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Digital technologies, poverty and microfinance in developing countries
Abstract
Purpose
The objective of this study is to examine the moderating effect of microfinance on the digital divide in developing countries.
Design/methodology/approach
On the methodology, the econometric method employed to estimate the equation is based on the two-stage least squares (2SLS).
Findings
This study confirms that microfinance can play an important role in mitigating the adverse effect of digitalization on poverty.
Research limitations/implications
Thus, governments should prioritize and encourage the integration of digital technologies with robust microfinance systems to effectively combat poverty, given the importance of microfinance.
Originality/value
Given the importance of digital technology to businesses and economic development, we need to search for a better solution that allows digital technology to be further developed but at the same time, is not harmful to the poor. The issue of the poor, either financially or technically can be partially resolved if the poor is given the necessary and sufficient assistance. Therefore, this paper examines whether microfinance can be part of solutions to the digital divide in developing countries.
Purpose
The innovation brought by FinTech is strategically transforming the business models of banking entities, their operational efficiency and their relationship with customers and stakeholders. Although the financial drivers behind FinTech investments have been extensively explored, there remains a gap in the extant research regarding the influence of governance factors on these kinds of investments. This study seeks to address this gap by investigating whether and how governance composition and characteristics are associated with investments in FinTech projects, exploring a sample of Cooperative Credit Banks (CCBs) operating in Italy, a unique context where these small institutions represent more than half of the banking sector and that often face difficulties in adopting innovative and digital tools.
Design/methodology/approach
This study adopted a quantitative approach. Specifically, multiple regressions analyses were performed on a sample of 230 Italian CCBs during the period 2017–2022.
Findings
We find that the presence of a corporate social responsibility committee, managers with high IT skills, Board’s gender diversity, younger generation of managers and their educational level can significantly stimulate FinTech investments.
Originality/value
The study contributes to enriching the literature on FinTech and digital transformation in the banking sector, offering particular insights for regulators and managers of CCBs, who are particularly sensitive to innovation matters and increasingly inclined to strategically satisfy the needs of a 4.0 clientele.
Background:
Understanding the health status of the poor households and the influence of unhealthy on their income can provide some vital insights into the effectiveness and appropriateness of poverty reduction solutions.
Methods:
Based on a nationwide cross-sectional survey of 29,712 rural poor households, this study systematically investigated the causes of poverty and health status of Chinese rural poor households, and revealed the relationship between health, income and poverty.
Results:
The health status of the rural poor in China is not optimistic, with 51.63% attributing their poverty to the illness of household members. NCDs are the biggest health threat to the rural poor in China. Over 60% of all the households have at least one patient and more than a quarter of the households with patients cannot afford expensive medical expenses. Although 98% of all the households participate in China's a rural health insurance system - the New Rural Cooperative Medical Scheme - 16% are still unable to bear their medical expenses after reimbursement from the scheme. Further, high altitude, ill-health and low-income are interlinked and mutually reinforcing. The per capita net income of poor households was inversely proportional to the altitude of their places of residence, family aging and unhealthy status, but was positively correlated with the number of workforces in their families.
Conclusions:
Poverty due to illness is one of the root causes of rural poverty in China. With the backward medical infrastructure in high altitude areas, people are more prone to fall into the vicious circle of poverty-unhealthy-low income-poverty. The establishment of effective long-term mechanism of disease prevention and intervention is an important prerequisite to enhance the endogenous development power of the poor and reduce poverty.
This paper investigates dynamic effects of remittances on households’ poverty and income distribution. Using state-of-the-art matching techniques, we measure impacts based on counterfactual scenarios, and make a step forward by applying for the first time a dose-response function approach to assess poverty effects due to variations in the time-length of receiving remittances. Our results suggest that remittances alleviate both absolute and relative poverty levels and lead to a marginal increase in inequality in the case of Kosovo. We further demonstrate that – although poverty reduction effects are stronger in the short-run – remittances have a positive poverty reduction effect over time. These findings have important welfare policy implications for low- and middle income economies with a high dependency on remittances.
Purpose
The purpose of this paper is to examine the impact of microfinance programs sponsored by Sudanese microfinance institutions (SMFIs) on monetary poverty reduction in Sudan where poverty is widely spread.
Design/methodology/approach
The study adopted the control group approach, where income and expenditure are taken as welfare indicators. The updated World Bank’s international poverty line of 1.90 per person per day was adopted to separate the poor from non-poor. The data were collected by the means of a questionnaire distributed to a random sample of beneficiaries in the institution under study. The study adapted the Foster, Greer and Thorbecke (FGT) model to evaluate the role of microfinance programs in poverty reduction. Furthermore, to gain more insight into the impact of the program, a preliminary analysis was conducted using the independent-samples t -test to examine the difference in the welfare indicators for the sample of the control group and treatment group as well as that of the small loan group and micro-loan group.
