The influence of loans and savings for poor people on income and consumption: evidence from Bolivia, Ghana, and Vietnam By Aniek Quist

(1)

1

The influence of loans and savings for poor people on income and

consumption: evidence from Bolivia, Ghana, and Vietnam

By Aniek Quist

University of Groningen Faculty Economics & Business

Research Paper for Pre-MSC IB&M (EBS014A10) Groningen, May 2010

Student: Aniek Quist Rivierenhof 16 9725 HA Groningen Tel. 0651266787

(2)

2

The aim of this paper is to gather information from previous research and country data from Bolivia, Ghana, and Vietnam to prove that microfinance in the form of loans and savings have a positive impact on the income and consumption. Results show that offering poor people financial services as loans and savings does increase the income and consumption of the participants, though the poor people that do not participate do not experience this increase and stay poor.

Keywords: Microfinance, loans and savings, income, consumption, Bolivia, Ghana, Vietnam Researchtheme: Microfinance

(3)

3

Preface

As a Pre-Master IB&M student I have to realize a research paper on the field of international business. For this research paper we had the choice between different subjects, from which I have chosen ‘Microfinance’. I find it an interesting subject that is very important for the economic development of third world countries. Unfortunately, I have never studied microfinance before, and therefore I have taken the opportunity now to write my research paper about this topic.

(4)

4

Chapter 1: Introduction and Problem Statement

In this chapter first some background information will be given on microfinance. After that the research question will be stated and explained and the sub questions will be formed. Also the case study that will be performed is clearly outlined.

1.1 Microfinance and microfinance institutions

Microfinance can be described as offering poor people financial services, such as loans and savings (www.cgap.org). Microfinance has become an important instrument in fighting poverty, and therefore a lot of research has been done already on the achievement of microfinance activities so far. These researches, however, show contradictory results (Hulme, 2000). There are various kinds of financial services that poor people might need to improve their lives. By providing finances for improving business activities, the household incomes of the people is to rise, which improves the financial position of poor families and households can build on their assets. By increased incomes, the poor become less vulnerable and are able to make future plans with their savings (www.cgap.org). According to CGAP, the Consultative Group to Assist the Poor, the majority of the clients of microfinance is female, only 33% of all microfinance clients are men.

The financial services for the poor are usually offered by microfinance institutions (MFI’s) Among these institutions are commercial and government-controlled banks, non-governmental organizations, specialized microfinance banks and non-bank financial institutions, financial cooperatives, and self-managed semi-formal groups. As an assessment tool microfinance institutions can use the standard of poor people being people that live on less than one dollar a day (www.cgap.org).

1.2 Problem statement

As said, there has been done research on what the achievements of microfinance activities are, and the results of these researches are contradictory. Therefore, I would like to find out what these researchers have said and how come their results are so different. From this information I will draw my own conclusion on the research question mentioned below. Next to this a case-study will be performed, to see whether I can prove the conclusion that I have drawn from the literature research. The research question that has been set is the following:

‘What is the relationship between savings and loans of poor people and their income and consumption?’

FIGURE 1: conceptual model

(5)

5 Figure 1 shows the conceptual model that relates to this research question. Figure 2 shows the research framework. It explains that one thing, microfinance, can effect another thing,

economic growth and better economic position of poor people, through different steps. From this second figure, the sub questions are formulated in the next paragraph.

FIGURE 2: Research framework



  



1.2.1 Sub questions

In order to keep the research structured and to get to the answers I want, the following sub questions on the theory of microfinance have been set:

1. What are the different microfinance services that can support poor people, and in what way?

2. Who can be defined as poor people and belong to the target group of microfinance? 3. What kind of organizations offer microfinance?

These first three explain the three concepts of the research.

4. What can be the positive effects of savings and loans for poor people? 5. What can be the negative effects of savings and loans for poor people? 6. In what way can savings and loans contribute to income and consumption?

7. Does the overall consumption in a country increase after the introduction of microfinance, or do only the participants profit?

