Working Papers Series

This Working Papers Series is published by the Rural Microfinance and Employment project (RUME). This project has been selected in December 2007 by the French National Agency for Research (programme: Les Suds, Aujourd’hui). The main objective of this research is to explore the linkages between rural finance and rural employment - including diversification and migration - with a view to contributing to the ongoing discussions and interventions in the fields of rural development and poverty and vulnerability reduction.

Explaining heterogeneity in microcredit take-up rates and repayment defaults in rural Morocco: the role of social norms and actors

Isabelle Guérin, Solène Morvant-Roux, Marc Roesch, Jean-Yves Moisseron - May 2012

This Working Papers Series is published by the Rural Microfinance and Employment project (RUME). This project has been selected in December 2007 by the French National Agency for Research (programme: Les Suds, Aujourd’hui). The main objective of this research is to explore the linkages between rural finance and rural employment - including diversification and migration - with a view to contributing to the ongoing discussions and interventions in the fields of rural development and poverty and vulnerability reduction.

Working Paper 18

The political economy of micro entrepreneurship for women: why does microfinance fail to promote self-employment in rural south-India?

Isabelle Guérin, Marc Roesch, Venkatasubramanian - February 2012

For the past two decades, microfinance has been considered an efficient tool for self-employment creation in developing countries, especially for women. This has been particularly true in rural India, where through strong support from public authorities, international donors and local NGOs, the microfinance sector has developed considerably over the past decade. This paper draws on institutional political economy and on several micro-studies conducted in rural areas in Tamil Nadu to demonstrate that the impact of microfinance on self-employment is in fact very limited. The first section addresses the inherent fuzziness of “self-employment” as a concept. If the term is restricted to entrepreneurs who genuinely control the means of production and access to the market, then the proportion of self-employed people is in fact much smaller than what is usually claimed. As in many other rural areas, Indian rural employment is characterized by the increasing importance of non-agricultural income. However this is mostly derived from waged and casual labour, and is mostly based on a daily wage or piece rate. The second part of this paper demonstrates that in the context studied here, contrary to official rhetoric, the direct effects of microfinance on households’ livelihood portfolios are in fact very limited. On the one hand, microloans are largely used for purposes that do not generate direct income, such as health, education and the repayment of pre-existing debts. Moreover, little potential exists for the expansion of self-employment. Besides households’ risk aversion, local market functioning is a key explanatory factor, in particular owing to a lack of local demand, alongside the hierarchical structure and social segmentation of the local markets.

Working Paper 17

Debt in Rural South India: Fragmentation, Social Regulation and Discrimination

Isabelle Guérin, Bert D’Espallier, Marc Roesch, Venkatasubramanian - July 2011

This micro-level study combines multivariate statistics and qualitative analysis to highlight the fragmented nature of debt in southern Indian rural households. It finds that debt is socially regulated inasmuch as social interactions shape the cost, use and access to debt, for which caste, class and locality are the key indicators. Caste, social class and location affect how individuals borrow varying amounts from distinct money providers, for varied purposes and at differing costs. Debt thus amounts not merely to a purely economic transaction, but first and foremost a social relationship, which inscribes debtors and creditors into local systems of hierarchies. It is also an illustration and catalyst of broader socio-economic and political trends, namely a lack of social protection, persistent under-employment and rising consumerism. In terms of policy implications, the study highlights the ambiguities and illusions inherent to “financial inclusion” policies aiming to eradicate informal debt.

Working Paper 16

Liquidity Constraints and Land Tenancy Market Participation: Evidence from Lac Alaotra Region (Madagascar)

Ulrich Zombre, Emmanuelle Bouquet - July 2011

This article intends to explore the relationship between liquidity constraints faced by households and their participation in the tenancy market, using original data from Madagascar and a combination of qualitative and quantitative analysis. By showing how households combine credit and land inputs in their strategies and behaviour, the paper intends to bridge gaps between the often disconnected strands of literature dealing with credit on the one side, land markets on the other side. Our results show that liquidity constraints play a role both on the supply and on the demand side. On the supply side, they contribute to the decision to lease out land, and the nature of the constraint can drive the contractual choice: fixed-rent with ex ante payment in case of immediate need of cash, share-tenancy otherwise …. On the demand side, liquidity constraints drive the contractual choice towards share tenancy. As such, share tenancy can be conceived of as a compromise for household who face liquidity constraints on both supply and demand side. Our data also indicate that the level of fixed-rent is substantially lower than the expected value of the share of the production in the case of share tenancy. The difference can be interpreted as a quasi-loan from landowners to tenants, even when landowners are themselves liquidity constrained for the cultivation of their plots.