Findings
The findings show that the microfinance program provided by SMFIs has reduced the monetary poverty among the participants. The results also reveal that beneficiaries who had received a larger volume of loan were noted lesser poverty than those who had received very small loan size. Moreover, the results demonstrate that poverty indices based on expenditure as a welfare indicator are far lower than those based on income for both groups.
Originality/value
This study contributes to the available literature by filling the gaps through including income and expenditure as monetary variables, which included separately in previous studies adopted the FGT model in the area of microfinance, in addition to exploring the role of loan size in the effect of microfinance on poverty reduction.
This study investigates the impacts of workers’ remittances on poverty and inequality by using data for 103 developing countries from 1990 to 2014. The main difficulty in assessing these impacts is the endogeneity of remittances and the difficulty in finding instruments to resolve this issue at the aggregate level. To address the endogeneity of remittances, I estimate bilateral remittances and use them to create weighted indicators of remittance-sending countries. These weighted indicators are used as instruments for remittance inflow to remittance-receiving countries. Results obtained in this study indicate that remittances decrease poverty. A 10% increase in per capita remittances leads to a 1% decrease in poverty headcount, 1.8% decrease in poverty gap, and 2.5% decrease in poverty headcount. Remittances also decrease inequality in developing countries. Remittances decrease the Gini coefficient, increase the income share held by the poorest decile and quintile, and decrease the income share held by the richest quintile and decile in developing countries.
This article mainly explores to what extent international remittances alleviate household poverty in Bangladesh. This study uses primary data collected from 216 households and employs multi-methods. Firstly, I measure the level of household poverty through Foster-Greer-Thorbecke index. The article secondly focuses on the impact of remittances on household poverty using a binary logistic regression model. I found that the level of poverty among remittance recipient households is notably lower than households that are not receiving remittances. Similarly, the probability of a household being poor is alleviated by 28.07 per cent if the household receives remittance. It can be suggested that nursing international remittances can be useful for poverty alleviation in Bangladesh.
This paper provides evidence for the relationship between financial development, income inequality, and poverty. Unlike the existing literature, which mainly studies the effects of financial deepening, this paper features a multidimensional investigation. We considered financial access, depth, efficiency, stability, and liberalization. This paper reports three major findings. First, four out of five dimensions of financial development (access, depth, efficiency, and stability) can significantly reduce inequality and poverty. Second, financial liberalizations tend to exacerbate inequality and poverty. Third, the development of the banking shows a more significant impact on income distribution than the development of the stock market.
This article summarises emerging evidence on the relationship between productivity and the digital transformation, based on work underway in the OECD’s Going Digital project. The article starts by discussing the relationship between the global productivity slowdown and the diffusion of digital technologies and related processes across firms and industries. It then outlines the role of structural factors in digital adoption, before concluding with a brief discussion on policies to strengthen future productivity growth.
Purpose
Remittances to developing countries, especially less developed countries, have been growing tremendously as compared to the past few decades. Nevertheless, whether they can be a critical source of poverty alleviation in developing countries is yet to be conclusively studied. Therefore, this study investigates the implications of remittances on poverty in 44 developing countries from 2006 to 2014.
Design/methodology/approach
A dynamic panel estimator is applied to examine remittances – poverty nexus.
Findings
The results provide strong evidence that the level of poverty tends to be lower in countries with a higher flow of remittances. This may be because of the increase in the household incomes of the poor by virtue of the remittance, and/or the money remitted might be channeled to more productive activities, indicating the powerful role of remittances to maintain a sustainable reduction in poverty.
Originality/value
Although there is no direct policy applicable to remittances, several areas might be good to be assisted and improved by the government.
The aim of this paper is to investigate the direction of causality between poverty, inequality and economic growth in Tunisia using time series data covering the period 1970-2013. We use in this paper the ARDL bound testing approach to cointegration and Toda and Yamamoto (1995) modification of the Granger causality test. The result of bound testing reveals that there is an evidence of long-run relationship among the variables. In long term, we conclude that there is a positive relationship between income inequality and poverty. However, in the short-run there is a positive relation between inequality and growth to poverty. The results of Toda and Yamamoto indicate that there is a unidirectional causal relationship running from economic growth to poverty. We, therefore, recommend that governments should intense efforts in reinforcement the economic growth and should pay attention on its sustainability. In addition, we found unidirectional causality between poverty and inequality. However, on the other hand, the results of this paper indicate a bidirectional causality between inequality and economic growth. Therefore, the political leaders should focus their efforts on the middle class and poorest to reduce inequality and, therefore, support the growth that can reduce poverty.
