Department of Economics GC University, Lahore

Course Outline: Microfinance

Course:ESME 510: Microfinance Credit: 3 Credit Hours Pre-Requisite: None but elementary knowledge of Finance would be an advantage Course Objectives:

• To develop the understanding of students about microfinance and its impact on poor and poverty,

• To give students necessary skills to undertake Impact assessment of micro finance in poverty reduction.

Course Outline: 1-Introduction and Overview Why Development Finance Institution Exists? Market Failure vs Government failure, Why Credit Markets Fail the Poor? Micro Financing. 2- Current Debates in Micro Finance Subsisted credit provision, the move to market based solution, making use of social collateral, Savings, Can Micro finance intervention reduce poverty? Poverty as Powerlessness; Credit for micro enterprises, Researching the poorest, financial intervention and social change, treading carefully micro finance. 3- Micro Finance Mechanism Design features, loan collection method and repay method. Repayment incentives. Saving arrangements interest rates, The Value of a savings facility, Compulsory or voluntary Savings? Linking savings to credit peer selection, peer monitoring, Dynamic incentives, Regular Repayment Schedule Collateral Substitute, Group based Lending.

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Department of Economics GC University, Lahore

4- Financial Performance and Sustainability Introduction to Financial Performance, repayments/ recovery rate, Arrears and default, Financial Sustainability, The pros and cons of scaling up Issues in sustainability: The experience of village banking sustainability through extending coverage, Measuring financial sustainability, Managerial and organizational sustainability, subsidy dependence index, role of innovative credit institution in the credit market. 5- Impact Assessment. The objectives and difficulties of assessing, impact, Establishing loan use, Measuring change: Control and baselines, proving causality, Innovations in impact assessment; assessing impact on social relationships, impact assessment as a dynamic process, Validating - quantity data. Using. Quantitative data in impact assessment, Innovations in impact assessment, participatory and learning action. Recommended Texts: Finance Against Poverty (2 Volumes) by Hume, D. Routledge London (1996) Microfinance and Poverty Reduction by Johnson S and Roglay, B. Oxfam (UK and Ireland) (1997).

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