The Unbanked

By Don E. Johnston, J. Morduch. 2008

184 citations recorded by the source corpus.

To analyze the prospects for expanding financial access to the poor, bank professionals assessed 1,438 households in six provinces in Indonesia to judge their creditworthiness. About 40 percent of poor households were judged creditworthy according to the criteria of Indonesia's largest microfinance bank, but fewer than 10 percent had recently borrowed from a micro bank or formal lender. Possessing collateral appeared as a minor determinant of creditworthiness, in keeping with microfinance innovations. Although these households were judged able to service loans reliably, most desired small loans. Calculations show that the bank, given its current fee structure and banking practices will lose money when lending at the scales desired. So, while innovations have helped to extend financial access, it remains difficult to lend in small amounts and cover costs.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/8023a26912347e47f25ec1e39142ca7b417b256a

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Citations in the corpus

Access to Finance (2008, background): “Johnston and Morduch (2008) show that many unbanked individuals in Indonesia, although judged creditworthy by microfinance professionals, seek loans that are too small to be profitable at common interest rates, even for an innovative microlender.”
Social and financial efficiency of Islamic microfinance institutions:a Data Envelopment Analysis application (2015, background): “Furthermore, small loans that they demanded are considered unprofitable (Johnston & Morduch, 2008).”
ACHIEVING THE SUSTAINABLE DEVELOPMENT GOALS (2016, background): “Research also shows that small, short-term loans, commitment products, and direct debit services can help households pay expenses such as tuition fees (Morduch 2007; Ashraf et al. 2003).”
Access to Finance (2010, unknown): “Thus, getting business loans is not always a priority for poor households, and the focus on business loans risks blinding policymakers and practitioners to a wider range of opportunities (Collins, et al., 2009; Johnston and Morduch, 2008).”
Measuring Financial Inclusion: Explaining Variation in Use of Financial Services across and within Countries (2013, background): “1 See, for example, King and Levine (1993); Beck, Demirguc-Kunt, and Levine (2007); Beck, Levine, and Loayza (2000); Demirguc-Kunt and Levine (2009); Klapper, Laeven, and Rajan (2006); and World Bank (2008a).”
Access to Financial Services (2009, unknown): “Instead, a sizable fraction of microcredit goes to meet important consumption needs (Johnston and Morduch 2008).”
Microfinance Meets the Market (2008, background): “Johnston and Morduch (2008), for example, find that half of recent loans taken by poor households in Indonesia were used for purposes unrelated to business.”