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Cyclical Effects of Bank Capital Requirements with Imperfect Credit Markets

Agénor, Pierre-Richard; Pereira da Silva, Luiz A.
Fonte: Banco Mundial Publicador: Banco Mundial
Relevância na Pesquisa
56.08%
This paper analyzes the cyclical effects of bank capital requirements in a simple model with credit market imperfections. Lending rates are set as a premium over the cost of borrowing from the central bank, with the premium itself depending on firms effective collateral. Basel I- and Basel II-type regulatory regimes are defined and a capital channel is introduced through a signaling effect of capital buffers on the cost of bank deposits. The macroeconomic effects of various shocks (a drop in output, an increase in the refinance rate, and a rise in the capital adequacy ratio) are analyzed, under both binding and nonbinding capital requirements. Factors affecting the procyclicality of each regime (defined in terms of the behavior of the risk premium) are also identified and policy implications are discussed.

Capital Requirements and Business Cycles with Credit Market Imperfections

Agénor, P.-R.; Alper, K.; Pereira da Silva, L.
Fonte: Banco Mundial Publicador: Banco Mundial
Relevância na Pesquisa
56.09%
The business cycle effects of bank capital regulatory regimes are examined in a New Keynesian model with credit market imperfections and a cost channel of monetary policy. Key features of the model are that bank capital increases incentives for banks to monitor borrowers, thereby reducing the probability of default, and excess capital generates benefits in terms of reduced regulatory scrutiny. Basel I and Basel II-type regulatory regimes are defined, and the model is calibrated for a middle-income country. Simulations of supply and demand shocks show that, depending on the elasticity that relates the repayment probability to the capital-loan ratio, a Basel II-type regime may be less procyclical than a Basel I-type regime.

Albania : Access to Finance for Enterprise Sector

World Bank
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Relevância na Pesquisa
76.05%
This report was prepared in close collaboration with the Bank of Albania. This report focused on trade, services, and agriculture; however, the limited scope of their operations still leaves a potentially large unmet demand for credit in agriculture. This report focuses on problems related to the operation of Immovable Property Registry System (IPRS) and other institutions and the formalization of property rights and inscription of mortgages. This study believes the reform with most optimum impact on sustainable credit growth will be focused on (i) improving the quality, breadth, and depth of financial intermediation, (ii) growth and development of credit unions and microfinance institutions, and (iii) facilitate the development of new instruments. The authorities will also focus on implementing reforms to become compliant with Financial Action Task Force (FATF) recommendation.

Are We Overestimating Demand for Microloans?

Anand, Malika; Rosenberg, Richard
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Relevância na Pesquisa
56.07%
This brief addresses demand for micro credit only, not demand for microfinance or other microfinance services, such as savings or funds transfers, which may be greater than the demand for micro credit. For instance, the ratio of savers to borrowers is about 10-to-1 for Bank Rakyat Indonesia, 9-to-1 for Centenary Bank in Uganda, and 4-to-1 for PRODEM in Bolivia (MIX Market). Micro credit demand estimates address the amount of funding required: the expected number of active borrowers is multiplied by an assumed average outstanding loan amount. Reasonable estimates of average loan size can be derived from international databases maintained by the mix market and micro credit summit. But estimating numbers of expected borrowers can be a minefield. This brief discusses the kinds of reductions that should be factored into a demand estimate and looks at some all too-sketchy empirical evidence about the size of those reductions. Most-but not all-of this evidence raises a concern that demand may often be overestimated by a considerable margin.

Timor Leste : Access to Finance for Investment and Working Capital

Conroy, John
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
EN_US
Relevância na Pesquisa
56.1%
This study argues the need for a policy environment supporting both urban informal sector dynamism and rapid transition from subsistence to monetization in agriculture. Such policies must include measures facilitating access to financial services for households, which are the backbone of the informal and subsistence economies. The economy of Timor-Leste is divided between a farm sector in which as many of 80 percent of workers remain, with most of these still dependent on subsistence production, and a non-farm sector in which micro- and small enterprises are an overwhelming majority. Most urban enterprises operate in an informal environment, while in both the farm and non-farm sectors the household is the basic unit of economic activity.

