Thesis advisor: Richard McGowan / Thesis advisor: Robert Murphy / Microfinance has been heralded as the solution to global poverty by optimists in the development field. Many regard the practice of extending unprecedented financial access to the poor through small loans as a necessary and important tool in the development process. The industry has grown and changed shape over the last two decades and recently has come under fire. The new face of microfinance has included for-profit lenders, usurious interest rates, loan sharks, and suicides. Many critics are beginning to question the ethics, practices and efficacy of microfinance. They claim that microfinance cannot make more than a marginal impact on poverty, and more serious development efforts should address structural causes of underdevelopment. This paper will examine the effects microfinance on extreme poverty as defined by the poverty headcount ratio at $2 a day and $1.25 a day. The study will focus on the Latin America and Caribbean. Through regression analysis, this paper measures the effects of microfinance on the poverty rate while controlling for structural economic changes. We will conclude that microfinance has a statistically significant effect on extreme poverty in this region. These results are an important response to critics who posit that the costs of microfinance outweigh the benefits. / Thesis (BA) — Boston College, 2011. / Submitted to: Boston College. College of Arts and Sciences. / Discipline: Economics Honors Program. / Discipline: Economics.

Yes / Financial access is gradually being recognised as an important input to economic development. Using World Bank (2007) database, this study measures the extent of financial access in developed and developing countries. Further, it develops a new Socio-Economic Development Index, which incorporates financial access. It then compares socio-economic development of various countries as shown by Human Development Index (HDI) alone and by the new index incorporating financial access. The results of the study show that Spain ranks highest in terms of financial access followed by Belgium, Malta and South Korea. In addition, the ranking of countries in terms of HDI changes if financial access is taken into account

The role of access to finance for economic development has received extensive attention recently, which has brought the issue to the top of the policy agenda. The growing attention has resulted in several public policy initiatives to encourage access to financial services, especially in low-income countries where credit constraints are severe. The guarantee instrument has the potential of mobilizing finance, lowering borrowing costs and addressing market failures, why PASS with support from Sida has issued a guarantee that targets smallholder farmers in the agricultural sector in Tanzania. The linkages between access to finance, productivity and welfare are supported by abundant evidence in the previous literature, but few studies have examined the productivity and welfare effects of increased access to finance in the context of the guarantee instrument. This study aims to fill the research gap and evaluate the effects of the PASS guarantee by analysing the productivity and welfare effects of increased access to finance for paddy farmers in the Morogoro region in Tanzania. The study is based on 86 structured interviews and the data is analysed by frequency statistics and cross-sectional regressions estimated with OLS. The results show that farmers provided with a formal bank loan have higher productivity than non-borrowers and that those who use the business plan in their operations are more productive. This highlights the importance of running the business according to the suggestions in the business plan. Furthermore, financial access has a positive and significant effect on household welfare, meaning that households provided with a loan attain a higher welfare level. The results confirm that the guarantee has positive effects on both productivity and welfare, why it can be considered as an effective tool for poverty reduction. Given the results of the study, we suggest that effort to promote financial access should be encouraged by both local governments, international development agencies and NGOs. Furthermore, PASS is recommended to encourage the farmers to use the business plan and provide necessary opportunities to facilitate the use. As the most common reason for not using the business plan is the language barrier, we recommend PASS to offer translation services to increase the productivity of the farmers as well as the probability of repayment. In addition, the results indicate low financial literacy among the farmers, why emphasis to reinforce the understanding of the loan conditions should be prioritised. Finally, the results show that formal education has a significant effect on household welfare, but when considering productivity, formal education is not significant on any level. However, knowledge can be assumed to affect productivity positively, why strategies to increase both formal and informal education, such as business training, should be considered.

