Dominican Republic: Analysis of the Clients of FondoMicro

This report provides a preliminary quantitative analysis of the financial results of five organizations which are clients of FondoMicro. It also includes a qualitative assessment of the long-run vision held by these institutions' managers and of the organizations' ability to allow a transformation into self-sustainable institutions, whose financial contracts are useful to small and micro entrepreneurs.O54 H43

Foreign Assistance and Domestic Financial Markets in Developing Countries

A.E. Res. 89-2

Linking poverty, natural resources, and financial markets: a model of land use by rural households in El Salvador

This paper posits that deforestation and poverty levels are related through an inverted-U shape --the environmental Kuznets-- curve and that access to credit shifts this curve downwards, thus positively impacting natural resource uses. This hypothesis is tested using a household panel data set from El Salvador.Land Economics/Use,

A COMPARISON OF OPTION-THEORETIC AND CHOICE-THEORETIC APPROACHES TO EVALUATING ALTERNATIVE FINANCIAL TECHNOLOGIES FOR MORTGAGE LOANS TO LOW-INCOME HOUSEHOLDS

This paper evaluates the efficacy of two alternative lending technologies - the traditional banking technology and a cash flow based counseling program - by using competing risks (option-based) and choice theoretic approaches. We find evidence to support the notion that low-income borrowers have some degree of financial sophistication, as they prepay the mortgage loan by considering the current value of the call option. The evidence also suggests that borrower heterogeneity and insolvency affect mortgage termination.credit counseling, competing risks, low-income mortgage loans., Financial Economics, Q140 (Agricultural Finance), Q140,

THE INFLUENCE OF MICROFINANCE ON THE EDUCATION DECISIONS OF RURAL HOUSEHOLDS: EVIDENCE FROM BOLIVIA

There is debate about measurement of impact and achievement of expected results of rural microfinance programs in LDCs. The paper addresses these issues using survey household data from Bolivia. Regression models examine the determinants of education outcomes for microfinance clients. The results challenge usual assumptions in program design.Teaching/Communication/Extension/Profession,

A DYNAMIC MODEL OF MICROLENDING IN THE DEVELOPING COUNTRIES

In this paper, we examine the contract design problem of banks that extend loans to poor borrowers and seek to maximize outreach while remaining financially sustainable. A dynamic model is developed that shows how interest rates can be determined based on information about productivity and diligence characteristics of borrowers, investment opportunities, correlation of business activities, peer monitoring costs, and social sanctions. The results indicate that relative to the traditional static models, the dynamic model explains better the current experience in individual and group lending in developing countries.Financial Economics,

RURAL POVERTY, INCOME SHOCKS, AND LAND MANAGEMENT: AN ANALYSIS OF THE LINKAGES IN EL SALVADOR

Data collected in surveys of more than 700 Salvadoran households carried out in 1996 and 1998 are used in an econometric analysis of linkages between land and labor use. Particular emphasis is offered on how poor households allocated labor resources in response to the El Nino weather phenomenon of 1997. Implications for resource conservation are offered.International Development, Land Economics/Use,

Impact of Conditional Cash Transfers and Remittances on Credit Market Outcomes in Rural Nicaragua

The impact of public and private transfers on credit markets has not been sufficiently studied and understanding any spill over effects caused by these transfers may be useful for policy makers. This paper estimates the impact of Conditional Cash Transfers (CCTs) and remittances received by poor households in rural Nicaragua on their decision to request a loan. We find that, on average, CCTs did not affect the request of credit while remittances increased it, controlling for potential endogeneity. We argue the reduction in income risk provided by remittances changes borrowers’ expected marginal returns to a loan and/or their creditworthiness, as perceived by lenders. The successful enforcement of the use of CCTs on long-term investments seems to have avoided externalities on the use of short-term credit these households have access to and their creditworthiness.International Development, D14, F22, O15,