Working Paper 15

The social meaning of over-indebtedness and creditworthiness in the context of poor rural South Indian households (Tamil Nadu)

Isabelle Guérin, Marc Roesch, Venkatasubramanian, Santosh Kumar - January 2011

Drawing on field work done in rural South India, where consumer credit has dramatically increased over the last decade, the chapter analyses the processes through which contemporary forms of debt lead to pauperization and misery. The authors’ findings suggest that in the villages studied here, households’ over-indebtedness is shaped by and constitutive of broader socioeconomic and political changes. More specifically, households’ over-indebtedness illustrates the contradictions of the urbanization and “modernization” of rural south-India. Of course over-indebted households struggle to meet ends and face material poverty. But some of them also have growing social aspirations which are hardly compatible with income uncertainty and job precariousness. Social aspirations translate not only into costly needs but also into the willingness to engage into market debt relationships which are also more costly financially than traditional relationships of dependency and patronage. In other words, those who are the bottom of the hierarchy are faced with a Faustian choice, between on the one hand the financial price of the market and on the other hand the social cost of dependency.

Working Paper 14

Credit for whom and for what? The diversity of borrowing sources and borrowing uses in south-India

Isabelle Guérin, Bert D’Espallier, Marc Roesch, Venkatasubramanian - August 2010

This article aims to deepen understandings of poor household borrowing practices by drawing on a case study from rural Southern India. It combines descriptive statistics and qualitative analysis to show how households juggle with a wide range of borrowing sources and that each serves very specific purposes. Our research has implications for both theory and practice. From a theoretical perspective we suggest that the neoclassical cost/benefit framework often used to analyze debt decisions should be enlarged to include social criteria in line with recent insights from economic anthropology and political economy. From a policy perspective, we argue that all things being equal, local financial arrangements might have important comparative advantages over traditional microfinance products.

Working Paper 13

Social Boundaries and Economic Dilemmas in Micro-financial Practices

Magdalena Villarreal - April 2010

The paper discusses the ways in which social, cultural and economic issues are articulated and framed in people’s everyday financial practices, particularly within low income population sectors. I use studies from Mexico, where micro-lending organizations have mushroomed, to discuss the relevance of non commoditized transactions and the differential value attributed to goods, property, and money, and to sustain the argument that social, cultural, domestic, ethnic and power relations are part of the economy’s constituent elements. These relations, although they might not, strictly speaking, be defined as capitalist, may act to mediate and structure monetary elements.

Working Paper 12

The multiple times of debt bondage and its practices in southern India: Temporary protection and over-indebtedness

David Picherit - January 2010

This article is a study of the multiple temporal dimensions of social and power connections linked to and by debt, but also the stakes, negotiations, and resistance that they engender between maistris and debt-bonded laborers. The objective is, on the one hand, to examine how time, an essential dimension of bondage, is controlled and negotiated at different levels, as much by the maistri as by the workers, and on the other hand, how tactics to shorten the time of domination – and thus personalized protection, trust, and loyalty – are susceptible to lead to over-indebtedness, considered as a gap between the two inherent terms in the relationship of debt, exploitation and protection. The search for less personalized multiple and temporary protection(s) is just as much a quest for dignity and markers of insecurity that oblige reimbursement. Firstly, I will discuss how the power of debt plays out in the time control of workers at different levels, from the village to the workplace and labor camps, in general to the production of power in merest acts of daily life. Secondly, the study of the heterogeneity of the bonded laborers will allow for the analysis of the variable relations to the times of domination and debt.

