Manohar Sharma

Repayment performance in group-based credit programs in Bangladesh: An empirical analysis

This paper analyzes the repayment rates of credit groups belonging to three group-based credit programs in Bangladesh: the Association for Social Advancement (ASA), the Bangladesh Rural Advancement Committee (BRAC), and the Rangpur Dinajpur Rural Service (RDRS). Hypotheses are drawn from economic theory relating group responsibility, and the resulting monitoring by peers, to a more effective enforcement of contractual obligations as well as to improved ability of the group as a whole to repay loans. Specific tests are performed on the following hypothesized determinants: group size, size of loans, degree of loan rationing, enterprise mix within groups, demographic characteristics, social ties and status, and occurrence of idiosyncratic shocks. Analysis is conducted using TOBIT maximum likelihood procedures. Implications for policy and institutional design are discussed.

A Profile of Poverty in Egypt

This paper presents a profile of poverty in Egypt for 1997. It assesses the magnitude of poverty and its distribution across geographic and socioeconomic groups, provides information on the characteristics of the poor, illustrates the heterogeneity amongst the poor, and helps identify empirical correlates of poverty. This poverty profile is constructed using data from the Egypt Integrated Household Survey (EIHS), which is a nationwide, multiple-topic household survey. One of the more striking set of findings relates to the differences between the poor and the non-poor in their educational attainments. Our results indicate a significant literacy and schooling gap between the poor and the non-poor. On average the poor have 2.6 fewer years of schooling than the non-poor, and their literacy rate is 27 percent lower than the non-poor. Our results also indicate that augmenting educational attainment of the poor does not require building more schools, but reducing the poor’s opportunity cost of attending schools and increasing their returns from extra schooling, both suggesting the importance of income generating activities as a policy instrument. Le present article dresse un profil de la pauvrete en Egypte pour l’annee 1997. Il evalue l’ampleur du phenomene de pauvrete et sa repartition entre les groupes geographiques et socio-economiques, presente les caracteristiques des pauvres, illustre l’heterogeneite des situations de pauvrete, et aide a identifier les correlats empiriques de la pauvrete. Ce profil de la pauvrete se fonde sur des donnees tirees de l’Enquete integree sur les menages en Egypte (EIHS), un sondage national portant sur une multiplicite de sujets. L’un des constats les plus marquants concerne les differences entre les pauvres et les non pauvres en matiere de resultats scolaires. Notre enquete revele un ecart significatif entre les taux d’alphabetisation et de frequentation scolaire des pauvres et des non pauvres. En moyenne, les pauvres vont 2,6 annees de moins a l’ecole que les non pauvres et leur taux d’alphabetisation est de 27 pour cent inferieur a celui des non pauvres. L’enquete revele egalement que pour ameliorer les performances scolaires des pauvres, il n’est pas necessaire de construire de nouvelles ecoles mais de reduire le cout d’opportunite de la frequentation scolaire pour les pauvres et d’accroitre le rendement de chaque annee supplementaire de frequentation, deux facteurs qui soulignent l’importance des activites generatrices de revenu en tant qu’instrument de politique.

Many borrow, more save, and all insure: implications for food and micro-finance policy

Abstract Among policy makers, researchers and micro-finance practitioners alike, there is much discussion on the role of micro-finance for alleviation of poverty. This paper focuses on the linkages between access to credit, savings and insurance services and household food security. What is the role of micro-finance in the overall mix of policy instruments? What types of financial services are demanded by the poor, and which are offered by micro-finance institutions (MFIs)? Hence, which are the gaps in financial products? We present a conceptual framework that addresses these questions, and provide a synthesis of the empirical results of a multi-country research program in ten African and Asian countries. We conclude that insurance can be considered as the missing third of micro-finance during the 1990s, and that the MFIs outreach to the poor can be improved by offering savings, credit and insurance products that enhance the poors ability to bear risks. Applied research on the poors preferences as well as bold experimentation with new financial products appear to be particularly promising in making progress towards that goal. Since insurance services are difficult to be offered except for easily observable idiosyncratic risks, precautionary savings services can be a valuable insurance substitute in particular for the poorest.