The study examined the relationship between financial intermediation and poverty in selected developing countries. In particular the study sought to examine the deterministic relationship, cointegration and the causality between financial intermediation and poverty. Panel data spanning the period 2004-2016 for 35 developing countries was employed. Substantial empirical research proposed that financial development expands economic prospects and reduces poverty and inequality. Hitherto, there is a dearth of empirical studies on the potential effects of formal financial dimensions of financial access, financial efficiency and financial stability in reducing poverty. There is also a lack of empirical work on the joint effect of the other financial dimensions in a financial intermediation setting in poverty reduction. The present study contributed to literature by including these financial dimensions in examining cointegration and causality between financial dimensions and poverty. The study employed a number of econometric methodologies to address the objectives of the research such as the GMM, panel ARDL and panel ECM. The GMM was employed to examine the determinants of poverty that were selected for this study. To examine the long run, short run and the causal relationship, the panel ARDL and the error correction model were used. In addition the study deployed PCA to develop the composite index for institutional quality. Panel heterogenous estimation methods such as the pooled mean group to infer the cointegration and causal effect between the financial dimensions and poverty were employed. The Hausman test was used to determine the most appropriate estimator and the PMG estimator was selected as the most appropriate since the p-value of the Hausman test was insignificant. The results from panel ARDL, cointegration test showed the existence of a long run relationship between financial intermediation, financial access, financial efficiency, financial access and poverty. Furthermore, the study noted that the relationship between financial intermediation and poverty differ depending on how poverty is measured. Therefore, the distortions in understanding and definition of poverty may consequently lead to distorted policies that yield little or no results for the effectiveness of the financial sector in poverty reduction.The study found strong causality in the long run for all the poverty proxies and the selected financial variables. Additionally the results from the panel causality tests indicate the bidirectional causality of the variables in the long run. We fail to observe the causality among most iii of the variables in the short run. There is strong joint causality among the variables in the panel as the results of the error correction term is negative and significant indicating that there is dynamic stability between the financial variables and poverty. The study further included the domestic public debt and remittances as determinants of poverty in a financial intermediation setting. Since domestic public debt can crowd out private credit, this study included domestic public debt for the panel of the developing countries and the study found that domestic public debt has a poverty reducing effect. Additionally the study found that remittances reduce the share of population living in poverty whilst increasing inequality as indicated in the findings of the study. / Finance, Risk Management and Banking

My dissertation consists of empirical and theoretical essays on Microeconomic Theory and International Economics. The first chapter discusses the existence and characterization of a model that determines producer's optimal pricing and allocation rule as a preannounced markdown schedule. The mechanism focuses on pricing and operational implications of allotting scarce resources when customers are heterogeneous in their valuations and sensitivities towards availability of product. The proposed mechanism suggests that a carefully designed multistep markdown pricing could achieve optimal revenue when selling a single unit. However, to sell multiple units, monopolist should modify the implementation of markdown pricing by either hiding the number of available products or selling them via contingent contracts and upfront payments. In the second essay, we study the heterogeneity of finance and growth nexus across countries. Our paper contributes to the literature by investigating whether this impact differs across regions and types of economy. Using a rich dataset, cross-section and dynamic panel estimation results suggest that the beneficial effect of financial deepening on economic growth in fact displays measurable heterogeneity; it is generally smaller in oil exporting countries; in certain regions, such as the Middle East and North Africa (MENA); and in lower-income countries. Further analysis suggests that these differences might be driven by regulatory/supervisory characteristics and related to differing performance on financial access for a given level of depth. The third chapter analyzes contraction of exports in the aftermath of severe financial crises and tests for its heterogeneity across different industries and based on their credit conditions. It provides a theoretical framework to provide insight on why sectors are hit disproportionately during and in the aftermath of severe financial distresses, and confirms most of them with empirical estimations. The findings suggest that industries with greater reliance on outside financing and fewer shares of tangible assets experience greater contractions in export volumes in the years following a severe financial crisis. / text

