national objective of balanced sectoral development. With a small change in the guidelines, it can also be made an effective instrument for reducing geographical inequalities in any federal structure of government. Since the program involves a significant proportion of the economy’s resources and has a social objective to serve, its use should be optimal and in alignment with the current national priorities. The present paper therefore, aims at examining the patterns, preferences and challenges of directed lending by banks across various states in India, with a view to identifying state specific characteristics, which may impact its distribution, and to thereby offer policy suggestions for strengthening the program. The paper is based on an analysis of secondary data relating to priority sector lending (1999-2013) for thirty-five states and Union Territories in India, and is supplemented by the findings of a survey of ninety-seven lending officers of different banks. The results indicate notable disparity in PSL across various states and regions in India. They also identify state specific characteristics like its level of economic development, urban orientation, agrarian/industry oriented economy, and bank penetration, which have a significant impact on its per-capita PSL amount. The findings thus, indicate that contrary to the objectives, the economically advanced states are receiving higher per-capita PSL amount. Based on its findings, the paper offers policy suggestions to enable a more equitable regional flow of priority lending and to thus, serve the achievement of national policy objective of balanced geographical development through the Directed Credit Program of a country.
In many developing countries, macroeconomic stabilisation and supply side reform are implemented simultaneously. Typically, the liberalisation of financial markets ? including interest rate deregulation, the abolition of credit ceilings and the removal of administrative controls on the capital account of the balance of payments ? is an important component of structural reform. There is widespread consensus on the benefits of such policies both in the theoretical literature and from experience. Market determined interest rates may lead to a better allocation of domestic saving while inflows of foreign capital augment domestic resources, permitting greater and more efficient investment. However, little attention has been paid to the implications of financial liberalisation for the behaviour of financial variables, particularly the monetary and credit aggregates, that are commonly used as intermediate targets and indicators of the success of financial reform during macroeconomic stabilisation. This paper outlines a simple two stage model of financial liberalisation in the developing country context. The model suggests deregulation does change the relation ship between financial variables and economic activity. Nevertheless, carefully chosen variables may retain useful indicator properties. This simple analytical framework is confronted with data from selected African and Asian countries. Of course, the process of liberalisation in Asian countries is more advanced. The implementation of financial reforms in Africa only began in earnest in the late 1980s, whereas Asian liberalisation was instituted in the late 1970s. Nevertheless, as summarized by Chart 1, the post-liberalisation experience of African and Asian nations differs considerably, notably along two dimensions. First, financial deepening following interest rate deregulation was extensive in Asia but has yet to occur in Africa, especially on the private sector credit measure.2 Second, the behaviour of money and credit through time are similar in the Asian countries, but appear to be divergent in Africa following 1. This paper was written while Huw Pill was a visiting scholar at the International Monetary Fund, the generous hospitality of which is gratefully acknowledged. The authors thank Francesco Caramazza, David T. Coe, Pierre Dhonte, Cyril Enzewe, Ugo Fasano, Thomas Hebling, Ronald McKinnon, Ichiro Otani, David J. Robinson and Michael Sarel for many helpful comments and suggestions and Toh Kuan for extensive research assistance. The views expressed are those of the authors and not necessarily those of the International Monetary Fund. The responsibility for all remaining errors is entirely our own. 2. Of course, financial deepening will itself depend on the state of development of the economy as a whole. The more advanced general development of the private sector in Asia will have helped to promote financial deepening beyond that observed in Africa, where the private sector remains underdeveloped and weak.