With these last four questions the relationship between the three concepts will be explained. In the research framework is also mentioned that microfinance can lead to an increase in investment. This increase in investment can also lead to an increase in income and consumption, however in this research paper this is not being researched, though it could be a very interesting relation for further research. It is mentioned in the research fra mework because I think it is an import part of microfinance in the form of microcredit.

1.3 Case study

Since I also would like to find prove of the effect that microfinance has on poor people, I will perform a case study. For this case-study, I have selected three countries.

 Bolivia: one of the poorest and least developed countries in South-America, with 60% of the population living below the poverty line in 2006. Bolivia has 9,7 million inhabitants and has a GDP per capita of 4,600 US dollar (2009).

(6)

6

 Ghana: the country has a lot of natural resources, but is very dependent on international financial and technical assistance. The country has 23,8 million inhabitants of whom 28,5% live below poverty line. The GDP per capita is 1,500 US dollar (2009).

 Vietnam: the country’s economy had to come from deep poverty, but over the decades this poverty has declined. Out of the 88.5 million inhabitants, only 12,3% lives below the poverty line (2009). The GDP per capita is 2,900 US dollar (2009).

The information on the countries originates from the CIA World Factbook, in the case study itself there is also information originating from the Worldbank and other sources. These three countries are in different stages of economic development, by comparing the development of microfinance in these countries I want to see what kind of achievements have been made over time and if these achievements can function as a role model for other countries. I would also find it interesting to see whether there are differences in the wa ys microfinance supports poor people in different continents and whether the impact of microfinance on poor people is the same or differs in these three countries.

In the case study I will describe how the economic situation of the country looks like at this moment. Then I will try to find answers to the following questions:

1. Since when do poor people in these countries have access to financial services? 2. Which kind of financial services are most important; loans or savings?

3. How many and which kind of MFI’s are active in these countries?

4. How did the income and consumption of the participants evolve over the years, compared to the non-participants?

5. What is the role of the government in Microfinance in these countries, and is this role positive or negative?

(7)

7

Chapter 2: Literature review

In this chapter the information found to answer the sub question of paragraph 1.2. The information is given in order of the sub questions.

Microfinance

Microfinance includes the whole of loans, savings, insurances, and other financial services to poor people. The ‘Micro’ in microfinance refers to the small amounts that are usually involved in microfinance, since a person that does not have a lot of money will not need a loan of thousands. Traditional banks do not offer financial services to poor people for various reasons, among them being that these people do not have a credit history and most are not employed in the formal sector. Also these traditional banks require a minimum amount in deposit and poor people do not have the amount of savings required to open an account (www.themix.org). The loans are used in many ways, some buy livestock, others a sewing machine and fabric to make clothes or stock for starting a local store. The repayment rates on microfinance loans is 97% globally (www.themix.org). But only half of the loans are used for business purposes, others use the loan for household cash management needs as education fees, medical expenses, or life-cycle events such as weddings and funerals (www.microfinancegateway.org). These investments might be seen also as investments to improve life and future capacities.

Poor people

The clients of microfinance can be divided into groups: vulnerable non-poor, upper poor, poor, and very poor. Women are the major client group of microfinance, just 33% of the clients is men. As an assessment tool microfinance institutions can use the standard of poor people being people that live on less than one dollar a day (www.cgap.org).

Microfinance institutions

Microfinance is offered by Micro Finance Institutions (MFI’s). These organizations can operate as a non-governmental organization, a credit cooperative, a non-bank financial institution, but also formal for-profit banks offer micro finance. The microfinance institutions differ in size and reach, some are focused on one country or small region, others serve hundreds of thousands and are present in a larger setting. Many microfinance institutions do not only offer loans and savings services, they also offer education on business or financial issues and social services focused on the children’s health (www. Themix.org).