Using a panel of 13 tourism-intensive economies for the period 1995–2012, this paper shows that rising growth in tourism which is proxied by tourism receipts to GDP ratio has an impact on poverty conditional on the poverty measure used. Using a panel Vector Autoregression method, there is little evidence to suggest that growth in tourism reduces headcount poverty. However, the poverty gap measure shows that the amount of money needed to help the poor out of poverty is significantly reduced. Based on different types of Gini coefficient, the results fail to find an improvement in income inequality resulting from tourism growth. Alternative measures such as relative poverty and poverty gap may be considered to better assess the impact of tourism on the poor.
This paper examines the impact of financial development, economic growth and income inequality on poverty in India from 1970 to 2015 by employing the autoregressive distributed lag (ARDL) bounds testing procedure. The findings reveal a robust long-run relationship between financial development, economic growth, inequality and poverty. Results show that financial development and economic growth help in poverty reduction in India, whereas income inequality and inflation aggravate poverty. Empirical evidence of the Granger-causality test supports the presence of unidirectional causality from financial development and economic growth to poverty. Moreover, bidirectional causality exists between inequality and poverty. The present study provides evidence on which the policymakers may proceed with detailed investigation of how specific financial sector policies and interventions can be deployed as effective instruments for achieving favorable economic growth and income distribution. The study recommends that policies geared toward increasing financial development and economic growth should be adopted to reduce the high level of poverty and inequality currently prevailing in India.
Purpose-While microfinance institutions(MFIs) from Bangladesh, such as Grameen Bank, received worldwide recognition and the Nobel Peace Prize in 2006, however, there is a paucity of research that provided a comprehensive discussion on the characteristics of the microfinance industry. Hence, the aim of this paper is to discuss some important aspects of the microfinance sector in Bangladesh. Research design, data, and methodology-This study used secondary sources of data, such as annual reports of the Microcredit Regulatory Authority (MRA) and the World Bank database in its descriptive analysis. Results-This study found that Bangladesh has made remarkable progress in her socioeconomic and economic development in the last few decades. It is also generally perceived that microfinance has placed significant contribution on such socioeconomic development. While microfinance observed unprecedented growth domestically, however, the regulatory framework is still rather weak, and a majority of the MFIs are found to be concentrated in the well-off areas (e.g., Dhaka, Chittagong etc.). Conclusions-The findings are significantly important for the parties who are interested to know the microfinance sector in Bangladesh. To some extent, the findings of this study will provide policy implications that may benefit the industry.
In this article we provide a critical analysis of the role of market-based approaches to poverty reduction in developing countries. In particular, we analyse the role of microfinance in poverty alleviation by conducting an ethnographic study of three villages in Bangladesh. Microfinance has become an increasingly popular approach that aims to alleviate poverty by providing the poor new opportunities for entrepreneurship. It also aims to promote empowerment (especially among women) while enhancing social capital in poor communities. Our findings, however, reflect a different picture. We found microfinance led to increasing levels of indebtedness among already impoverished communities and exacerbated economic, social and environmental vulnerabilities. Our findings contribute to the emerging literature on the role of social capital in developing entrepreneurial capabilities in poor communities by highlighting processes whereby social capital can be undermined by market-based measures like microfinance.
The main objective of this paper is to study the effects of microfinance on poverty reduction in developing countries, using cross-sectional and panel data. We show that a country with higher microfinance institution (MFI) gross loan portfolio per capita tends to have lower levels of poverty headcount ratio and higher level of expenditure of consumption per capita, confirming the role of microfinance in poverty reduction at the macro level. We show also that microfinance loans per capita are negatively associated with poverty gap (which measures the depth of poverty) and squared poverty gap (which measures the severity of poverty), implying that MFIs benefit not just the poor but also the poorest.
This paper takes a new look, from a macro perspective, at the issue of remittances effectiveness. An important point of departure for this study is the adoption of poverty reduction, as contrasted with economic growth, as the metric for measuring remittances effectiveness. By controlling for time-invariant country-specific effects and endogeneity, I find that remittances reduce poverty, but the size of the poverty reduction depends on how poverty is being measured. Additionally, remittances have income-equalizing effects. A well-functioning financial sector enhances remittances effectiveness in Sub-Saharan Africa.