Working Paper 11

Understanding the diversity and complexity of demand for microfinance services: lessons from informal finance

Isabelle Guérin, Solène Morvant-Roux, Jean-Michel Servet - December 2009

There is growing consensus that microfinance supply is too standardised, inflexible and inadequate given the diversity of financial needs). As a result, microfinance is a very partial substitute for informal financial services and their comparative advantages. This paper aims to deepen understanding of financial service demand by learning from informal finance. Based on economic anthropology, our analysis shows that microfinance does not substitute informal finance for many reasons: because money and informal finance are multidimensional and context specific, because the boundary between saving and borrowing is blurred, because money circulates in small quantities and quickly in village economies, because informal finance is more flexible, and, last but not least, because informal finance is a vector of social inclusion.

Working Paper 10

Microfinance and the dynamics of financial vulnerability. Lessons from rural South India

Isabelle Guérin, Marc Roesch, Venkatasubramanian, Mariam Sangare, Santosh Kumar - December 2009

Drawing on data collected in rural South India, and using mainly a comprehensive approach, the purpose of this paper is to analyse the effects of microfinance on the financial vulnerability of its clients. First, we observe that microfinance is a double-edged sword: it can either reduce the financial vulnerability of households or push them further into debt. Second, we argue that an understanding of the uses and processes of microfinance is inseparable from one of the broader local dynamics pertaining to employment, financing and consumption. We also argue that the effects of microfinance depend upon how clients articulate and coordinate microfinance with the other financial tools to which they have access and the whole range of strategies deployed to cope with vulnerability and to build assets, both tangible and intangible.

Working Paper 9

Acces to microcredit and continuity of indebtedness dynamics in rural Mexico: Combining economics anthropology with econometrics

Solène Morvant-Roux - August 2009

This article aims at studying the interactions that are taking place between microfinance and households’ indebtednesses strategies. The strict opposition between two financial sectors is neither pertinent nor operational. Boundaries between the various forms of indebtedness are hazy. An anthropological approach reveals a complex cash management, not only at the household level but, more globally, at the level of the social network. Thus microfinance borrowers continue to mix the various modalities of obtaining liquidity and thus participate in maintaining the “debt chain” system, with any actual substitution therefore being very limited in scope. These results are confirmed by a statistical and econometrical analysis proving that access to microcredit is neither at odds with indebtedness within the social network, nor brings about any reduction in liquidity supply to the social network.

Working Paper 7

Rice inventory credit in Madagascar: Conditions of access and diversity of rationales around and hybrid financial and marketing service

Emmanuelle Bouquet, Eliane Ralison, Betty Wampfler - August 2009

The Malagasy rural finance network CECAM has been offering an innovative individual rice inventory credit to its members since 1993. Starting from the acknowledgement that the inventory credit is a hybrid product, which involves a mix of in kind and in cash flows and stocks, a mix of credit and savings features, and linkages with the local rice market, the papers sets out to inquire how it is accessed, used, and inserted in the strategies of different wealth categories of Cecam members. The paper is based on an analysis of quantitative and qualitative data that were collected in several phases during a 4 year impact study conducted by the authors from 2003 to 2007. Evidence suggests that the Cecam inventory credit is globally well suited to the differentiated needs of poor as well as nonpoor households, because it lowers the access thresholds, it enhances the value of their rice production (be it for consumption or sale) and it allows them to pursue different kinds of strategies (more food security oriented for the poor, more entrepreneurial and diversification oriented for the non poor).

Working Paper 6

Women and income generating activities: Understanding motivations by priotising skill, knowledge and capabilities

M. Thanuja - June 2009

With controversial results, both supporting and not the assumption that microfinance can promote income generating activities, this paper attempts to demonstrate that the livelihood framework can be useful in such assessment. The paper proposes this framework given its scope for exploring and drawing attention to women’s strategies, their motivations, skill, knowledge and capabilities. Using qualitative data (life experiences of six women) from two villages in Tamil Nadu, South India, the paper demonstrates the significance of paying attention to socio-economic dynamics through this approach.