Subsidies as an Instrument in Agriculture Finance : A Review

Meyer, Richard L.
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
EN_US
Relevância na Pesquisa
66.13%
This paper presents a literature review of issues related to recent subsidies and investments in the financial sector that have been designed to address the immediate effects of the crises and to develop the financial institutions necessary to modernize agriculture. Section two of the paper discusses the impact of recent food, fuel, and financial crises on developing countries and the emergency actions taken by countries and international agencies to reduce the suffering inflicted on poor people. It also discusses the challenge of finding a balance between pragmatic immediate responses and longer-term objectives. The third section discusses the role of finance in agricultural development and poverty alleviation. Section four deals with the challenge of creating credit markets in developing countries. The fifth section covers shifts in the paradigm used to intervene in credit markets and summarizes the main features of the old directed-credit and the new financial systems paradigms. This is followed by a sixth section that summarizes highlights in the development of the microfinance industry. It covers guidelines created for developing microfinance...

Equilibrium Credit : The Reference Point for Macroprudential Supervisors

Buncic, Daniel; Melecky, Martin
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
EN_US
Relevância na Pesquisa
76.09%
Equilibrium credit is an important concept because it helps identify excessive credit provision. This paper proposes a two-stage approach to determine equilibrium credit. It uses two stages to study changes in the demand for credit due to varying levels of economic, financial and institutional development of a country. Using a panel of high and middle-income countries over the period 1980-2010, this paper provides empirical evidence that the credit-to-GDP ratio is inappropriate to measure equilibrium credit. The reason for this is that such an approach ignores heterogeneity in the parameters that determine equilibrium credit across countries due to different stages of economic development. The main drivers of this heterogeneity are financial depth, access to financial services, use of capital markets, efficiency and funding of domestic banks, central bank independence, the degree of supervisory integration, and experience of a financial crisis. Countries in Europe and Central Asia show a slower adjustment of credit to its long-run equilibrium compared with other regions of the world.

Credit Constraints, Agricultural Productivity, and Rural Nonfarm Participation : Evidence from Rwanda

Ali, Daniel Ayalew; Deininger, Klaus; Duponchel, Marguerite
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
EN_US
Relevância na Pesquisa
56.09%
Although the potentially negative impacts of credit constraints on economic development have long been discussed conceptually, empirical evidence for Africa remains limited. This study uses a direct elicitation approach for a national sample of Rwandan rural households to assess empirically the extent and nature of credit rationing in the semi-formal sector and its impact using an endogenous sample separation between credit-constrained and unconstrained households. Being credit constrained reduces the likelihood of participating in off-farm self-employment activities by about 6.3 percent while making participation in low-return farm wage labor more likely. Even within agriculture, elimination of all types of credit constraints in the semi-formal sector could increase output by some 17 percent. Two suggestions for policy emerge from the findings. First, the estimates suggest that access to information (education, listening to the radio, and membership in a farm cooperative) has a major impact on reducing the incidence of credit constraints in the semi-formal credit sector. Expanding access to information in rural areas thus seems to be one of the most promising strategies to improve credit access in the short term. Second...

Does Institutional Finance Matter for Agriculture? Evidence Using Panel Data from Uganda

Khandker, Shahidur R.; Koolwal, Gayatri B.
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
EN_US
Relevância na Pesquisa
56.1%
Smallholder agriculture in many developing countries has remained largely self-financed. However, improved productivity for attaining greater food security requires better access to institutional credit. Past efforts to extend institutional credit to smaller farmers has failed for several reasons, including subsidized operation of government-aided credit schemes. Thus, recent efforts to expand credit for smallholder agriculture that rely on innovative credit delivery schemes at market prices have received much policy interest. However, thus far the impacts of these efforts are not fully understood. This study examines credit for smallholder agriculture in the context of Uganda, where agriculture is about 35 percent of gross domestic product, most farmers are smallholders, and the country has introduced policies since 2005 to extend credit access to the sector. The analysis uses newly available household panel data from Uganda for 2005-2006 and 2009-2010 to examine (a) whether credit effectively targets agriculture...