This paper seeks to explore an important aspect of the developmental state, namely its ability to raise the level of savings in the domestic economy. This focus on capital accumulation deliberately re-emphasises an almost forgotten virtue: thrift. In East Asia, the resource allocation, rather than capital accumulation, has attracted the most attention which has also been criticised by Akyuz and Gore who write that' [t]he success of East Asian industrialization has depended very much on the role of gov ernment intervention in accelerating capital accumulation and growth' (1996, p. 461). Among the countries Leftwich (1995) identifies as developmental states are the old guard of East Asian countries whose inclusion will surprise no one - Japan, Ko rea, Taiwan, Singapore, and the second generation tigers - but also one solitary African state, Botswana. When it comes to measuring the developmental effective ness of their respective economic policies, Botswana equals, according to Leftwich, Korea, Taiwan and Singapore. By focusing predominantly on Taiwan, with brief comparisons to Botswana, this paper seeks to highlight one of the most defining characteristics and 'central econom ic mechanism of the developmental state [which] is the use of state power to raise the economy's investible surplus' (Wade, 1990: 342). It is not intended here to pro vide a full-scale analysis nor a critique of Botswana's economic policies, but to show that it is flawed to classify Botswana as a 'developmental state' if this concept is to re main a meaningful one. I will argue that developmental states mobilise savings in the private sector by re ducing private consumption and intervening in household saving-consumption deci sions. I will show that both motivation and returns for private savings are effected by developmental state policies. 'Forced' capital accumulation, where the state appropri ates household savings by means of monopolistic pricing methods and controls also played an important part. This paper is organised as follows: section 2 will briefly outline Botswana's eco nomic structure and sources of growth. Section 3 discusses some micro-economic
seas) was established. This latter bank also had its roots in colonialism, but there was minimal national interest and participation in the ownership structure and opera tion of the bank. The operations of these banks were controlled and supervised from London; as a result the interest of the colonial economy dictated the nature of ser vices they rendered. Uche (1997) reiterated that the colonial government actually al lowed banking services to commence in Nigeria in order to provide services for gov ernment and British commercial interest and, as a result, they did not seek to satisfy the natives' needs. Despite the discriminatory tendency in the operations of these banks, there was a remarkable growth in economic activities in the country. However, the growth in economic activities coupled with the quest for indigenous control and greater participation in the management of banking services, and it was later realized that these banks were not adequate enough to meet the demand for funds and the yearning of the people. Consequently, approval was given for the establishment of more indigenous banks. Between 1917 and 1952 a number of expatriate and indige nous banks, were established and they developed alongside one another. However, most of the indigenous banks could not perform up to expectations because they were hampered by low capital base, indifferent attitudes of colonial banks and poli cies to indigenous banks and inadequate supply of locally trained and experienced manpower. These problems restricted their effectiveness and overall performance. Similarly, owing to the poor quality of personnel in financial and accounting profes sions, most of the banks suffered from inefficient monitoring and supervision. This sit uation led the operations of the banks to become a free-for-all with little concern for banking ethics (Falegan, 1987); while some succeeded in the process others failed. The need to harmonise the operations of these banks for the benefit of the then growing commercial enterprises in the country called for the setting up of a regulatory
The end of Apartheid in South Africa has set the agenda for economic reform: lack of opportunity has created a racially skewed income distribution and black poverty. Though an important reservoir for labour, the majority of blacks existed on the margin of white economic development. The real measure of successful democratic transition is the full integration of all South Africans into mainstream economic life. First and foremost, this means increased employment, including self-employment, and a real perspective on individual economic and social mobility. Yet the traditional providers of employment and income are overburdened. Mining is the traditional backbone of the South African economy. Though remaining important, mining does not offer the opportunity for hugely increased employment. Industry - much of it import-substituting - will be hard pressed to maintain present employment levels in the face of trade liberalisation. Foreign direct investment remains sluggish. Agriculture is about to undergo land reform that threatens to be long winding; agricultural production has seen sharp decreases recently. The stimulation of a vibrant, indigenous private sector is the single most important potential source of future employment and income. Entrepeneurship, self-employment and township enterprises are often the only avenues open for disenfranchised urban poor blacks. Yet entrepreneurs need venture capital. South Africa's financial system is notoriously unprepared for these demands. Previous financial regulation has reinforced the concentration on the top end of the market (Munro, 1988). Although South Africa has one of the most modern financial systems of the world, local bankers used to consider 70% of its population 'unbankable'1. The Government emphasizes the importance of credit for entrepreneurs in its White Paper on Small and Medium Business Development (spring 1995). Short of suggesting viable solutions, the Paper highlights the growing awareness and importance of credit as a means of addressing political imperatives. Unfortunately, mainstream economic theory fails to address the policy issue of credit rationing. Informational asymmetries and the risk involved in financial transactions have been put forward to account for non-market clearing on these markets, yet no solutions have been suggested in mainstream literature. Policy positions are, therefore, notoriously difficult to define. Policy makers, bankers and donors struggle with the perceived need to