Working Paper 5

Women and repayment in microfinance

Isabelle Guérin, Bert D’Espallier, Roy Mersland - March 2009

This paper analyzes gender-differences with respect to microfinance repayment-rates using a large global dataset covering 350 Microfinance Institutions (MFIs) in 70 countries. The results indicate that more women clients is associated with lower portfolio-at-risk, lower write-offs, and lower credit-loss provisions, ceteris paribus. These findings confirm common believes that women in general are a better credit-risk for MFIs. Interaction effects reveal that the effect is stronger for NGOs, individual-based lenders, ‘finance plus’-providers and regulated MFIs. This indicates that two types of MFIs benefit more than others from focussing on women: First, those MFIs that develop hands-on, women-friendly procedures tailored to individual women’s need, and Second, those MFIs that apply coercive enforcement methods to which women are more responsive.

Working Paper 4

Gender bias in microfinance

Isabelle Guérin, Bert D’Espallier, Roy Mersland - November 2009

While most gender studies on microfinance have concentrated on possible women empowerment, few have asked why some microfinance institutions (MFIs) target women while others do not. This paper provides empirical evidence on the existence and consequences for an MFI of having a conscious gender bias towards women in microfinance. Specifically, using a global dataset of 379 MFIs in seventy-three countries, we investigate what characterizes MFIs that have a gender bias and how this bias affects various aspects of financial performance. The results indicate that a conscious gender bias is associated with group lending methodologies, international orientation, female leadership, smaller loans, and a non commercial legal status. With respect to performance we find that having a conscious gender bias significantly improves repayment but does not enhance overall profitability. We find that the positive repayment effect associated with a focus on women is offset by higher costs related to smaller loans, leading to similar overall profitability measures.

Working Paper 8

Poor Women and their Money: between Daily Survival, Private Life, Family Obligations and Social Norms

Isabelle Guérin - December 2008

This article examines the complexity and diversity of women’s informal financial practices and circuits using data from surveys conducted in Senegal and South India. A micro level analysis reveals the subtlety and complexity of these practices and circuits: apart from economical constraints, these practices express, reproduce, update and sometimes modify the range of personal and social relations in which these women are embedded. Our analysis also reflects the burden of the current norms and institutions for women of the two social groups studied, particularly with respect to matrimonial alliances, property rights and access to the labour market. Moreover, our analysis highlights the ongoing process of interpretation, adjustment and, sometimes, circumvention of these norms, and it is precisely this incessant work of adaptation that explains the heterogeneity of the arrangements and trajectories that we observed.

Working Paper 3

The Social Life of Microfinance Projects: Brokerage and Resistance.

Isabelle Guérin - January 2009

Risk management (especially the risk of borrowers’ default) and loyalty are one of the main challenges of microfinance organizations. While these two components have been mainly analyzed in a technical and economical perspective, our observations in South-India suggest that daily and ordinary practices of risk and loyalty management are embedded into local social and political relationships. Far from being market relations, reduced to financial transactions and isolated from personal issues, the relationships between borrowers and microfinance NGOs are based on patronage and brokerage, socially built thanks to the active role of credit officers and group leaders who play simultaneously a role of intermediary, mediator, interface, adjustment. As with any patron-client relationship, these relations are characterised by the diversity of goods and services exchanged, be it of an economic, social, moral or political nature: support, protection, loyalty are at the heart of the relationship. They are also characterised by reciprocity of a hierarchical type, but this asymmetry doesn’t prevent resistance, protests and power struggles from the client’s side.

Working Paper 2

La microfinance, un objet de pouvoir de plus ? Conflit en Andhra Pradesh

Cyril Fouillet, Britta Augsburg - November 2008

RUME Working Paper 1, November 2008

En nous appuyant sur notre travail de terrain et sur la situation microfinancière en Andhra Pradesh, nous tenterons de comprendre les relations conflictuelles entrainées par l’introduction de la microfinance. Nous reviendrons tour à tour sur le point de vue des différents acteurs impliqués dans cette configuration et tenterons d’en dessiner les contours et les enjeux.

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