The present study employs recent World Bank data to shed light, in a global context, on the transformation of changes in income and inequality into poverty reduction for a large number of countries in sub-Saharan Africa (SSA). The study begins by discussing SSA's progress on poverty. Next, it presents data on how various African countries have fared in terms of the incidence of poverty relative to other countries, with special emphasis on the period since the mid-1990s, when SSA generally experienced a growth resurgence. The paper then decomposes performance on poverty into changes in income and inequality for a sample of SSA countries that have the requisite data. The paper finds that recent progress on poverty has been considerable, in contrast to the earlier, 1980–early 1990s, period. Compared with the progress in a global sample of countries, however, progress has been mixed: nonetheless, although African countries lag behind the Brazil, India, China and Russia group of countries as a whole, many of them have outperformed India. Furthermore, while income growth is found to be the main engine for poverty reduction in SSA in general, the role of inequality is crucial in certain countries. Viewed in a global context, moreover, the low levels of income have inhibited the effectiveness of income and inequality improvements in reducing poverty in many African countries.
In recent years, many of the Commonwealth countries have experienced a reduction in income inequalities due to the development of financial markets and intermediaries. At the same time, widespread corruption among public officials, civil servants, or politicians from these countries have been well documented. A key public policy question is whether the return to financial sector development at the level of massive corruption, exacerbate income inequality, offsetting the benefits of financial development. Using a panel data of 30 Commonwealth countries over the period of 1995–2008, it is found that the high rates of corruption in the Commonwealth countries are crowding out the return to financial development. The return to financial development on income inequality, at the level of higher corruption, are positive for all countries and significantly larger for the low- and middle-income countries compared to high-income countries, which suggest that the complementary nature of policies that simultaneously reduce corruption and promote financial development have a greater impact in reducing income inequality than implementing these policies separately.
Multiplicative interaction models are common in the quantitative political science literature. This is so for good reason.
Institutional arguments frequently imply that the relationship between political inputs and outcomes varies depending on the
institutional context. Models of strategic interaction typically produce conditional hypotheses as well. Although conditional
hypotheses are ubiquitous in political science and multiplicative interaction models have been found to capture their intuition
quite well, a survey of the top three political science journals from 1998 to 2002 suggests that the execution of these models
is often flawed and inferential errors are common. We believe that considerable progress in our understanding of the political
world can occur if scholars follow the simple checklist of dos and don'ts for using multiplicative interaction models presented
in this article. Only 10% of the articles in our survey followed the checklist.
This study addresses the question whether participation of the poor in microfinance contributes to reducing a country’s level of income inequality. Using data from 70 developing countries, we show that higher levels of microfinance participation are indeed associated with a reduction of the income gap between rich and poor people. We also show, however, that the effects of microfinance on reducing income inequality are relatively small. The results of this study add to the discussion on the impact of microfinance on poverty by showing that, although access to microfinance does seem to improve the relative income position of the poor, this improvement is modest, which is probably because the use of microfinance is generally small as compared to the size of the economy of the countries in our sample. Microfinance should, therefore, not be seen as a panacea for bringing down income inequality in a significant way.
Our era is one of increasingly pervasive digital technologies, which penetrate deeply into the very core of the products, services, and operations of many organizations and radically change the nature of product and service innovations. The fundamental properties of digital technology are reprogrammability and data homogenization. Together, they provide an environment of open and flexible affordances that are used in creating innovations characterized by convergence and generativity. An analysis of convergence and generativity observed in innovations with pervasive digital technologies reveals three traits: (1) the importance of digital technology platforms, (2) the emergence of distributed innovations, and (3) the prevalence of combinatorial innovation. Each of the six articles in this special issue relates to one or more of these three traits. In this essay, we explore the organizational research implications of these three digital innovation traits and identify research opportunities for organization science scholars. Examples from the articles in this special issue on organizing for innovation in the digitized world are used to demonstrate the kind of organizational scholarship that can faithfully reflect and inform innovation in a world of pervasive digital technologies.
This paper analyzes the impact of internal remittances (from Ghana) and international remittances (from African or other countries) on investment and poverty in Ghana. It has three findings. First, when compared to what they would have spent without the receipt of remittances, households receiving remittances spend less at the margin on food. Second, households receiving remittances spend more at the margin on three investment goods: education, housing, and health. Third, the receipt of remittances greatly reduces likelihood of household poverty. These findings support the growing view that remittances can reduce poverty and increase investment in developing countries.