Money or Ideas? A Field Experiment on Constraints to Entrepreneurship in Rural Pakistan

Gine, Xavier; Mansuri, Ghazala
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
EN_US
Relevância na Pesquisa
66.05%
This paper identifies the relative importance of human and physical capital for entrepreneurship. A subset of rural microfinance clients were offered eight full time days of business training and the opportunity to participate in a loan lottery of up to Rs. 100,000 (USD 1,700), about seven times the average loan size. The study finds that business training increased business knowledge, reduced business failure, improved business practices and increased household expenditures by about $40 per year. It also improved financial and labor allocation decisions. These effects are concentrated among male clients, however. Women improve business knowledge but show no improvements in other outcomes. A cost-benefit analysis suggests that business training was not cost-effective for the microfinance institution, despite having a positive impact on clients. This may explain why so few microfinance institutions offer training. Access to the larger loan, in contrast, had little effect, indicating that existing loan size limits may already meet the demand for credit for these clients.

Dual Credit Markets and Household Access to Finance; Evidence from a Representative Chinese Household Survey

Cull, Robert; Gan, Li; Gao, Nan; Xu, Lixin Colin
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Tipo: Working Paper; Policy Research Working Paper; Publications Research
ENGLISH; EN_US
Relevância na Pesquisa
76.03%
Using a new and representative data set of Chinese household finance, this paper documents household access to and costs of finance, along with their correlates. As in most developing countries, informal finance is a crucial element of household finance, and wealth tends to be associated with better access to formal and informal finance. Better financial knowledge shifts loan portfolios toward formal sources relative to informal ones. Connections to the Communist Party are associated with significantly better access to finance in rural areas but not in urban areas. A larger social network is positively associated with access to informal finance. Controlling for household characteristics, rural residents pay interest rates on loans similar to urban residents. Younger residents pay higher rates, while households on firmer economic footing face lower rates. Taking financial classes and college education is associated with higher interest rates for urban residents, suggesting perhaps that financial knowledge coincides with greater demand for credit in areas with more economic opportunity. Overall...

Assessing Firms' Financing Constraints in Brazil

Claessens, Stijn; Sakho, Yaye Seynabou
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Tipo: Publications & Research :: Policy Research Working Paper; Publications & Research
ENGLISH; EN_US
Relevância na Pesquisa
66.2%
Firm surveys often indicate that firms complain a lot about lack of access to financial services, but financing constraints are difficult to identify, given demand and supply considerations and with only surveys based on firms' perceptions. Specifically, it is difficult to separate demand for access to finance of viable firms with good growth opportunities from that of firms that are not creditworthy and should not deserve financing. In Brazil, one of the main constraints to finance is related to the high level of interest rates, which affects both bank funding costs as well as bank intermediation spreads and, as such, the cost of finance and hence the demand and supply of bank financing. This paper analyzes a unique loan level data set that covers almost a decade of monthly firm bank information from credit registry information that is not publicly available as well as two cross-sections of Brazil's Investment Climate Assessment surveys in 2004 and 2008 that provide detailed information on firms' micro characteristics as well as perceptions of credit. The data allow identification of how firms' characteristics...

Microfinance and Moneylenders: Long-Run Effects of MFIs on Informal Credit Market in Bangladesh

Berg, Claudia; Emran, M. Shahe; Shilpi, Forhad
Fonte: World Bank, Washington, D.C. Publicador: World Bank, Washington, D.C.
EN_US
Relevância na Pesquisa
56.07%
Using two surveys from Bangladesh, this paper provides evidence on the effects of microfinance competition on village moneylender interest rates and households' dependence on informal credit. The views among practitioners diverge sharply: proponents claim that competition of microfinance institutions reduces both the moneylender interest rate and households' reliance on informal credit, while the critics argue the opposite. Taking advantage of recent econometric approaches that address selection on unobservables without imposing standard exclusion restrictions, this paper finds that microfinance competition does not reduce moneylender interest rates, thus partially repudiating the proponents. The effects are heterogeneous; there is no perceptible effect at low levels of coverage, but when microfinance coverage is high enough, the moneylender interest rate increases significantly. In contrast, households' dependence on informal credit tends to go down after they become a member of a microfinance institution, which contradicts part of the critic's argument. The evidence is consistent with a model where microfinance institutions draw away better borrowers from the moneylender, and fixed costs are important in informal lending.