Positive and negative effects of loans and savings

(8)

8 levels of operations, increasing income flow, or levels of employment. The success is often measured by the loan repayment rate, this only indicates that the borrower is willing and able to repay its loan but it says nothing on the results of the enterprise (G. Buckley, 1997). According to the Asian Development Bank (www.adb.org), offering microfinance has a lot of positive effects in poverty reduction. Savings and loans can reduce households vulnerability to external shocks, less volatility in household consumption, the severity of poverty and the social exclusion is reduced, generating a higher income, more diversified income sources, increase in household consumption and better education for children (www.adb.org).

It is difficult to get to know the demand for microfinance in a country because of an identification problem; it is difficult to measure whether the demand for microfinance is low or whether the supply of microfinance is low (S. Navajas, M. Schreiner, 1998)

Microfinance can contribute on a country’s reduction of unemployment and poverty, the development of local communities, and increasing labor market flexibility. To come to this, microfinance has to be targeted at the financially excluded, the impact should be effective in the way that it should promote self-employement to reduce unemployement, and the participants should be able to pay back the loans. When all these requirements are met, microfinance can give poor people the possibility to build on a social network and with that the social status of participants increases (Mosley, Steel. 2004)

Apart from the effects on the income and consumption of financial services, over time the women participants become more confident and assertive. The empowerment of women within households can come from an increase in income, access to markets and information, and more decicion making power. On the downside however, it is mentioned that an increase in income can contribute to an increase in domestic violence or women within a microfinance enterprise working extreem long workingdays and losing control over their finances (www.cgap.org).

Contribution of loans and savings to income and consumption

Having access to financial services can have two principle effects on households. It can raise a households income and with that the households consumption. It also decreases the chance of income and consumption reducing (Lusting, N. 2001).

Having access to loan and saving services can increase the expenditure of participants and the educational level of (the children of) participants. Though evidence from Bangladesh shows that microfinance institutions focus on the poor that have some kind of asset, the main reason could be that these people have more potential of being a successful microfinance participant. The poorest of the poor are still not reached (Chemin, 2008).

(9)

9 Increase in overall consumption

(10)

10

Chapter 3: Methodology

This chapter describes how the research will be performed, what kind data will be used and how it will be collected. It also gives two hypotheses for the case-study. Finally the chapter will also explain how the data will be analyzed.

3.1 Research design

The objective of the research design is to have a plan and structure of research, and to explain what type of research will be performed to come to the answer to the research question. Blumberg (2008) distinguishes four types of study; reporting, descriptive, explanatory, and predictive. The study that I will perform will be an explanatory type of study, since I will not only study the different variables, being loans and savings on one side and income and consumption on the other, but also I want to know whether there is a positive relationship between the different variables. In other words, I want to explain whether the loans and savings have a positive impact on income and consumption. The hypothesis that could be drawn from the conceptual model in chapter one is that microfinance, in the form of loans and savings, has a positive impact on the income and consumption of the poor that are using those microfinance services.

The purpose of the study will be of the causal type, since I not only try to answer the research question but also want to learn whether there is causal relationship between the variables. The time-dimension of the study is cross-sectional, I will only carry out the study once and it will represent a view on the current situation.

3.2 Hypotheses

This paper will focus on discussing whether there is a positive relationship between the savings and loans of poor people and their income and consumption. After the literature research the following hypotheses have been set. The hypotheses will be tested in the case study.

Hypothesis 1

H1: Access to financial services in the form of loans and savings enhances the income and consumption of participants

H0: Access to financial services has no impact on income and consumption of participants Hypothesis 2

The influence of microfinance and microfinance institutions on a countries economic development will be examined with the following hypothesis.

