Zeller Peru Bangladesh

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  • Thanks. The objective of my paper is to discuss whether different institutions for microfinance differ in their width and depth of poverty outreach, and to draw conclusions about their management emphasis. Following the structure of my paper, I begin my presentation (next slide)....
  • Zeller Peru Bangladesh

    1. 1. Is There a Difference in Poverty Outreach by Type of Microfinance Institution? The Case of Peru and Bangladesh Manfred Zeller Institute of Agricultural Economics and Social Sciences in the Tropics and Subtropics University of Hohenheim, Stuttgart, Germany Julia Johannsen Institute of Rural Development Georg-August-University Göttingen, Germany Global Conference on ‘ Access to Finance: Building Inclusive Financial Systems’ of The World Bank and the Brookings Institution in Washington, D.C., May 30 and 31, 2006
    2. 2. Outline of presentation <ul><li>Changing paradigms and policy objectives in development finance </li></ul><ul><li>Types of financial institutions </li></ul><ul><li>Sampling design and poverty lines </li></ul><ul><li>Poverty outreach of MFIs </li></ul><ul><ul><li>Bangladesh </li></ul></ul><ul><ul><li>Peru (national and MFI sample) </li></ul></ul><ul><li>Conclusions </li></ul>
    3. 3. The triangle of finance: Synergies and trade-offs Sourc e: Zeller, M., and Meyer, R.L. 2002. The triangle of microfinance: Financial sustainability, outreach, and impact. Book published by IPPRI/John Hopkins Univ, Dec. 2002. Outreach (Breadth and Depth) Welfare impact (Direct/Indirect) Financial sustainability
    4. 4. Types of financial institutions <ul><li>Semi-formal Institutions (NGO-MFIs) </li></ul><ul><li>Member-based institutions: </li></ul><ul><li>(1) Credit unions </li></ul><ul><li>(2) Village banks (supported by NGOs) </li></ul><ul><li>Micro-banks, l ending technologies: </li></ul><ul><li>Individual and solidarity group lending, </li></ul><ul><li>linkage model (with pre-existing self-help groups) </li></ul><ul><li>Other: </li></ul><ul><li>(1) Public banks (sectoral, agricultural, rural) </li></ul><ul><li>(2) private commercial banks with MF windows </li></ul>
    5. 5. Sampling design <ul><li>Nationally representative self-weighing sample of 800 households (IRIS Center) </li></ul><ul><li>Multi-stage cluster sampling </li></ul><ul><li>Probability-proportionate-to-size (PPS) </li></ul><ul><li>Bangladesh: 10 counties (Thanas) in 5 divisions (x 80 hhs) </li></ul><ul><li>Peru: 8 of 24 departments (x 100 hhs), controlling for 7 geographic areas (rural/urban macro-regions): </li></ul><ul><ul><li>Lima Metropolitan, Urban/Rural Coast, Urban/Rural Highland, Urban/Rural Lowland </li></ul></ul><ul><li>Peru: 6 purposefully selected MFIs (1175 client hhs) </li></ul>
    6. 6. Poverty lines in Peru Source: adapted from Zeller, Johannsen and Alcaraz (2005) Regionally disaggregated national and median poverty line and international $2 and $1-poverty line 4.16 4.16 4.16 4.16 4.16 4.16 4.16 2.08 2.08 2.08 2.08 2.08 2.08 2.08 8.45 6.99 4.75 6.01 3.93 5.81 4.04 5.98 4.68 3.04 4.04 2.38 3.83 2.60 Lima Metrop. Urban Coast Rural Coast Urban Highland Rural Highland Urban Highland Rural Lowland Internat. 2$ Poverty Line (Soles/pers/day) Internat. $1 Poverty Line (Soles/pers/day) National Poverty Line (Soles/pers/day) Median Poverty Line (Soles/pers/day) Expenditures July 2004 Region
