Information, the Cost of Credit, and Operational Eﬃciency: An Empirical Study of Microfinance

Garmaise, Mark J.; Natividad, Gabriel

doi:10.1093/rfs/hhq021

Cited by 70 publications

(40 citation statements)

References 49 publications

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“…The authors define information risk to include information dissemination, the fraction of investors who receive private signals, and information asymmetry, the fraction of signals that are available information environment and firm financing choices. Garmaise andNatividad (2010, p. 2560) explain this shortcoming as follows:…”

Section: Introductionmentioning

confidence: 99%

“…Since considerations of changes to the information environment are absent in the analysis of Myers and Majluf (1984) and Myers (1984), merely relating the firm information environment (or changes to the firm information environment) to firm financing choices is empirically problematic since a firm's transparency (or opacity) is endogenously determined in the real world setting. Garmaise and Natividad (2010) attribute the lack of empirical support for the role of information asymmetry in firm financing decisions to these endogeneity issues. Our use of a change in disclosure regime helps us limit these endogeneity concerns in prior studies and better identify the relation between the information environment and the choice between debt and equity.…”

Section: Introductionmentioning

confidence: 99%

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Does the Firm Information Environment Influence Financing Decisions? A Test Using Disclosure Regulation

et al. 2016

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E xtant theory claims a firm's information environment impacts the choice between debt and equity financing.However, empirical evidence supporting this contention is limited. We evaluate this relation within the context of Regulation Fair Disclosure (Reg FD), which prohibited the use of selective disclosure. We find that firms with high proprietary costs of public disclosure are more likely to resort to debt financing following the passage of Reg FD. This relation is not sensitive to whether a firm has relied on selective disclosure in the pre-Reg FD regime. We also evaluate changes in firm disclosure policy and find that firms that adopted an expansive public disclosure policy are more likely to turn to equity financing. Overall, our evidence is consistent with the pecking order theory: firms with deteriorated firm information environments increase their use of less information-sensitive debt, whereas firms with improved information environments favor the use of equity financing.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Does the Firm Information Environment Influence Financing Decisions? A Test Using Disclosure Regulation

et al. 2016

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“…Although funding is a critical component of the microfinance ecosystem, scholarly inquiry in the area has been limited. Academics have made important inroads into enhancing our understanding of microfinance funding by studying crossnational capital flows and interest rates (Garmaise & Natividad, 2010;Tchuigoua, 2014).…”

Section: Discussionmentioning

confidence: 99%

Funding Financial Inclusion: Institutional Logics and the Contextual Contingency of Funding for Microfinance Organizations

Cobb

Wry

Zhao

2016

AMJ

179

110

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Microfinance is a promising tool for addressing the grand challenge of global poverty. Yet, while many studies have examined how microfinance loans affect poor borrowers, we know little about how microfinance organizations (MFOs) themselves finance their lending activities. This is a significant oversight because most MFOs do not self-fund their lending, but, rather, rely on loans from external funders. To better understand microfinance funding, we apply and extend the institutional logics perspective to analyze the lending practices of commercial and public funders, who together provide most of the capital for global microfinance. We argue that these funders adhere to financial and development logics, respectively, and that this leads them to invest in different types of MFOs. Yet, in the face of uncertainty, we suggest that the practices motivated by these logics will start to converge in ways that are problematic for a nation's microfinance sector. Using a proprietary database of all traceable loans to MFOs from 2004 to 2012, we find strong support for our hypotheses. In particular, our findings show that the relationship between institutional logics and organizational practices is contextually contingent, and this insight contributes important understanding about the efficacy of microfinance as a poverty-reduction tool. The Wharton School University of Pennsylvania Eric Yanfei Zhao Assistant Professor of Management and EntrepreneurshipThe Kelley School of Business Indiana University Acknowledgements:The authors gratefully acknowledge the excellent suggestions and support provided by Laszlo Tihanyi and the three anonymous reviewers. We also thank

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“…The success of our venture lies in how much crumpled bank notes our once starving members now have at their disposal. The microcredit movement (Silva, 2012) is built for and with money, but ironically at its heart, and at its deepest root, it is not entirely about money in its totality itself but it is the insignificant sum of money prudently used that can effectively alleviate the needy mass of the poor and raise their dignity to enable them to contribute to the society even if it is on a small scale for a start (Garmaise & Natividad, 2010). As a matter of fact, the microcredit movement is actually about helping each person to exploit his or her viable potential in one way or another.…”

Section: Introductionmentioning

confidence: 99%

“…Not only does the operation of the MFI suffer from the effect of customer rejection and staff resignation (Islam, 2011), but its progress is also unnecessarily stunted and its long-term plans immitigably disrupted (Shahriar, 2012). This Hybrid Organization (HO) primarily pursues a social mission mixed with commercial activities and heavily relies on commercial revenues to sustain operations and market competitiveness and in order to comfortably survive; it must strike a balance between the social responsibility and the economic logic of self-survival (Garmaise & Natividad, 2010). A hybrid organization is one characterized by fluidity, not rigid policy structures or linear operational processes (Hulme et al, 2010).…”

Section: Introductionmentioning

confidence: 99%

Factor Analysis of Drop out Clients in Microfinance Institutions (MFIs) in Satkhira District in Bangladesh

Rahman¹,

Rahman²,

Jalil³

2014

RES

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The main objective of the study is to identify the reasons why clients are dissatisfied and thinking to switch to other MFI or to leave the MFI. A total of 129 valid cases were collected through a random sampling method by means of questionnaires and in-depth interviews, and questions were put to the respondents to measure the levels of satisfaction and dissatisfaction over the MFIs' performance. The data was collected from a regional manager, a branch manager, credit officers and borrowers who were involved in BRAC organization at Satkhira district in Bangladesh, between November 2013 and January 2014. The results revealed that membership cancellation, conflict between medium and small size loan, high interest rate on loan but low on savings, societal facts (e.g. widow, death, unsuitable social role), religion and rude behavior from officers (who collect weekly installments) are substantially very strong which followed by lack of industrial regulatory policy, MFIs considered membership cancellation decision, natural disaster, mistrust and lack of co-operation. The result also found the existence of numerous shortcomings on managerial policy, implementation, infrastructure, organization, system, diplomatic policy, quality service and product facilities the sum total of which cause clients' decision to opt out of the MFIs. The main aspect of the study is that, the results of this study can contribute to improve the management of the business organizations to improvise an effective client-friendly plan in developing microfinance institutions in Bangladesh. The findings of this research may also contribute to the improvement of business organization, especially, the microfinance institutions so that they can satisfactorily serve their clients with the proper facilities, managerial strategy and prudent organizational plan.

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Information, the Cost of Credit, and Operational Eﬃciency: An Empirical Study of Microfinance

Cited by 70 publications

References 49 publications

Does the Firm Information Environment Influence Financing Decisions? A Test Using Disclosure Regulation

Does the Firm Information Environment Influence Financing Decisions? A Test Using Disclosure Regulation

Funding Financial Inclusion: Institutional Logics and the Contextual Contingency of Funding for Microfinance Organizations

Factor Analysis of Drop out Clients in Microfinance Institutions (MFIs) in Satkhira District in Bangladesh

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