Financial Sector Policy Note : Financing Small and Medium-Sized Businesses in Burkina Faso

Soubeiga, Sidiki; Strauss, Jeremy
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Tipo: Economic & Sector Work :: Policy Note
ENGLISH; EN_US
Relevância na Pesquisa
66.1%
As in other Sub-Saharan African countries, small and medium-sized enterprises (SMEs) represent the vast majority of firms operating in the private sector in Burkina Faso. Private sector-led growth is a major element of Burkina Faso's poverty reduction strategy, la strategie de croissance accelere et le developpement durable. Unfortunately, many characteristics of Burkina Faso's business environment, and of businesses themselves, make private sector-led growth a challenge. This financial sector policy note focuses on the market for credit and closely related financial services, how private banks are providing these services to SMEs, and recommendations that address problems they are having. This requires understanding the behavior of banks with respect to SME lending, particularly investment lending and related financial products like leasing, guarantees, microcredit, and subsidized credit funds. This policy note consists of a study and survey of commercial banks and two non-bank financial institutions (NBFIs) (Burkina Bail and Societe Financiere de Garantie Interbancaire du Burkina (SOFIGIB) focusing on lending to SMEs. It focuses on the supply side of the market. The survey and accompanying interviews took place during the summer of 2013. Twelve private banks and five NBFIs were asked to participate in the study and survey. The study references two additional surveys focused on SMEs: (1) the 2009 World Bank enterprise survey...

Demand versus Returns? Pro-Poor Targeting of Business Grants and Vocational Skills Training

Macours, Karen; Premand, Patrick; Vakis, Renos
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Tipo: Publications & Research :: Policy Research Working Paper; Publications & Research
ENGLISH; EN_US
Relevância na Pesquisa
66.01%
Interventions aimed at increasing the income generating capacity of the poor, such as vocational training, micro-finance or business grants, are widespread in the developing world. How to target such interventions is an open question. Many programs are self-targeted, but if perceived returns differ from actual returns, those self-selecting to participate may not be those for whom the program is the most effective. The authors analyze an unusual experiment with very high take-up of business grants and vocational skills training, randomly assigned among nearly all households in selected poor rural communities in Nicaragua. On average, the interventions resulted in increased participation in non-agricultural employment and higher income from related activities. The paper investigates whether targeting could have resulted in higher returns by analyzing heterogeneity in impacts by stated baseline demand, prior participation in non-agricultural activities, and a wide range of complementary asset endowments. The results reveal little heterogeneity along observed baseline characteristics. However...

Remittances and Financial Inclusion : Evidence from El Salvador

Anzoategui, Diego; Demirgüç-Kunt, Asli; Martínez Pería, María Soledad
Fonte: Banco Mundial Publicador: Banco Mundial
Tipo: Publications & Research :: Policy Research Working Paper
ENGLISH
Relevância na Pesquisa
56.09%
This paper investigates the impact of remittances on financial inclusion. This is an important issue given recent studies showing that financial inclusion can have significant beneficial effects on households. Using household-level survey data for El Salvador, the authors examine the impact of remittances on households' use of savings and credit instruments from formal financial institutions. They find that although remittances have a positive impact on financial inclusion by promoting the use of deposit accounts, they do not have a significant and robust effect on the demand for and use of credit from formal institutions. If anything, by relaxing credit constraints, remittances might reduce the need for external financing from financial institutions, while at the same time increasing the demand for savings instruments.