This paper examined the issue of the gap in access to Information and Communication Technology(ICT) known as the digital divide and its linkages to poverty in Nigeria. The study found that the contributions of access to the use of ICTs to poverty in Nigeria has been marginal. This was also found out to be partly due to some teething problems such as poor quality of service caused primarily by network capacity constraints, lack of physical and transmission infrastructure, scarce spectrum resources, unreliable electric supply e.t.c which are still confronting ICT usage in Nigeria. Finally, a summary with some policy recommendations are presented.
This study undertakes impact analysis of remittances on poverty in developing countries at two levels. Firstly, it estimates the impact of remittances on poverty in 77 developing countries; Secondly, separate analyses are undertaken for 29 developing countries and 21 Asian developing counties, which have 5 per cent or more share of remittances in GDP.
Many high technology executives and political leaders increasingly believe that bridging the so-called digital divide would lift people out of poverty. In addition, the high technology industry views the vast numbers of poor people around the world as a potential market and a large business opportunity. However, an examination of poverty in the United States suggests that the eradication of poverty cannot be easily turned into a business proposition based on technological solutions. Developing countries would do well to focus first on meeting the basic needs of the poor using affordable, low technology resources. Ultimately, the eradication of poverty demands not more technology, but fundamental social changes. KEYWORDS. Digital divide, technology gap, global poverty Kumar Venkat is the founder and principal engineer of Surya Technologies, Inc., a software development company located in the Silicon Valley.
In this essay, we argue that pervasive digitization gives birth to a new type of product architecture: the layered modular architecture. The layered modular architecture extends the modular architecture of physical products by incorporating four loosely coupled layers of devices, networks, services, and contents created by digital technology. We posit that this new architecture instigates profound changes in the ways that firms organize for innovation in the future. We develop (1) a conceptual framework to describe the emerging organizing logic of digital innovation and (2) an information systems research agenda for digital strategy and the creation and management of corporate information technology infrastructures.
This paper examines the empirical relationship between economic growth and income inequality both at aggregate and regional level using more comparable data set for 69 developing countries over the period 1965-2003. The study identifies credit market imperfection in low-income developing countries as the likely reason for a strong negative relationship between income inequality and economic growth. While in short run the relationship between growth and income inequality might be positive but over time more income inequalities reduces economic growth. Moreover, this paper finds evidence that more physical and human capital investment, openness to trade and higher government spending have statistically significant impact on enhancing economic growth and reducing inequality.
Both in its institutional range and in its penetration of financial markets, the microfinance sector in Bolivia rivals any in the world, and has played a major part in extracting the macro-economy from meltdown since the mid-1980s. We seek specifically to assess its impact on poverty, and do this through small-sample surveys on four microfinance institutions, two urban and two rural, using a range of poverty concepts: income (generated both through the borrower's enterprise and through the labour market), asset holdings and diversity, and various measures of vulnerability. All the institutions studied had, on balance, positive impacts on income and asset levels, with income impacts correlating negatively with income on account of poor households choosing to invest in low-risk, low-return assets. Microfinance may, however, augment vulnerability: average debt-service ratios of microfinance clients are disturbingly high, and if the coping mechanisms used by borrowers fail, borrowers may be forced out of the microfinance system, possibly resulting in decapitalisation and impoverishment. Poorer households are more restricted in their choice of coping strategy, and many as a consequence 'choose' coping strategies more likely to jeopardise their long-term income prospects, in particular asset sales and cuts in children's schooling. The more successful low-income borrowers are those who have voluntary savings deposits and do not rush into fixed capital purchases too early: collapse back into poverty is associated with multiple crises and the failure of one or more 'safety nets', in particular of one or more 'safety nets', in particular support from a member's solidarity group. The following actions appear to be promising for the further reduction of poverty in Bolivia: stronger efforts to mobilise rural savings, removal of lower limits on loan size, and the introduction of appropriate insurance mechanisms. In comparison with other anti-poverty measures, microfinance appears to be successful and relative cheap at reducing the poverty of those close to the poverty line, but ineffective, by comparison with labour-market and infrastructural measures, in reducing extreme poverty.
This paper examines the contribution of digitalization to economic growth of Sub Saharan Africa (SSA) in comparison with the Organization for Economic Cooperation and Development (OECD) economies. The main reason for comparing the most and the least developed countries to measure the effects of digitalization is to have an insight of whether such effects depend on the levels of development of the country. New technologies in Sub Saharan Africa are assumed to have played significant roles in economic activity, including accessibility of communications, which was impeded by poor infrastructure, accommodation of the poor majority who were initially financially excluded from mobile banking and participation of small and medium enterprises (SMEs) in e-commerce. On the other hand, due to the effects of digitalization, least developed countries in SSA have been facing a premature deindustrialization.