    7. 7. Poverty lines in Bangladesh Source: adapted from Zeller, Johannsen and Alcaraz (2005) Regionally disaggregated national and median poverty line and $1-poverty line 23.10 23.10 23.10 23.10 23.10 23.10 23.10 23.10 22.96 17.05 21.84 20.94 24.85 19.47 20.16 17.57 24.80 22.24 27.77 27.06 30.22 23.18 25.97 21.90 Rural Dhaka Rural Faridpur, Tangali, Jamalpur Rural Sylhet, Comilla Rural Noakhali, Chittagong Urban Khulna Rural Barishal, Pathuakali Rural Rajshahi, Pabna Rural Bogra, Rangpur, Dinajpur Internat. $1 Poverty Line (Taka/pers/day) Median Poverty Line (Taka/pers/day) National Poverty Line (Taka/pers/day) Expenditures July 2004 Region
    8. 8. Gender and residence of clients in Bangladesh (N=2209 adults) (100%) 53.0% 47.0% 21.6% 78.4% Total 49.6% 50.4% 19.8% 80.2% Non-clients 2.7% 53.8% 46.2% 69.2% 30.8% Other (private bank, coop, etc.) 4.7% 54.2% 45.8% 8.3% 91.7% Other governmental institution providing microfinance 28.7% 7.6% 92.4% 16.0% 84.0% Public bank 63.9% 90.5% 9.5% 32.6% 67.4% NGOs providing microfinance Share (%) of total clients Sex of client FEMALE MALE Does client live in rural area? NO YES Main type of financial institution
    9. 9. Poverty outreach in Bangladesh 27.8 35.1 16.6 37.2 Mean Total (N=2209) 28.1 35.7 16.5 37.1 Mean Non-clients (N=1700) 30.8 30.8 30.8 39.2 Mean Other (private bank, coop, etc.) 8.3 8.3 8.3 52.7 Mean Other government institutions providing microfinance(N=24) 16.7 25.0 7.6 42.2 Mean Public bank (N=144) 32.3 38.7 21.0 34.6 Mean NGOs providing microfinance (N=328) Below the internat. Poverty line ($PPP 1.08 at 1993 prices) Below the national poverty line (adj. by regions)(%) Below the median poverty line (adj. by regions)(%) Daily expenditures per capita (Taka) Main type of financial institution
    10. 10. Poverty by length of membership 27.8 35.1 16.6 37.2 Mean Total (N=2209) 28.1 35.6 16.5 37.1 Mean Non-clients (N=1700) 17.0 20.1 8.8 42.8 Mean Longer than five years (N=159) 29.0 38.5 20.0 37.4 Mean Two to Five years (N=200) 34.0 40.0 21.3 32.7 Mean Less than two years (N=150) Below the internat. Poverty line ($PPP 1.08 at 1993 prices) Below the national poverty line (adj. by regions) (%) Below the median poverty line (adj. by regions) (%) Daily expenditures per capita (Taka) Length of client relationship (in approx. terciles)
    11. 11. Gender and residence of clients in Peru (N=2325 adults) (100.0%) 48.6% 51.4% 71.0% 29.0% Total 47.0% 53.0% 70.1% 29.9% Non-clients 16.6% 72.0% 28.0% 72.0% 28.0% Other (NGO, rural savings banks, coop, etc.) 23.2% 77.1% 22.9% 74.3% 25.7% Municipal Savings and Loan Banks (CMACs) 37.7% 75.4% 25.7% 93.0% 7.0% Private banks (including micro-banks such as MiBanco) 22.5% 58.8% 41.2% 88.2% 11.8% Public bank (Banco de la Nacion) Share (%) of total clients Sex of client FEMALE MALE Does client live in rural area? NO YES Main type of financial institution
    12. 12. Poverty outreach in Peru 9.1 9.6 8.0 0.0 0.0 2.9 Below the internat. Poverty line($PPP 1.08 at 1993 prices) 32.0 51.7 28.0 7.4 Mean Total (N=2325) 33.5 53.6 29.2 7.2 Mean Non-clients (N=2174) 20.0 28.0 8.0 10.3 Mean Other (NGO, rural savings bank, coop, etc.) (N=25) 2.9 25.7 0.0 9.4 Mean Municipal Savings and Loan Banks (N=35) 3.5 21.1 8.8 11.8 Mean Private banks (including MiBanco) (N=57) 23.5 26.5 23.5 10.2 Mean Public bank (Banco de la Nacion) (N=34) Below the internat. Poverty line($PPP 2.16 at 1993 prices) Below the national poverty line(adj. by regions) (%) Below the median poverty line(adj. by regions) (%) Daily expenditures per capita (Soles) Main type of financial institution
