The role of microcredit in promoting financial and social inclusion

Funder

Organizational Unit

Publications

Microfinance – A Theoretical and Empirical Assessment

Publication . Nogueira, Serafim Agostinho Gomes; Duarte, Fábio; Gama, Ana Paula

This master thesis consists in two chapters addressing the topic of Microfinance. Since the emergence, in the 1970s, of Grameen Bank by the hand of Muhammad Yunus, Microfinance industry has gained a space that results from a path that we can analyse theoretically and empirically. The first chapter scrutinizes the theoretical framework on the Microfinance topic. Heeding the call for more research on the role of microfinance for achieving social, economic, and financial inclusion, this paper provides a systematic literature review of the growing research domain depicts the current state of this dynamic setting in which scholars and policy makers investigate and develop microfinance practices—especially in relation to entrepreneurial finance. Using a bibliometric analysis, we identify three main dimensions of microfinance that guide academic research: (1) social considerations, (2) economic effects, and (3) the performance of microfinance institutions (MFIs). The study evidences that most literature continues to concentrate on developing countries, reflecting the success of microfinance as an instrument to promote social and economic development, mainly through microcredit programs. In addition, a keyword co-occurrence analysis reveals that despite growing interest in both financial inclusion and entrepreneurship domains, these areas remain underexplored empirically. The results provide promising opportunities for further research, as well as potential routes to extend current theoretical and empirical analyses of microfinance research to developed countries, according to an entrepreneurial finance context. The second chapter investigates the role of entrepreneurial motivation and repayment performance on credit terms’ in the context of Portuguese microcredit industry. Using data from the organization which first promoted and most consistently developed MC in Portugal – ANDC, covering 2,060 micro-loans granted to micro-entrepreneurs/micro-enterprises between 1999 and 2015, our results show that Portuguese microcredit industry tend to lend higher amounts of credit with longer maturities to entrepreneurs who have lower likelihood of repayment (entrepreneurs moved by necessity). The focus on these riskier entrepreneurs led us to confirming the argument that MC is a prosocial instrument, following its initial belief.

2020Master thesis

Restricted access

Microcredit – Literature and Effectiveness to Reduce Micro and Small Firms’ Financial Constraints

Publication . Ribeiro, João Paulo Coelho; Duarte, Fábio; Gama, Ana Paula Matias

Financial constraints have been a constant research topic on the literature. For micro and small firms, their impact is particularly important considering their reliance on credit to survive. These firms are the responsible for much of the market dynamism. In this master dissertation, we aim to explore microcredit (MC) and microfinance (MF) as banking specialization to finance micro and small firms. Created by Professor Muhammad Yunus, MC’s concept arises in Bangladesh in 1970’s with the purpose of fighting poverty in less developed countries. Positive experiences in this context encouraged MC to be replicated in developed countries, where it can be addressed to support problems of micro and small firms’ financial constraints. These topics has been raising attention through the years. The United Nations Economics and Social Council declared the year 2005 as the “International Year of Microcredit”. In 2006 Yunus was awarded with the Nobel Peace Prize. Recently, in 2019, the Nobel Economic Prize was attributed to Abhijit Banerjee, Esther Duflo and Michael Kremer for their approach in alleviating global poverty. The dissertation is divided in two chapters. In the first we measure the academic productivity related to MC and MF aiming to identify research trends and empirical gaps. To do so, we conduct a bibliometric analysis considering business, economics, business finance and management research. Collecting data from Institute for Scientific Information (ISI) Web of Science, we separate research into three clusters: “Performance”, “the relationship between microcredit and entrepreneurs’ social characteristics” and “gender and entrepreneurship”. Exploring the performance cluster, our study reveals that MC and MF research are largely oriented to Microfinance Institutions (MFIs), given little attention to the borrowers’ perspective. Moreover, performance articles in the borrowers’ perspective reveal a lack of studies on developed countries. In the second chapter, we explore MC and MF as small business lending specialization and it effect on credit constraint’s mitigation. In order to explore the European context, we use a cross-country dataset collected from Survey on Access to Finance of Enterprises (SAFE) and complement with market and macroeconomic variables consulted on World Bank Development Indicators (WBDI). Our sample include information from 38 countries being nearly 95% developed countries, considering a time period between 2008 e 2018. Our findings reveal strong evidences that applying for a loan on an MFI reduces credit rationing for micro and small firms. However, we found that borrowers with past relationship lending with MFIs are more discouraged to apply for a new loan.

2020Master thesis

Restricted access