The great bulk of the Ethiopian population, including the majority of urban dwellers, makes little use of the few formal financial intermediaries. These institutions which, are transplanted from industrial countries, seem largely inappropriate to Ethiopian realities. Their high costs of transaction, complex bureaucratic procedures of giving services, elaborate paper work, high collateral requirements, delays, etc. are among some of the factors that militate against an effective utilization of the existing insurance and bank ing facilities. On the other hand, the informal financial sector, as shown by studies under taken in developing countries (e.g. Bouman 1977, Chandavarkar 1985, Miracle et. al. 1980), has certain advantages over the formal sector. In the former case, the average scale of operation and the cost of rending financial service is small; procedures are flexible; there is in general freedom of entry and exit; there is freedom from de jure and de facto control by central authorities; information gathering is kept to the minimum and, instead, trust and first hand knowledge of a participant is important (see Bouman and Houtman 1988: (69-70). The iddir is an informal financial and social institution that has so far remained the preserve of anthropologists and sociologists as will be seen below. It is only Mauri (1987) that considered the economic aspects of the iddir. Moreover, most of the literature on the iddir deals with conditions before the creeping coup d'etat of 1974. Recent years saw, inter alia, everdeepening economic and social insecurity in the country and the need to appreciate common heritage fostering national identity. The iddir becomes more important and increasingly complex as the growing urban population face economic and social difficulties. The general purpose of this paper is to highlight the socio-economic importance of the iddir using empirical information. The study focuses on the characterization of its nature and structure, identification of its recently emerging features, explanation of its rela tions with the formal financial sector, and the characterization of the socio-economic
Confronted with weak economic growth, low competitivity and serious difficulties in paying their external debt in the 80's, many Francophone countries belonging to the monetary union known by its French acronym UMOA1, embarked on adjustment programs supported by the IMF and the World Bank. Unfavorable exogenous factors and slippages in policy implementation made success ellusive. Many economists felt that a critical policy ingredient was missing in these programs: the absence of adjustment between the CFAF and the French Franc exchange rate. This rate has been kept fixed since 1948. Resistance to modification was explained partly by fear of higher inflation and risks of social upeaval. Doubts were also expressed about the efficacy of the use of the exchange rate as an economic instrument. Confronted with the failure of their adjustment programs and the dry up of foreign resource inflows, the UMOA and other CFAF countries agreed to devalue their currency effective January 12, 1994. The moderate inflation of less than 5% which prevailed in many UMOA countries before the devaluation gave way to double digit price rises. Several actions were taken in order to contain the price increases, including a minimal adjustment in public sector wages and salaries, a lowering of some import tariffs, a hike in interest rates, a diversification of import sources and a moderate increase in the administered prices of utilities. The control of inflationary pressures is critical for the successful restoration of competitiveness and economic growth in the countries concerned. The purpose of this paper is to explore, based on a simple model, the rise of real income consistent with an equally endogenous rate of price increase. The model was tested only for Cote d'lvoire because of the paucity of the data for the other UMOA countries. The study is organized in three sections: first, a brief review of the literature is presented, followed by an outline of the model. The empirical work is presented in section three. An appendix containing details of the model is attached. * The authors are grateful to Simon Nguiamba and two anonymus referees for helpul commets on earlier drafts. The views expressed in this paper are those of the authors and do not necessarily reflect the opinions of the commentators or the institutions to which they are attached. 1. The abbreviation UMOA stands for Union Monetaire Ouest Africaine or West African Monetary Union. It regroups Benin, Burkina, Cote d'lvoire, Mali, Niger, Senegal and Togo. These countries together with six Central African countries, the Comoros and France belong to a monetary group called the Zone Franc. The currencies of the African members of the Zone Franc are tied to the French franc (FF) by a fixed exchange rate. The local currency of the West and Central African groups is called the CFA franc (CFAF). This currency and the Comorian franc are convertible into other currencies via the French franc and bank tranfers between the Zone franc countries are free from restrictions.