H1: The Gross Domestic Product (GDP) of a country increases with an increase in a strong network of microfinance institutions

(11)

11

3.3 Data collection

The literature research is a qualitative study, which is based on qualitative information (Blumberg, et al. 2008). For this part of the paper data is collected from previous researches on the topic. The case-study will be partly quantitative, since I expect the results to find on microfinance to contain numerical data. Next to previous research, I will try to find statistical data on e.g.. the economical development of the countries since microfinance was introduced. For the part of the case-study I will perform myself I will use secondary data, which is data already collected by someone else. Types of secondary data that I could use are for example scientific articles, books, newspapers, magazines, governmental websites, and statistical databases such as the Worldbank or country specific equivalents. I will use secondary data since it fits in the time-frame given for completing the research paper and it does not cost money. Because I want a research paper of good quality, I will focus on using resources which are of a fairly high quality. The main disadvantage of using secondary data is that this data is often collected for other purposes and therefore it will not always contain the exact information I need, which means I will have to combine different sources to get to the answer to my research question.

Since there is a time limit on this research and there is no budget available, the field research will not be performed. But after the part of the research that can be performed, a plan will be drawn on how this further research should look like and what the implications of the results could be.

3.4 Data analysis

The analysis of the results of the research will be done in two parts. First the data from the literature research will be compared to the findings from the case study, this will be done with qualitative data. This means that I will see whether the findings from the literature stroke with the findings from the three countries studied. Second the three countries will be compared to each other. This will not just be qualitative information but also quantitative data such as the development of GNP. Finally, the findings will be linked to the hypotheses to see whether they can hold true.

To come to a good conclusion whether the hypotheses hold true, the results need to made measurable. In the first hypothesis, there needs to found proof that participants of microfinance experience an increase in income and consumption. Therefore the year the participants will receive microfinance for the first time is considered the starting point, at 100 percent. Then for each year will be measured in percentages whether they have had increase in income and consumption. The increases will be classified in order to compare the participants from different countries with each other.

(12)

12 the function sharing experiences and best practices within a country. A weak network can be considered a network in which microfinance do not cooperate or rarely cooperate and work separately from each other, causing double work.

In the part on further research there will be developed a questionnaire which can be used to collect primary data, that can prove the hypotheses in more accurate way. The questionnaires will be filled out by microfinance participants. Because it is possible that these people are illiterate, they will be executed in the form of personal interviews. There also will be language barriers, which can overcome by using interpreters from those countries. A drawback on this type of data collection is that it is very time consuming and can get quite expensive. The sample for this questionnaire will be random. In the part on further research will be explained how many questionnaire are needed. The data from these questionnaires will be transformed into results by using the statistical program SPSS.

(13)

13

Chapter 4: Case study

Many authors have diverging ideas about microfinance and its impacts. With this case study of three countries a more practical point of view will be given. The countries for the case study are Bolivia, Ghana, and Vietnam. For these countries has been chosen because they are in different stages of economic development and are all minor countries within their region. There has been chosen for countries in different stages of their development to see whether there can be found a pattern that countries follow or whether that the development is different for every country. The aim of performing this case study is to come to a more objective discussion, that does not only refers to previous research. Appendix 1 shows the map of the world with the three countries indicated. The sub questions mentioned in chapter one will be tried to answer and with this data will be analyzed whether the hypotheses hold.

4.1 Microfinance in Bolivia

In the first chapter the sub questions for the case study were formed. In this and the following paragraph for each country the questions that could be answered by desk research are given. Later in the paper in the part on further research will be explained how further data can be gathered.

Economic situation

One of the poorest and least developed countries in South-America is Bolivia. Sixty percent of the population lives below the poverty line. The country has 9,7 million inhabitants and has a GDP per capita of 4,600 US Dollar (www.cia.gov).

Bolivia one of the poorest and most unequal countries in the continent, where the rural and indigenous population is vulnerable in because of their past exlusion from political and economic power. The current president, Evo Morales, is the first indigenous president and is trying to empower the excluded groups. During the economic crisis the country’s economic growth decreased from 6.1 percent to 3.4 percent, which was the highest in the region (www.worldbank.org).

Microfinance and microfinance institutions in Bolivia

(14)

14 microfinance in the country is constrained by the long distances and low density of population, which causes high transaction costs (S. Navajas, M. Schreiner, 1998).