This study employs a panel dataset consisting of 11 years from 2006 to 2016 for 41 SSA and 33 OECD economies and we use the generalized linear methods of moments (GMM) estimators. The results show that digitalization has a positive contribution to economic growth in both groups of countries. The effect of broadband internet is minimal for SSA compared to OECD countries, whereas the impact of mobile telecommunications is higher in SSA compared to the OECD counterpart. These results are particularly interesting as less advanced technologies create more opportunities in the least developed countries since there is more space for improvement. With respect to policy implications, this study recommends that SSA governments should invest more in ICT along with other infrastructures, so as to benefit from digitalization and to realize significant economic growth.
This study assesses the role of Information and Communication Technologies (ICT) in poverty & inequality reduction by fostering financial inclusion, using panel dataset of sixty-two countries between 2001 and 2012. It mainly focuses on two different dimensions of financial inclusion e.g., inclusion by commercial banks and by microfinance institutions (MFIs). As the formal financial institutions deal with wealthy and well-off clients, whereas the MFIs claim to be the bankers of poor. A large number of poor people are still un-banked in low income countries; however, research in development finance suggests that accessible and timely finance has the potential to bring poor out of poverty. The importance of MFIs in providing credit and other financial services at the doorstep of financially excluded households is globally acknowledged. Thus, it is inevitable to investigate the determinants of (MFIs)/financial inclusion particularly in developing countries. In the first step of data analysis, we find positive association of ICT diffusion with financial inclusion and a negative relationship with poverty & inequality. Furthermore, the results of the study indicate poverty reducing effects of financial inclusion measured either way. It was also observed that the ICT dimensions when used as instruments for financial inclusion accelerate economic growth and reduce poverty & inequality. Therefore, policies to promote information and communication infrastructure could stimulate financial inclusion by promoting digital finance. Moreover, better collaboration between ICT and financial sector will likely to advance digital financial inclusion that could help to bridge the financial infrastructure gap.
Despite a significant growth in profitability and efficiency, MENA's well developed banking system seems to be unable to reach vast segments of the population, especially the underprivileged ones. To this end, the onus of policymakers in the region is to create effective opportunities for financial inclusion, and subsequently poverty and income inequality reduction. Whether they have succeeded in their endeavor is an empirical question we seek to address in this paper. Using Generalized Method of Moments (GMM) and Generalized Least Squares (GLS) econometric models and a large sample of eight MENA countries over the period 2002-2015, this paper assesses empirically the impact of financial inclusion on income inequality, poverty, and financial stability. Our empirical results show that while financial inclusion decreases income inequality, population size and inflation are found to increase income inequality. Other empirical results show that financial inclusion has no effects on poverty, whereas population, inflation, and trade openness are all found to significantly increase poverty. Finally, the empirical evidence indicates that while financial integration is a contributing factor to financial instability in MENA, financial inclusion contributes positively to financial stability.
The objective of this study is to analyze the framework within which microfinance institutions (MFIs) deliver their services and provide an assessment of their operations and financial management. These institutions are examined because of their current importance to a special group of consumers, primarily the poor and disenfranchised in the developing world, and of their future promise as an economic development solution. Since the objective of these institutions is somewhat unique, the manner of their assessment must also differ from that used to assess the performance of traditional financial intermediaries. In particular, assessment of MFIs must recognize their dual (bank and development instrument) status. Their efficiency, then, must be analyzed in terms of its economic (or financial) dimension as well as its social dimension. The first dimension may be examined with traditional measures, while examination of the second requires measures that reflect the MFI’s social objectives. In order to accommodate the special nature of MFIs, this study proposes the use of a Balanced Scorecard approach. It contributes to the study of financial institution performance by examining a non-traditional group of institutions using a variety of assessment measures. The findings should be of value to those interested in the financial sector as well as those involved in public policy decision making.
The present study re-examines the effects of remittances on growth of GDP per capita using annual panel data for 24 Asia and Pacific countries. The results generally confirm that remittance flows have been beneficial to economic growth. However, our analysis also shows that the volatility of capital inflows such as remittances and FDI is harmful to economic growth. This means that, while remittances contribute to better economic performance, they are also a source of output shocks. Finally, remittances contribute to poverty reduction – especially through their direct effects. Migration and remittances are thus potentially a valuable complement to broad-based development efforts.
Kenya has a bad image among those who see themselves as ‘friends of the people’, who for many years must have thought of it as the land where it is always 1788. But although some years ago we were informed by a reliable authority that ‘Africa is ripe for revolution’, in Kenya up till now – though who dares predict what will be in the newspapers tomorrow? – it is still not 1789: the revolution has not arrived.