    13. 13. Poverty rate, by participation in formal savings 32.5 10.0 50.4 26.9 7.6 Mean Total (N=800) 11.4 2.9 21.4 5.7 12.8 Mean YES (N=70) 34.5 10.7 53.2 28.9 7.0 Mean NO (N=730) Below the internat. Poverty line($PPP 2.16 at 1993 prices) Below the internat. Poverty line($PPP 1.08 at 1993 prices) Below the national poverty line(adj. by regions) (%) Below the median poverty line(adj. by regions) (%) Daily expenditures per capita (Soles) Household has a formal savings account
    14. 14. 6 selected MFIs <ul><li>EDYFICAR, registered NGO (non-bank financial institution, only credit) </li></ul><ul><li>CRAC Cruz de Chalpon (rural savings and loan bank) </li></ul><ul><li>CMAC Chincha (municipal savings and loan bank) </li></ul><ul><li>Coop San Isidro Huaral (cooperative) </li></ul><ul><li>Coop San Pedro Andahuaylas (cooperative) </li></ul><ul><li>CARITAS (NGO) </li></ul><ul><li>none with explicit women targeting </li></ul><ul><li>only San Pedro and Caritas with rural/poverty targeting objective </li></ul>
    15. 15. Poverty outreach of 6 MFIs 44.5 43.5 16.0 6.4 Coop San Pedro Andahuaylas (N=200) 1.5 15.5 4.0 12.2 Coop San Isidro Huaral (N=200) 6.0 22.0 5.5 10.3 Caritas (N=200) 6.0 38.5 8.0 10.2 CMAC Chinca (N=200) 9.7 23.4 12.6 11.5 CRAC Cruz de Chalpon (N=175) 2.5 41.0 16.5 10.7 Edyficar (N=200) Below the internat. Poverty line ($PPP 2.16 at 1993 prices) Below the national poverty line (adj. by regions) (%) Below the median poverty line (adj. by regions) (%) Daily expenditures per capita (Soles) Main type of financial institution
    16. 16. Conclusions-1 <ul><li>Main institution types in samples (legal status): </li></ul><ul><ul><li>(semi-formal) NGOs/solidarity groups, cooperatives (member-based, peer pressure) </li></ul></ul><ul><ul><li>public banks, private banks, micro-banks (information asymmetry) </li></ul></ul><ul><li>Bangladesh: 46% client households </li></ul><ul><ul><li>NGOs! (solidarity group lending) </li></ul></ul><ul><li>Peru: 19% client households </li></ul><ul><ul><li>heterogeneous sector (transformed in 90s, micro-banks!) </li></ul></ul>
    17. 17. Conclusions-2 <ul><li>Bangladesh: higher breadth of outreach! </li></ul><ul><ul><li>microfinance since 1970s </li></ul></ul><ul><ul><li>high population density, low administrative costs </li></ul></ul><ul><li>Peru: </li></ul><ul><ul><li>mistrust in formal institutions: inflations 1980s (savings losses!), guerilla war 1980s-90s </li></ul></ul><ul><ul><li>heterogeneous geography (Andes, rainforest) </li></ul></ul><ul><li>Bangladesh: higher depth of outreach, NGO-MFIs! Peru: cooperatives! </li></ul><ul><ul><li>length of membership: 5 yrs vs. 3 yrs (Peru) </li></ul></ul><ul><ul><li>->mutual trust </li></ul></ul><ul><ul><li>declining poverty pattern with increasing length of membership </li></ul></ul>
