New Growth Approach to Poverty Alleviation

This essay attempts to break the divide between growth and development economics. Using the example of India over the past decades, it argues that innovation and/or productivity growth have been main engines of poverty reduction in that country. It also argues that new growth theories can shed light on this process and explain why growth and poverty reduction have not occurred in Latin America. The remainder of this essay is organized as follows. The second section summarizes what is currently known about the evolution of growth and poverty indicators in India since the 1960s. The third section provides a very brief presentation of new growth theory and of some of its main predictions. The fourth section uses the description of new growth theory to analyze the reform process in India. The fifth section shows that the 1991 reforms had unequalizing effects on productivity and profitability across industries and states. Finally, it reflects upon the contrasting experiences of Asia and Latin America with regard to productivity growth and poverty alleviation.Economic

Can commercially-oriented microfinance help meet the Millennium Development Goals? Evidence from Pakistan.

YesThe current emphasis in the microfinance industry is a shift from donor-funded to commercially sustainable operations. This article evaluates the impact of access to microloans from the Khushhali Bank - Pakistan's first and largest microfinance bank which operates on commercial principles. Using primary data from a detailed household survey of nearly 3000 borrower and non-borrower households, a difference in difference approach is used to test for the impact of access to loans. Once the results are disaggregated between rural and urban areas there is a positive impact in rural areas on food expenditure and on some social indicators

The Determinants Of Interest Rates In Microfinance: Age, Scale And Organisational Charter

This study compares the responsiveness of microcredit interest rates to age, scale of lending and organisational charter. It uses an unbalanced panel of 300 MFIs from 107 developing countries from 2005 to 2015. Three key trends emerge from the results of a 2SLS regression. First, the adoption of formal microbanking practices raises interest rates compared with other forms of microlending. Second, large scale lending lowers interest rates only for those MFIs that already hold legal banking status. Third, age of operation in excess of eight years exerts a negative impact on interest rates, regardless of scale and charter type of MFI. Collectively, our results indicate that policies which incentivise mature MFIs to share their knowledge will be more effective in helping the nascent institutions to overcome their cost disadvantages compared with reforms to transform them into licensed banks. For MFIs which already hold permits to operate as banks, initiatives to increase loan sizes are key strategic pricing decisions, irrespective of the institution’s age. This study is original in its differentiation of the impact on interest rates of regulations which promote formal banking principles, credit market extension vis-à-vis knowledge sharing between mature and nascent MFIs

Social Efficiency in Microfinance Institutions: Identifying How to Improve It

This article analyzes the determinants for social and economic efficiency in Microfinance Institutions using a Seemingly Unrelated Regression. We find two factors that improve their relative efficiency: legal status and target market; however, age and scale are not clear determinants. The main contribution of this paper is to engage MFIs to achieve the desired social efficiency without giving up economic efficiency as the two can be complementary; moreover, it is possible to be efficient as an NBFI/NGO with small size and low-end target, at least. The paper is a new contribution in line with the so-called paradox of social cost

Governance of microfinance institutions (MFIs) in Cameroon: What lessons can we learn?

The aim of this paper is to find out the effects of the COBAC regulations regulating the microfinance industry on the governance of microfinance institutions (MFIs) in Cameroon. The paper is based on 35 in-depth interviews carried out from May to June 2011 and June to July 2012 with managers and accountants from MFIs in Cameroon, MFI clients and non-clients, regulatory authorities in the Ministry of Finance, and accounting professionals. The findings show that the regulations have broken down the governance within the MFIs in Cameroon thus turning MFIs into hybrid organizations with managers striving to meet their shareholders' interests