Microfinance in Bolivia started around the financial crisis of 1985. Many previously state-employed people were out of work, state-owned banks were not able to improve the access to financial services and informal lending sources asked high interest rates. Non-governmental organizations saw opportunities for small enterprises and developed a lending technology for people who wanted to start their own enterprise. During the nineties this form of microfinance, called microcredit, expanded. The economy was stable during those years and the number of microcredit clients increased rapidly. Other institutions entered the microfinance market and started competing with the existing nongovernmental organizations by offering higher loans. During a second crisis in 1998-1999, the economy stagnated and borrowers were not always able to repay their loans. Microfinance institutions had learned its lesson from this crisis and since then they have improved their way of doing business and started offering more services like savings products. Between 1999 and 2006 the total portfolio of microfinance institutions increased by 172%, while in the banking system it decreased (E. Svensson, 2007).

The efforts of microfinance institutions have positive influence on the income and the poverty level of the borrowers, between ten and twenty percent has crossed the poverty line where they would not have were it not for microfinance. Still it is very difficult for the poor, especially in the rural areas to save within microfinance systems, there is a trend of microfinance institutions moving into these rural areas (P. Mosley).

Role of the government

Traditionally, the government did not interfere with microfinance a lot, only in the late nineties it started a more important role because of the increasing importance of micro enterprises. In 1997 a new government in Bolivia presented a plan to promote the development of these micro enterprises with its main aim being improving the lives of poor population by permanent self-employment (www.cdrg.org). More recently, the government also started regulating the market of microfinance in order to protect the consumers. Microfinance institutions now have to follow regulations to improve the Bolivian financial industry (www.centerforfinancialinclusion.org).

GDP

(15)

15

Table 1: GDP Bolivia

4.2 Microfinance in Ghana

Economic situation

From the 23,8 million inhabitants, 28,5 percent lives below the poverty line. The country has a lot of natural resources, but is very dependent on international financial and technical assistance. The GDP per capita is 1,500 US dollar (www.cia.gov).

Problems facing Ghana are the high inflation and high interest rates. Also the country is very vulnerable for external shocks. In the nineties core focus became poverty reduction, in 1995 microfinance institutions launched a plan for the promotion and analyzing poverty reduction. In 2000 the government followed this by preparing a development strategy to fight poverty. In the period between 1992 and 1998 the population living below poverty line decreased from 51 to 43 %, until 28,5% in 2009 (www.worldbank.org).

Microfinance and microfinance institutions in Ghana

Ghana has 41 active microfinance institutions that have a gross loan portfolio of 123 million dollar to more than 364 thousand borrows, the average loan per borrower is 267 dollar. The total amount of deposits in microfinance institutions is almost 127 million dollar from one million depositors (www.mixmarket.org). The main forms of microfinance institutions in Ghana are Rural and Community banks, Credit Unions, and Saving and Loan companies. It has been proven that in Ghana these microfinance institutions play a greater role than non-governmental organizations (A.Q.Q. Aboagye, 2010). In Ghana the GHAMFIN is a network that links microfinance organizations with each other. This network was set up by microfinance institutions in order to develop best practices and to develop a sustainable microfinance industry in Ghana (www.ghamfin.org).

(16)

16 poverty reduction. This more regulated approach has resulted in the development of more sustainable microfinance. The regulations are also important for consumer protection (J. Gallardo, 2001)

GDP

In table two the development of the GDP in Ghana is shown. The GPD has been growing rather stable around six percent per year, except for 2009 which could have been caused by the global economic crisis (Ghana Country Review).

Table 2: GDP Ghana

4.3 Microfinance in Vietnam

Economic situation

The economy of Vietnam had to come from deep poverty, but over the decades this poverty has declined. Out of the 88.5 million inhabitants, only 12,3% still lives below the poverty line (2009). The GDP per capita is 2,900 US dollar (2009) (www.cia.gov).