The aim of the paper is threefold. First, it empirically investigates the effect of international migration on poverty in origin countries, using data from a cross-country analysis. Second, it explores the specific part of the income distribution from which migrants are drawn, by comparing the effect of international migration on different income quintiles of the population. Finally, given that the selection of migrants depends not only on the income level of their households, but also on the skill levels of movers, the paper casts some light on the implications of the emigration of skilled workers on poverty. This article shows that the stock of international migrants have a positive effect on the income of the poor while it does not have a significant impact on the income of the middle and top quintiles of the population. In particular, a 10 per cent increase in the per capita stock of migrants resident in OECD nations augments the income of the poor by 1 per cent, on average and ceteris paribus. Finally, the poverty-reducing effect of migration holds even when the emigration process selects the best and the brightest. Copyright 2009 The Author. Journal compilation 2009 Blackwell Publishing Ltd.
This article provides theoretical reasoning and empirical evidence that international migration decisions are influenced by
relative as well as absolute income considerations. Potential gains in absolute income through migration are likely to play
an important role in households’ migration decisions, but international migration by household members who hold promise for
success as labor migrants can also be an effective strategy to improve a household’s income position relative to others in
the household’s reference group. The findings reported in this article provide empirical support for the hypothesis that relative
deprivation plays a significant role in Mexico-to-U. S. migration decisions. The findings also suggest that this migration
is an effective mechanism for achieving income gains in households that send migrants to the U.S. and that households wisely
choose as migrants those of their members who are most likely to provide net income gains.
This study examines the role of the distribution of income in determining the responsiveness of poverty to income growth and changes in income inequality using panel data of 58 developing countries for the period 1980–1998. We show that the large cross-regional variation in the capacity of income growth to reduce poverty, i.e. the income elasticity, is largely explained by differences in the initial distribution of income and present region and time specific estimates of the income and Gini elasticities of poverty. We find that the income elasticity of poverty in the mid-1990s equals −1.31 on average and ranges from −0.71 for Sub-Saharan Africa to −2.27 for the Middle East and North Africa, and that the Gini elasticity of poverty equals 0.80 on average and ranges from 0.01 in South Asia to 1.73 in Latin America. Furthermore we show that while differing income growth rates account for most of the regional diversity in poverty trends, the additional impact of differences across regions in rates of inequality change and income and inequality elasticities of poverty is almost always significant and far too large to be ignored, most notably so in Eastern Europe and Central Asia.
The microenterprise earnings of microfinance clients in southeastern Sri Lanka are linked to their initial incomes. Poorer clients face geographic, financial and sociocultural barriers to entry to the most promising microenterprise occupations, leading them to select low-value activities with poor growth prospects. In semi-urban areas, poverty impacts could be strengthened by supplementing loans with nonfinancial interventions encouraging poor clients to select higher-value occupations. In arid rural areas, where microenterprises face severe market and infrastructure constraints, microenterprise development is unlikely to facilitate poverty exit.
At any positive rate of growth, the higher the initial inequality, the lower the rate at which income-poverty falls. It is possible for inequality to be sufficiently high to result in rising poverty, despite good underlying growth prospects at low inequality.
Few studies have examined the impact of international migration and remittances on poverty in the developing world. This paper fills this lacuna by constructing and analyzing a new data set on international migration, remittances, inequality, and poverty from 71 developing countries. The results show that both international migration and remittances significantly reduce the level, depth, and severity of poverty in the developing world. After instrumenting for the possible endogeneity of international migration, and controlling for various factors, results suggest that, on average, a 10% increase in the share of international migrants in a country’s population will lead to a 2.1% decline in the share of people living on less than $1.00 per person per day. After instrumenting for the possible endogeneity of international remittances, a similar 10% increase in per capita official international remittances will lead to a 3.5% decline in the share of people living in poverty.
This paper tests whether the large, cheap, stable, and low-cyclical flows of workers’ remittances reduce the probability of current account reversals in recipient countries. Using a large panel of emerging and developing economies, we find that this is indeed the case: when remittances get above 3% of GDP, the relationship between a decreasing stock of international reserves and a higher probability of current account reversals becomes less stringent. IV estimation proves that the effect of remittances on current account reversals is of a causal nature.
Summary Remittances have been portrayed as the human face of globalization given their potential to alleviate poverty by directly increasing household income. Using a panel of rural households in Mexico from October 1998 to November 2000 this study assesses whether this is in fact the case. However, rather than examining whether remittances income would reduce future consumption poverty we asked if remittances are likely to reach people whose conditions are prone to worsen in the future. We found a negative and statistically significant relationship between the disbursement of remittances and the threat to future poverty that rural households could experience.