Microfinance Poverty Assessment Tool

Currently, no rigorous tool exists to measure the poverty level of microfinance institution (MFI) clients. In order to gain more transparency on the depth of poverty outreach, CGAP collaborated with the International Food Policy Research Institute (IFPRI) to design and test a simple, low-cost operational tool to measure the poverty level of MFI clients relative to nonclients. This tool is a companion piece to the CGAP Appraisal Format; donors should not use the poverty assessment tool without also conducting a larger institutional appraisal. The concept of poverty is complex and strongly influenced by local cultural and socioeconomic conditions. The poverty assessment approach presented in this manual supports a flexible definition of poverty that can be adapted to fit local perceptions and conditions of poverty. The tool is intended neither as a means to target new clients nor to assess the impact of microfinance services on the lives of existing clients. It may provide a useful means to verify-both for the donor and the MFI-the extent to which an existing strategy results in poor clients joining the MFI. The tool assesses the poverty levels of MFI clients compared to nonclients within the operational area of an MFI. Using available data or expert opinion, the tool also relates local poverty levels to poverty measured at larger regional and national levels.

Placement and Outreach of Group-Based Credit Organizations: The Cases of ASA, BRAC, and PROSHIKA in Bangladesh

Abstract The implicit but widespread assumption regarding nongovernmental financial institutions in Bangladesh has been that they are indeed placed in special poverty-stricken areas. Is this assumption valid? If not, what factors affect programs placement across communities? Using thana-level data to analyze the geographic placement of three credit programs in Bangladesh, this paper provides evidence that branches tend to be located in poor pockets of relatively well-developed areas than in remoter, less developed regions. Client density of established branches does not exhibit such a feature and actually tends to be better in less advantageous locations.

Strengthening Public Safety Nets from the Bottom Up

Helping to reduce vulnerability poses a new set of challenges for public policy. A starting point is understanding the ways in which communities and extended families try to cope with difficulties in the absence of public interventions. Coping mechanisms range from the informal exchange of transfers and loans to more structured institutions that enable an entire community to provide protection to its neediest members. This article describes ways of building public safety nets to complement and extend informal and private institutions. The most effective policies will combine transfer systems that are sensitive to existing mechanisms with new institutions for providing insurance and credit and for generating savings.

Who Migrates Overseas and Is It Worth Their While?: An Assessment of Household Survey Data from Bangladesh

The paper assesses the costs and household level benefits of migrating overseas from Bangladesh. The authors survey households who have had overseas migrants to assess their characteristics compared to non-migrants. They also compute various types of migration and remittance related transaction costs and discuss the channels by which overseas migration is financed, remittances sent and the constraints faced by the poorest. Using the Propensity Score Matching method, the paper finds that overseas migration conveys substantial benefits to families as measured by household consumption, use of modern agricultural inputs, and level of household savings. The authors also offer some possible policy directions to strengthen the returns from migration as well as reduce some of the costs.

Group-based financial institutions for the rural poor in Bangladesh: an institutional- and household-level analysis.

Table of Contents: Tables, Figures, Foreword, Acknowledgments, and Summary; 1. Introduction; 2. Determinants of the Placement and Outreach of Group-Based Financial Institutions:A County-Level Analysis; 3. Group-Based Financial Institutions:Structure, Conduct, and Performance; 4. Household Participation in Financial Markets; 5. Analysis of the Household-Level Impact of Group-Based Credit Institutions in Bangladesh; 6. Conclusions and Implications for Policy; Appendix A: Survey Modules, Sampling Frame, and Location of Survey Sites; Appendix B: Adult Equivalent Consumption Units Differentiated by Age and Gender; References