Causes and Implications of Credit Rationing in Rural Ethiopia : The Importance of Spatial Variation

Ayalew Ali, Daniel; Deininger, Klaus
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Tipo: Publications & Research :: Policy Research Working Paper; Publications & Research
ENGLISH; EN_US
Relevância na Pesquisa
66.04%
This paper uses Ethiopian data to explore credit rationing in semi-formal credit markets and its effects on farmers' resource allocation and crop productivity. Credit rationing -- both voluntarily and involuntarily -- is found to be widespread in the sampled rural villages, largely because of risk-related factors. Political and social networks emerge as key determinants of access to credit among smallholder, peasant farmers. Significant regional variation emerges as well. In high-potential, surplus producing areas where credit is largely used for agricultural production, eliminating credit constraints is estimated to increase productivity by roughly 11 percentage points. By contrast, in low-productivity, drought prone areas where loans were rarely used to acquire inputs for crop production, the authors find no relationship between credit rationing and agricultural productivity. To be effective, efforts to improve agricultural productivity not only need to increase credit supply, but also explore the reasons for credit rationing and the availability of productive opportunities.

Bangladesh Development Update, April 2014

World Bank
Fonte: Washington, DC Publicador: Washington, DC
Tipo: Economic & Sector Work :: Economic Updates and Modeling
ENGLISH; EN_US
Relevância na Pesquisa
66.15%
Bangladesh moved closer to achieving the sixth five year plan target of reducing extreme poverty to 22.5 percent by 2015 as it sustained healthy gross domestic product (GDP) growth and moderate single digit inflation in FY2014. However, growth this year slowed relative to last year with declining remittances and losses due to political turmoil. Sound macroeconomic management kept inflation in check, although it increased somewhat due to the one-off effects of supply disruptions and wage increases. Official foreign exchange reserves increased to an adequate level as Bangladesh Bank intervened to keep the exchange rate stable. Weak demand for credit reduced interest rates. Monetary policy remained prudent while fiscal management challenged by shortfall in tax revenue, demand for support from sectors adversely affected by the political turmoil, and under-utilization of development budget. The fund's extended credit facility (ECF) is on track. Immediate challenges are to boost investments in power and roads; manage the transition in readymade garments; and stem the decline in remittances.

The Kenya Rural Enterprise Program : Directing Credit to Low-Income Groups; Le programme d'aide aux entreprises rurales au Kenya : diriger les credits vers les groupes a revenus modesties

Pederson, Glenn D.; Kiiru, Washington K.
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Tipo: Publications & Research :: Brief; Publications & Research
ENGLISH
Relevância na Pesquisa
76.03%
The lack of credit facilities in Kenya's rural areas is a significant obstacle to building a sustainable rural financial market. A recent estimate placed the gap between the level of credit supplied and the effective demand for credit at some Ksh. 57 billion. The Government of Kenya has, since the early 1990s, shown an interest in the development of small-scale and micro-enterprises. The Kenya Rural Enterprise Program (K-REP) was established in 1984 as an intermediary Non Government Organization (NGO), providing credit for on lending and technical assistance to other NGOs. To promote growth and generate employment in the micro-enterprise sector, K-REP lends to clients who would otherwise find it extremely difficult to access credit from commercial banks and other formal financial institutions. Its operations are currently concentrated in Nairobi, Nyeri, Eldoret and Embu. Kenya Rural Enterprise Program: case study of a micro-finance scheme documents K-REP's innovations and performance, and provides some insight on how to improve micro-finance programs.

Increasing Revenues for India Post through Expanding Channeling of Financial Services

World Bank
Fonte: Washington, DC Publicador: Washington, DC
Tipo: Economic & Sector Work :: Other Financial Sector Study; Economic & Sector Work
ENGLISH; EN_US
Relevância na Pesquisa
65.97%
This report analyzes possibilities for increasing revenues for India Post through expanding channeling of financial services. The Indian postal network is among the largest networks in the world in terms of area covered and population served, and constitutes an important mechanism of achieving transportation and communication. Within India Post, the Post Office Savings Bank (POSB) is one of the oldest and largest financial institutions (with largest deposit base) in the country. The key objective of POSB is to provide people living in rural, semi-urban, remote and inaccessible areas of the country with an easy and reliable means of making investments, making remittances and operating savings accounts. It is of strategic importance for POSB to increase market-based revenues so as to gain better control of its market orientation and revenue structure. In addition, though POSB still retains competitive advantages over commercial banks, it will not be long before the competition replicates these advantages. Hence...