Closing Non-Bank Microfinance Sector: Does It Make Any Impact?

 

by Nargiza Alimukhamedova


Abstract

Microcredit was invented as an important development policy tool to combat poverty, promote economic growth and broaden access to finance for low income households. Despite its global recognition, empirical evidence of its effect is inconclusive. All efforts have been mainly concentrated on measuring the impact of introducing a new microfinance institution (MFI) on various development outcomes. Empirical evidence on effect of withdrawing or closing MFI is missing in mainstream literature. This project aims to exploit the effects of natural experiment of exogenous changes in microfinance market that happened in Uzbekistan. In 2011, activities of non-bank MFIs were officially terminated due to exogenous reasons. We aim to analyze the consequences of sector closure at various dimensions: (1) effect on financial sector development and access to finance (2) borrowing and saving patterns of households; and (3) identification of households who were suffered by sector closure. The findings of project are expected to generate new lessons for other developing countries and to draw important policy implications.

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