Essays on microfinance in Latin America

 

In the early 1970s, microfinance came to public attention as a promising tool to reduce poverty. However, some people began to claim that microcredit is unsuitable for sustainable development. Nevertheless, the lack of scientific support for both viewpoints has created a need for empirical studies to disentangle whether microfinance interventions should be implemented, and if so, how. The objective of this thesis is to provide evidence on the role of microfinance in Latin America, with a particular emphasis on Mexico. The main innovation of this study is the focus on four topics that have thus far received relatively little attention. Firstly, the relationship between efficiency and the ownership structure of microfinance institutions (MFIs) in Latin America is investigated. Non-Governmental Organizations (NGOs) and Cooperative/Credit Unions are found to be less technically efficient and have an inferior technology relative to Banks and Non-Banks Financial Intermediaries (NBFIs). Secondly, this study assesses five different microfinance programs on household welfare in Mexico. The findings reveal that savings-oriented microfinance programs outperform programs that primarily offer microcredit, in reducing poverty. Thirdly, the impact of microfinance on vulnerability to poverty is analyzed. The results of this analysis show that membership in a savings and credit society in Mexico improves the well-being of households and reduces their vulnerability. Finally, the impact of the loan officer’s characteristics on determining repayment rates in microfinance is examined. The main outcome suggests that the gender of the loan officer and his/her professional experience are important determinants of repayment rates. Further conclusions are that loan officers who work longer in Pro Mujer have higher default probabilities and that peer monitoring of group members is not a significant determinant of loan default.