The central part of Northern Kordofan Province, with runs between 12 to 14 degrees north latitude, is typical of the Sahelian zone. Its population is sparse, except in areas with fertile soils and accessible water points. Annual precipitation ranges between 200 and 400 millimeters, with large spatial and temporal variations. Farm output is low and subject to high variability due to a strong link with rainfall. To cope with such a high-risk environment, farmers often diversify their income sources (Table 1). On average, a rural farm household has three-to-four income sources. Crop and livestock account for half of total income. The rest is distributed between nonfarm and transfer incomes. The latter income sources become important in the dry season when the share of farm income is on a decline. Typically, demand for production credit peaks during the wet season (June-September), particularly among labor-hiring farmers who cultivate large farms. Seasonal consump tion credit also peaks during the wet season, but towards its end when food and cash savings are exhausted, and off-farm local wage employment opportunities are diminish ed. Farmers then engage in borrowing, selective selling of their livestock, and ad justments in their diets (cuts in frequency and size of meals, and changes in meal com position). Access to consumption credit is critical, particularly for those whose supply of internal (own) finance is quite constrained1. There is also a periodic demand for credit. Families who prepare for social or religious activities often require large and lumpy credit. Demand for debt financing also arises during times of severe declines in household income. Credit thus plays a multifaceted role within the framework of household diversification strategy2.
The involvement of non-bank institutions such as the Agricultural Credit Corpora tions and Agricultural Development Projects in credit delivery in Nigeria has been one of the ways of encouraging massive participation of small-scale farmers in formal cre dit programmes. To date, however, the use of formal credit by most of the farmers is still highly restricted. One of the critical constraints is the high cost of borrowing (Olo mola, 1990). Elsewhere, studies have shown that the transaction cost of borrowing constitute serious impediments to the acquisition of credit and they have advocated cost-reducing policy innovations in agricultural lending (Adams and Nehman 1979, Ladman and Adams, 1978). Some of the problems have arisen as a result of policy interventions in the form of interest rate restrictions, selective credit policies and loan portfolio requirements in fa vour of the agricultural sector in many developing countries. Credit intermediaries ha ve been found to circumvent such regulations through non-price mechanism which often result in high transaction costs. In some instances, borrowing transaction costs have been used as effective rationing devise in rural credit markets (Cuevas and Graham, 1986). From a theoretical perspective of borrowing transaction costs, loans to borrowers cannot be regarded as a homogeneous commodity. The money given out as loans has several dimensions including short-term, medium-term and long-term for large and small-scale farmers. Each of them can be viewed as a separate commodity with its own cost implications (Gonzalez-Vega, 1977). With such a distinction, the compe titive rates of interest will not be the same for all types of borrowers. For instance, longer term and more risky loans are expected to command higher prices to reflect the differences in their productivity. When the interest rate is fixed by deliberate policy intervention as it is often the case in many developing countries, credit institutions with limited supply of loanable funds tend to place emphasis on non-price factors in order to eliminate excessive credit demand. Such factors may include collateral, quo tas, compensating deposit balance, bureaucratic procedures, long delays in disburse ment and other quantitative restrictions which may vary from one institution to another. These factors need to be considered in determining the effective transaction costs of procuring credit. It is imperative to examine the true transaction costs on the demand side because a borrower's demand for credit will depend on his ability to obtain the credit at mini
Providing financial services to people beyond the reach of existing suppliers may be worthwhile, but is difficult A key determinant of the effectiveness of programmes that attempt to do so is their ability to learn from past performance. While the "Subsidy Dependence Index" represents a useful advance in monitoring programme costs, less progress has been made in improving methodologies for monitoring programme impact. The article identifies ways in which these needs can be met through qualitative methods of enquiry, particularly participative wealth ranking. PROGRAMMES DE SERVICES FINANCIERS AXES SUR LA PAUVRETE: MARGE AMELIORATION?