Financial literacy continues to be a significant factor affecting small and medium enterprises (SMEs) in their ability to access finance worldwide. Both new and existing SMEs rely on external financing to grow and expand operations. However, financial literacy remains low among entrepreneurs, resulting in restricted access to finance which leads and contributes to the high failure rate of SMEs. The objective of the study is to determine whether a relationship exists between financial literacy and financial access among SMEs. This study followed a descriptive and quantitative research design. Primary data was gathered in a survey by means of self-administered questionnaires distributed to 397 entrepreneurs in the Ekurhuleni Metropolitan Municipality, Gauteng. The study revealed that entrepreneurs in Ekurhuleni did not fully understand basic financial concepts and thus portrayed low levels of financial knowledge. The study also indicated that access to finance was a major challenge for the majority of the SMEs in the municipality. Furthermore, the study established a positive relationship between financial literacy and financial access among SMEs in the municipality. Recommendations were provided to government, financial institutions, academic institutions and entrepreneurs suggesting measures that could be implemented in an effort to improve the levels of financial literacy and financial access among entrepreneurs. This study is the first to examine the financial literacy-financial access relationship among SMEs in Ekurhuleni Metropolitan Municipality and provides a benchmark for future research studies in this area. / Ukufundiswa ngezezimali kuqhubeke njalo kuba yisithikamezo esikhulu esithinta amabhizinisi amancane nalawo asakhasayo (SMEs) kwikhono lawo lokuthola izimali emhlabeni wonke. Zombili lezi zinhlobo zamabhizinisi akhona ama-(SMEs) encike phezu koxhaso lwezimali oluvela ngaphandle ukuze zihlume futhi zidlondlobalise imisebenzi yazo. Yize-kunjalo, izinga lokufundiswa ngezimali lihlala liphansi phakathi kosomabhizinisi, lokhu kudala ukutholakala kwezimali kube wumnqansa omkhulu, lokhu kusuke kuholele futhi kube nomthelela omkhulu ekudaleni izinga eliphezulu lokwehluleka kwama (SMEs). Inhloso enkulu yocwaningo wukuthola ukuthi ngabe ubudlelwano bukhona yini phakathi kokufundiswa ngezimali kanye kanye nokutholakala kwezimali phakathi kwamabhizinisi amancane nalawo asakhasayo (SMEs). Ucwaningo lulandela indlela yocwaningo echazayo kanye naleyo esebenzisa ulwazi. Idatha yokuqala yaqoqwa ngokwesaveyi ngokusebenzisa imibhalo yemibuzo yokuzenzela, eyasatshalaliswa kosomabhizinisi abakumasipali Ekurhuleni Metropolitan Municipality, eGauteng. Ucwaningo luveza ukuthi osomabhizinisi base-Ekurhuleni abazange bazwisise ngokugcwele amagama ezimali awulwazi oluyisisekelo kanti lokhu kwaveza amazinga aphansi olwazi lwezimali. Ucwaningo futhi luyaveza ukuthi ukutholakala kwezimali kwakuyinselelo enkulu kwiningi losomabhizinisi abancane nalabo abasakhasayo (SMEs) kumasipali. Ngaphezu kwalokho, ucwaningo luye lwancoma ukuthi kukhona ubudlelwano obuhle phakathi kokufundiswa ngezezimali kanye nokutholakala kwezimali phakathi kwamabhizinisi amancane nalawo asakhasayo (SMEs) ngaphakathi komasipali. Izincomo kanye nemihlahlandlela eqondiswe kuhulumeni, kumaziko ezezimali, kumaziko ezemfundo kanye nosomabhizinisi kuye kwanikezwa, kanti lokhu kungasetshenziswa kwimizamo yokuthuthukisa amazinga okufundiswa ngezimali phakathi kosomabhizinisi. Lolu wucwaningo lokuqala oluhlola ubudlelwano obumayelana nokufundiswa ngezimali kanye nokutholakala kwezimali phakathi kosomabhizinisi abancane nalabo abasakhasayo (SMEs) ngase-Ekurhuleni Metropolitan Municipality kanti futhi lolu cwaningo luye lwandlala isisekelo lapho ezinye izinhlelo zocwaningo zingaqhutshekiswa khona ngalesi sihloko / Die finansiële geletterdheid van klein en medium ondernemings (KMO’s) bepaal die mate waarin hulle toegang tot wêreldwye finansiering verkry. Sowel nuwe as bestaande KMO’s steun op finansiering om hulle werksaamhede uit te brei. Omrede min entrepreneurs finansieel ongeletterd is, geniet hulle beperkte toegang tot finansiering, en misluk KMO’s meestal. Die doel van hierdie studie is om vas te stel of daar ʼn verband tussen die finansiële geletterdheid van KMO’s en hulle toegang tot finansiering bestaan. ʼn Deskriptiewe en kwantitatiewe navorsingsontwerp is in hierdie studie gevolg. Die primêre data is ingewin met vraelyste wat deur 397 entrepreneurs in die Ekurhuleni Metropolitaanse Munisipaliteit in Gauteng ingevul is. Uit die studie het geblyk dat entrepreneurs in Ekurhuleni ʼn gebrekkige begrip van basiese finansiële begrippe het, en gevolglik oor weinig finansiële kennis beskik. Daar is bevind dat finansiering ʼn groot struikelblok vir die meeste KMO’s in die munisipaliteit is. Hierdie studie het vasgestel dat daar ʼn bepaalde verband tussen finansiële geletterdheid en finansiering onder die KMO’s in die munisipaliteit bestaan. Aanbevelings word gedoen om die finansiële geletterdheid en finansiering van entrepreneurs te verbeter. Hierdie riglyne is vir die regering, finansiële en akademiese instellings, en entrepreneurs bedoel. Aangesien dit die eerste ondersoek na die verband tussen finansiële geletterdheid en finansiering onder KMO’s in die Ekurhuleni Metropolitaanse Munisipaliteit is, stel hierdie studie ʼn standaard vir ander studies in hierdie streek. / Business Management / M. Com. (Business Management)