The economic development of Vietnam over the last years have made the country an example of a development model of lifting millions of people out of poverty. The country has been able to create jobs and eliminate differences in school enrolment between boys and girls. Over the years 1995-2005 the average GDP growth rate was 7.3 percent, which makes it one of the best performing countries in the world. It is expected that the economy of Vietnam will grow to a middle income country within the near future (www.worldbank.org).

Microfinance and microfinance institutions in Vietnam

(17)

17 projects. The only possibility is to implement its project through government ministries, mass organizations, and international non-governmental organizations (www.scribd.com).

Microfinance was introduced in Vietnam in the 1990’s, after a launch of an economics renovations policy. This was relatively late compared to other countries. The contribution of microfinance in Vietnam to household welfare is very modest, though the access to microfinance services has increased the spending on education, food, and entertainment. It has been proven that person participating in microfinance on average experience a reduction of poverty (H.S. Nghiem, T. Coelli, P. Rao, 2007).

Microfinance in Vietnam is segmented, which causes overlap between organizations. To make microfinance more sustainable, coordination and exchange of information is needed. For that to happen the regulatory system in Vietnam should come with a supporting legal framework for microfinance institutions (McCarthy, 2001). The banking system of Vietnam was state-owned until 1988, when the financial system was reformed, but only in 1995 the not-for-profit Vietnam Bank for the Poor was formed to offer financial services to poor (www.bwtp.org).

GDP

Table 3 shows the GDP development over the last five years. From this information can be concluded that the GDP has been growing steadily by approximately 8,4 percent a year except for 2009. This can be the result of the global economic crisis (Vietnam Country Review).

Table 3: GDP Vietnam

4.4 Country comparison

The data from these three countries show many differences, which are shown in table 4.

Table 4:country comparison

Bolivia Ghana Vietnam

GDP per capita $4.600 $1.500 $2.900

% living in poverty 60 28,5 12,3

inhabitants 9700000 23800000 88500000

(18)

18 MF gross loan $1.600.000.000 $123.000.000 $3.100.000.000 MF borrowers 825000 364000 7000000 MF average loan $1.295 $267 $142 MF deposits $1.200.000.000 $127.000.000 $1.000.000.000 MF depositors 1300000 1000000 223000 MF started 1985 1995 1995

Government involvement medium low high

From this table can be seen that although the GDP of Bolivia is much higher than that of Ghana and Vietnam, the percentage of people living in poverty in this country is also much higher. This indicates that the inequality between poor and rich is higher. The average loan in Bolivia is much higher and the total of loans and savings are also higher when considering the amount of inhabitants compared to Ghana and Vietnam. In table 5 and graph 1 the GDP growth rates of the countries are shown. It shows that both Ghana and Vietnam have rather stable growth rates, and the decline in 2009 was caused by the global economic crisis. Bolivia however has a much more fluctuating growth rate, which makes it also harder to make future predictions.

Table 5: GDP growth rates 2005-2009

Vietnam 2005 2006 2007 2008 2009 real GDP growth rate in % 8,4 8,2 8,5 8,5 3,1

Ghana 2005 2006 2007 2008 2009 Real GDP growth rate in % 5,8 6,2 6,3 6,3 3,7

Bolivia 2005 2006 2007 2008 2009 Real GDP growth rate in % 6,1 0,4 -1,7 15,9 2,2

Graph 1: GDP growth rates 2005-2009

GDP growth rate % -4 -2 0 2 4 6 8 10 12 14 16 18 2005 2006 2007 2008 2009 years pe rc e nt a ge grow th Vietnam Ghana Bolivia

(19)

(20)

20

Chapter 5: Discussion

As far as the case study could be performed, it give interesting results. Though, since only secondary data was collected to come to a accurate discussion it is necessary to do further research, which will be discussed next. If the result from further research confirm the conclusions from the case study so far, it invites one to go deeper into the underlying factors that influence the results as well.