Previously published as an Appendix to the World development report. Incl. users guide, list of acronyms, bibl., index. The Little data book is a pocket edition of WDI
The paper provides a synthesis of the construction industry needs and requirements in relation to the adoption and use of information and communication technologies ICT. This is based, on the one hand, on existing research and technology development initiatives commissioned at a national and European level, and, on the other, on a wide consultation with construction industry key players across Europe. A framework, used as a basis for capturing industry requirements, and formulating an ICT vision, has been defined. Five priority areas have been identified with the potential to solve the ICT related problems of the construction industry, namely: knowledge management, legal and contractual aspects management, quality and performance management, total lifecycle management, and human aspects management. The ICT vision, enabled by addressing these priority areas, has been formulated on a consensus basis, and a detailed
roadmap has been developed providing a pragmatic implementation of the proposed vision.
Despite many approaches of neoclassical and endogenous growth theory, economists still face problems in explaining the reasons for income differences between countries. Institutional economics and the deep determinants of growth literature try to depart from pure economic facts to examine economic development. Therefore, this article analyzes the impact of institutions, geography, and integration on per capita income. Concerning theoretical reasoning, emphasis is on the emergence of institutions and their effect on economic growth. However, institutions can appear in different shapes since political, legal, and economic restrictions are not the only constraints on human behaviour. Norms and values also limit possible actions. Therefore, a differentiation between formal and informal institutions is made. Informal institutions are defined as beliefs, attitudes, moral, conventions, and codes of conduct. Property rights are assumed to be the basic formal institutional feature for economic success. Despite their direct impact on growth through individual utility maximization, property rights also make a statement concerning the political and legal environment of a country. Regarding the regression analysis, different religious affiliations are used as instrumental variables for formal and informal institutions. The regression results affirm a crucial role of informal and formal institutions concerning economic development. However, a high proportion of Protestant citizens encourage informal institutions that support economic growth, while a high Muslim proportion of the population is negatively correlated with growth-supporting formal institutions. --
Summary This paper assesses the effect of the steadily growing remittance flows to sub-Saharan Africa. Though the region receives only a small portion of the total recorded remittances to developing countries, and the volume of aid flows to sub-Saharan Africa swamps remittances, this paper finds that remittances, which are a stable, private transfer, have a direct poverty-mitigating effect, and promote financial development. These findings hold even after factoring in the reverse causality between remittances, poverty, and financial development. The paper posits that formalizing such flows can serve as an effective access point for "unbanked" individuals, and households.
— This paper evaluates the outreach and impact of two microfinance programs in Thai- land, controlling for endogenous self-selection and program placement. Results indicate that the wealthier villagers are significantly more likely to participate than the poor. Moreover, the wealth- iest often become program committee members and borrow substantially more than rank-and-file members. However, local information on creditworthiness is also used to select members. The pro- grams positively affect household welfare for committee members, but impact is insignificant for rank-and-file members. Policy recommendations include vigilance in targeting the poor, publicly disseminating the program rules and purpose, and introducing and enforcing eligibility criteria. � 2006 Elsevier Ltd. All rights reserved.
We develop a model to study the effects of migration and remittances on inequality in the origin communities. While wealth inequality is shown to be monotonically reduced along the time-span, the short- and the long-run impacts on income inequality may be of opposite signs, suggesting that the dynamic relationship between migration/remittances and inequality may well be characterized by an inverse U-shaped pattern. This is consistent with the findings of the empirical literature, yet offers a different interpretation from the usually assumed migration network effects. With no need to endogenize migration costs through the role of migration networks, we generate the same result via intergenerational wealth accumulation.
This paper uses a new data set of 126 intervals from 60 developing countries to analyze the growth elasticity of poverty, that is, how much does poverty decline in percentage terms with a given percentage rise in economic growth. The data set is both broader in coverage and more selective in terms of quality controls than those used in the past. The study finds that while economic growth does reduce poverty in developing countries, the rate of poverty reduction depends very much on how economic growth is defined. Controlling for changes in income inequality, when economic growth is measured by changes in survey mean income (consumption), the growth elasticity of poverty (excluding Eastern Europe and Central Asia) is −2.79; that is, a 10% increase in the survey mean will reduce poverty ($1.00/person/day) by 27.9%. But, when growth is measured by changes in GDP per capita, the growth elasticity of poverty is a statistically insignificant −2.27, which is lower than has previously been estimated.