Technological change, a vital component of the overall process of development, tends to produce differential impacts on different groups of people in human societies. Technological change in agriculture refers to technical innovations that affect directly the way a specific task is carried out. However such innovations are deeply intertwined with social relations. Hence any change in production technique is bound to affect the structure of a society. The adoption of 'green revolution' technology in Indian agriculture led to its adoption in other countries in South Asia. Rise in demand for food and raw materials stemming from unchecked population growth and India's industrialisation pro gramme since the early 1950s led to the growth of market forces in traditional rural India. While technological change increased agricultural productivity, total output, and greatly improved the economic condition of medium and large farmers, it also, in com bination with the growth of population and market forces, produced profound effects on the environment and thereby on the poor, particularly the tribals. Within this group, it is the women who have suffered most. This paper analyses the impact of technological change on the environment and on landless and land poor women with particular reference to tribals in India.
This paper examines the effect of skills training on the beneficiaries of microfinance in the Northern Region of Ghana. The main interest of the study is to look into how skills training combined with microfinance enhances beneficiaries’ ability to provide education for their dependents, improve their ability to afford healthcare for their families, and to acquire more household assets as well as enhance their empowerment. The study adopts qualitative and quantitative research designs drawing on both primary and secondary data. The research instruments used to gather data from sampled beneficiaries are interviewer administered questionnaires and focus group discussions. A random sampling technique is used to draw 107 respondents from the clients of Grameen Ghana. The sample consists of 82 beneficiaries enrolled in skills training and 25 beneficiaries without skills training. A total of six (6) focus group discussions were held; four (4) with groups receiving skills training and two (2) with groups without skills training. Skills training refers to educational programs offered to clients in order to improve their business capacity or life skills. The training programs cover topics including business development programs, entrepreneurial skills development, personal development, health, nutrition and sanitation, etc. The outcomes of the research reveal that skills training complements microfinance services to improve the socio-economic status of beneficiaries, in relation to the education of their dependents, their family access to health care and empowerment. Skills training has no influence on the household acquisition of assets.
This paper sets out to assess the state of capital mobility in Nigeria through the inter-temporal solvency approach. It is an attempt to identify the extent to which actual current account movements have deviated from what is considered optimal for international competitiveness. From this, one can infer a balance between export and import flows and the need to adopt macroeconomic policies necessary to ensure a sustainable external position. The results indicate the existence of a long-run equilibrium relationship between imports (including net investment income and transfers) and exports. However, in terms of current account sustainability, the results indicate otherwise. The presence of a structural break in the relationship between imports and exports is observed.
This input, essentially empirical by nature, analyses the FDI determinants in Africa independently from the already clearly identified attraction of natural resources. Do powers of anticipation as to the general prospects for these economies influence incoming flows of capital? What role is played by socio-political instability connected to the social consequences caused by conflicts? Are the processes of regionalization enhancing the appeal of countries that are going down that path? From a panel of 28 African countries, the results from estimations obtained using the Hausman-Taylor method of instrumental variables show that the impact of projections on any ongoing decision to invest in the continent is not statistically significant. Our results also show that, although negative, the direct correlation between social risk, a proxy of sociopolitical instability, and flows of foreign investment is not systematically significant.. However, the fact remains that these instabilities undermine national competencies (human capital) and compound certain ills such as HIV/Aids, whose impact on foreign investment increases along a negative curve in the presence of social risk. However, the simultaneous introduction of regionalization processes into our estimations tends to lower the adverse effects of instability on certain explicative FDI variables.