Chapter 6: Further research

In the research framework in the first chapter is also mentioned that microfinance can lead to an increase in investment. This was not part of this research but it is interesting issue to go on with in line with this paper. Another interesting issue for further research can be the result on the second hypothesis, why do country with a denser MFI network not experience a higher growth rate than countries with a less developed network of MFI’s. A topic for investigation there is that countries with a less developed MFI network have a more developed banking system, or there economy is already more developed.

This paper has only used secondary data, though primary data might be of real added value. Therefore the following plan gives an idea of how to gain more and maybe better information for the case-study.

To gain more data about network of microfinance institutions in Bolivia, Ghana, and Vietnam, a questionnaire to all the microfinance institutions can give an inside in how the institutions experience the network within a country and the regulations that are involved with those networks. Appendix 2 shows the questionnaire that can be used. Next to this, another questionnaire will be send to participants of microfinance to measure whether they really had an increase in income and consumption. The questionnaire will deal with how the situation of this people was before microfinance, and from the start until now. to get result that really are represantative this questionnaire will be send to five percent of the participants with a maximum of 50 per microfinance institutions. According to Blumberg et al. (2005) this will be representative for the large population. This questionnaire handles the main question whether these people really experienced an increase in income and an improvement of their lives. The questionnaire for participants is shown in appendix 3.

Conclusion

My personal goal of gaining more knowledge has been successfully achieved. I read with pleasure and interest a lot about the subject and I really have the idea to have gained a lot of knowledge and an objective view from it.

(21)

21 The research question stated in the first chapter of the paper was to see whether loans and savings have a positive effect on the income and consumption. The literature research has give a two-sided answer to that. First, participants of microfinance experience an increase in income and consumption, which would mean that loans and savings do have the positive effects of microfinance. Second, the prove for increase in a countries overall of income and consumption is two-sided, because the income and consumption does increase because the participants profit, but on the other side the poorest of the poor are not reached so they cannot profit from this development. For the case study two hypotheses were set. The first hypothesis was that there is a positive relation between the access to financial services and the income and consumption. The main lesson from the literature research is that microfinance does have a positive impact on the income and consumption of the participants in microfinance. Therefore, from this part can be concluded that access to financial services in the form of loans and savings enhances the income and consumption. It has to be mentioned though that this impact only accounts for the participants, the poor that are not included do not experience this development. Above that, only five percent of the potential microfinance clients are being reached. The overall effects on the global poverty reduction therefore is minimal. The second hypothesis argued that a country’s economy will increase faster with a strong network of microfinance institutions. This seems to be untrue when looking at the results of the case study. Bolivia has the strongest network of microfinance institutions and these have been active already ten years before microfinance institutions started their work in Ghana and Vietnam, still Bolivia has a much higher percentage of people living below poverty line. Also when looking at the GDP developments of the three countries, Ghana and Vietnam prove to be much more stable.

Limitations

(22)

22

References

Books

Blumberg, B. Cooper, D.R., Schindler, P.S. 2008. Business Research Methods. 2nd European edition. McGraw-Hill Education, Berkhire, UK.

Lustig, Nora. 2001. Shielding the poor: social protection in the developing world. Brookings Insitution Press, Washington, US.

Moyo, Dambisa. 2009. Dead Aid: Why aid is not working and how there is another way for Africa. Penguin Books, Londen UK.

Articles

Aboagye, A.Q.Q. 2009. A baseline study of Ghanian Microfinance Institutions. Journal of African Business. Vol. 10(2): 163-181

Bolivia Country Review, 2010. p59.

Buckley, G. 1997. Microfinance in Africa: Is it either the problem or the solution? World Development. Vol 25(7): 1081-1093

Chemin, M. 2008. The benefits and costs of microfinance: Evidence from Bangladesh. Journal of development studies: 44(4): 463-484

Gallardo, Joselito. 2001. A Framework for regulating microfinance institutions: the experience in Ghana and the Philippines. The World Bank, Financial Sector Development Department.