    18. 18. Conclusions-3 <ul><li>Bangladesh: 29% saving hhs, Peru: 9% </li></ul><ul><li>mainly demand constraints by poor for existing savings products </li></ul><ul><li>-> Does institution type really matter? </li></ul><ul><ul><li>mission!: management emphasis (triangle!) </li></ul></ul><ul><ul><li>ownership -> social investors </li></ul></ul><ul><ul><li>targeting strategy: rural, women, poor; instruments? </li></ul></ul><ul><ul><li>social capital/ pressure (member-based institutions) </li></ul></ul>
    19. 19. THIS IS THE END …
    20. 20. Old versus new paradigm <ul><li>Old paradigm of sector-directed, supply-led and subsidized credit: </li></ul><ul><ul><li>faulty assumptions about demand (i.e. “need”) </li></ul></ul><ul><ul><li>focus not on financial sustainability of institution, but on (depth) of outreach. Impact was assumed . </li></ul></ul><ul><li>New paradigm: </li></ul><ul><ul><li>focus on institution and systems building </li></ul></ul><ul><ul><li>liberalization of financial markets as necessary but not sufficient condition for deepening financial systems  need institutional and technological innovations to reduce transaction costs </li></ul></ul><ul><ul><li>Demand orientation, three objectives </li></ul></ul>
    21. 21. Relative poverty outreach of Grameen Bank, by expenditure terciles 100.0% Total 31.6% 3 33.3% 2 35.1% 1 Client households of Grameen Bank Tercile of daily per-capita expenditures from geographic subsample of nationally representative sample (N=400)
    22. 22. Relative poverty outreach of BRAC, by expenditure terciles 100.0% Total 20.0% 3 32.0% 2 48.0% 1 Client households of BRAC Tercile of daily per-capita expenditures from geographic subsample of nationally representative sample (N=559)
    23. 23. Relative poverty outreach in Bangladesh 21.5% 19.9% 19.2% 21.3% 18.2% 100.0% 24.1% 7.3% 37.5% 22.8% 18.7% 21.5% 21.1% 25.0% 16.2% 21.1% 25.0% 37.5% 15.4% 31.7% 50.0% 25.0% 100.0% 100.0% 100.0% 100.0% 1 2 3 4 5 Total Non-clients (N= 428) Main type of financial institution NGOs Public Other government Other providing bank institution (private microfinance providing bank, microfinance coop, etc.) (N=228) (N=123) (N=12) (N=8) Quintile of daily per-capita expenditures from nationally representative sample
    24. 24. Relative poverty outreach in Peru 22.4% 21.1% 19.7% 18.6% 18.1% 100% 8.7% 11.8% 26.1% 7.9% 3.7% 17.6% 23.6% 40.7% 11.8% 43.5% 18.4% 29.6% 35.3% 21.7% 47.4% 25.9% 23.5% 100.0% 100.0% 100.0% 100.0% 1 2 3 4 5 Total Non-clients Main type of financial institution Public bank Private banks Municipal Other (Banco de (includes Savings and (NGO, rural la Nacion) micro-banks) Loan Bank savings bank, (CMACs) coop, etc.) Quintile of daily per-capita expenditures from nationally representative sample (N=800)
    25. 25. Poverty by length of membership 32.0 9.1 51.7 28.0 7.4 Mean Total (N=2325) 33.5 9.6 53.6 29.2 7.2 Mean Non-clients (N=2174) 9.8 0.0 13.7 7.8 12.6 Mean Longer than 1 year and 7 months (N=51) 8.2 4.1 26.5 10.2 10.2 Mean Longer than 1 year and less than or equal to 1 year and 7 months (N=49) 13.7 1.0 33.3 11.8 9.1 Mean Less than or equal to 1 year (N=51) Below the internat. Poverty line($PPP 2.16 at 1993 prices) Below the internat. Poverty line($PPP 1.08 at 1993 prices) Below the national poverty line(adj. by regions) (%) Below the median poverty line(adj. by regions) (%) Daily expenditures per capita (Soles) Length of client relationship (in approx. Tercile ranges)

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