The influence of formal and informal institutions on microcredit: Financial inclusion for micro-entrepreneurs by lender type

Alexander Newman, Susan Schwarz, Daniel Borgia, Wu Wei

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)

Abstract

This chapter applies the Helmke–Levitsky typology of informal institutions to discuss how the interaction between the formal and informal institutional environment has shaped the development of China’s microfinance industry. The chapter shows that formal regulatory framework influenced commercial ‘for-profit’ microfinance providers (village and township banks or ‘VTBs’) and public interest microfinance providers (microcredit companies or ‘MCCs’) in different ways. While MCCs suffer deficiencies of not being able to accept savings deposits, VTBs are restricted by the inability to charge higher risk-adjusted interest rates. Geographical separation and low levels of out-group trust constrain the development of microfinance organisations, especially when the organisations do not have strong ties to local communities This study was approved by the appropriate university ethics committee and subsequently performed in accordance with the ethical standards in the 1964 Declaration of Helsinki. All persons gave their informed consent prior to inclusion in the study. Details disclosing the identity of the subjects under study have been omitted. The authors have full control of the primary data and have no financial relationship or conflict of interest with the organisations involved in the research.
Original languageEnglish
Title of host publicationMicrofinance for Entrepreneurial Development
PublisherSpringer
DOIs
Publication statusPublished - 1 Sep 2017

Fingerprint

Formal institutions
Informal institutions
Microfinance
Microcredit
Entrepreneurs
Financial inclusion
Regulatory framework
Institutional environment
Ethical standards
Informed consent
Charge
Local communities
Interest rates
China
Strong ties
Savings
Deposits
Interaction
Public interest
Outgroup

Keywords

  • Financial inclusion
  • Helmke–Levitsky framework
  • Institutional theory
  • Microenterprise
  • Microfinance
  • Poverty alleviation

Cite this

Newman, A., Schwarz, S., Borgia, D., & Wei, W. (2017). The influence of formal and informal institutions on microcredit: Financial inclusion for micro-entrepreneurs by lender type. In Microfinance for Entrepreneurial Development Springer. https://doi.org/10.1007/978-3-319-62111-1_2
Newman, Alexander ; Schwarz, Susan ; Borgia, Daniel ; Wei, Wu. / The influence of formal and informal institutions on microcredit : Financial inclusion for micro-entrepreneurs by lender type. Microfinance for Entrepreneurial Development. Springer, 2017.
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The influence of formal and informal institutions on microcredit : Financial inclusion for micro-entrepreneurs by lender type. / Newman, Alexander; Schwarz, Susan; Borgia, Daniel ; Wei, Wu.

Microfinance for Entrepreneurial Development. Springer, 2017.

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)

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