Ghana Country Review, 2010. p 53.

Hulme, David. 2000. Impact assessment methodologies for microfinance: theory, experience and better practice. Elsevier Science. Vol. 28 (1) 79-98.

Mahjabeen, R. 2008. Microfinancing in Bangladesh: Impact on households, consumption and welfare. Journal of policy modeling. Vol 30(6):1083-1092

McCarthy, A. 2001. Microfinance in Vietnam: A survey of schemes and issues. Downloaded from the State Bank of Vietnam.

Mosley, Paul. 2001. Microfinance and Poverty in Bolivia. Journal of development studies. Vol 37(4): 101-132

Mosley, P. Steel, L. 2004. Microfinance, the labour market and social inclusion: A tale of three cities. Social Policy and Administration. Vol 38(7): 721-743

Nghiem, H.S., Coelli, T., Rao, P. 2007. The wellfare effects of microfinance in Vietnam: Empirical results from a quasi-experiment survey. Center for efficiency and productivity analysis.

Svensson, Emma. 2007. Microfinance, Financial systems and Economic growth: a theoretical framework and findings from Bolivia. Downloaded from ASOFIN Bolivia.

Vietnam Country Review, 2010, p 45.

(23)

23 http://www.bog.gov.gh/index1.php?linkid=160&adate=30/08/2007&archiveid=1067&page=1 (08-05-2010 21.51h.) http://www.bog.gov.gh/privatecontent/File/Research/Working%20Papers/Microfinancing%281%29.p df (08-05-2010 21.51h.) http://www.scribd.com/doc/4304801/Microfinance-in-Vietnam (08-05-2010 22.51h.) http://www.bwtp.org/arcm/vietnam/Vietnam.html (09-05-2010 13.00h.) https://www.cia.gov/library/publications/the-world-factbook/geos/gh.html (09-05-2010 13.01h.) http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/BOLIVIAEXTN/0,,menuP K:322289~pagePK:141132~piPK:141107~theSitePK:322279,00.html (29-05-2010 13.27h.)

(24)

(25)

25

Appendix 2: Questionnaire for microfinance institutions

General information Name of organization: Number of employees: Started in:

Network of microfinance institutions

How often does your organization communicate with other microfinance institutions: o More than once a week

o Once a week

o Once every two weeks o Once a month

o Less than once a month o never

How often does your organization work together with other microfinance institutions: o Ongoing projects with other microfinance institutions

o Once a month

o Once every three months o Once every 6 months

o Less than once every 6 months o Never

How do you experience the cooperation with other microfinance institutions: o Very good

o Good o No opinion o Bad o Very bad

Do you experience your work is being obstructed by government regulation: o Yes

o No

o I don’t know

(26)

26

Appendix 3: Questionaire for microfinance participants

General Information: Household size:………

Household income before microfinance:……….. Year of becoming microfinance participant:……… Financial Service

What kind of financial service is most important for you as a participant: o Loans

o Savings o Insurances

o Other:………

If you received a loan, what was it used for: o To start a business

o Family events (wedding, funeral, etc)

o Other:……….

Income

Did you experience an increase in income within the first year of being a participant? o Yes

o No

What was the increase in income in the first year: o < 2,49%

o 2,5-4,99% o 5-7,49% o 7,5-9,99% o >10%

If relevant, for the second year: o < 2,49%

o 2,5-4,99% o 5-7,49% o 7,5-9,99% o >10% And third year:

o < 2,49% o 2,5-4,99% o 5-7,49% o 7,5-9,99% o >10% And the fourth year:

(27)

27 And the fifth year:

o < 2,49% o 2,5-4,99% o 5-7,49% o 7,5-9,99% o >10%

What did mainly you use this higher income for: o Food

o Consumer goods o Savings

The influence of loans and savings for poor people on income and consumption: evidence from Bolivia, Ghana, and Vietnam By Aniek Quist