Impact of seasonality-adjusted flexible microcredit on repayment and food consumption : experimental evidence from rural Bangladesh

The mismatch between credit repayments and income seasonality poses a challenge for microfinance institutions (MFIs) working in developing countries. For instance, in northern Bangladesh, income and consumption downfalls during the lean season after the transplanting of major paddy crops are a serious threat to a household's economy. Poor landless agricultural wage laborers suffer the most owing to this seasonality as they face difficulties in smoothing their consumption. However, in designing microcredit products, MFIs do not usually provide flexibility or seasonal adjustment during the lean season. This is mainly because MFIs are afraid that such flexibility might break the repayment discipline of borrowers, resulting in higher default rates. We thus conducted a randomized controlled trial in 2011-12 in northern Bangladesh to empirically test whether seasonality-adjusted flexible microcredit leads to an increase in repayment problems for MFIs as well as whether it can increase and stabilize consumption of borrower households. Our results suggest no statistically discernible difference among the treatment arms in case of default, overdue amount, or repayment frequency. On the other hand, we find no positive impact of repayment flexibility on immediate food consumption during the period of seasonality, except for in-kind full moratorium treatment group. After a year of initial intervention, however, we see positive changes in food intake during the lean season. Thus, our preliminary results are in favor of seasonality-adjusted flexible microcredit.

Analogous Cycles with Lagged Co-movement: U.S. and East Asian Business Cycles

In selected East Asian economies, the behavior of detrended macroeconomic variables was found to be similar to that observed in the postwar U.S. economy. Consumption and investment are highly procyclical while the balance of trade and the price level are counter-cyclical in most of them. Labor productivity is procyclical in general. The high coherence between U.S. GDP and that of the East Asian economies suggests that business cycles in terms of frequency are also similar between the United States and East Asia. However, the GDP and consumption of East Asian countries do not necessarily co-move well with current U.S. and Japanese GDP and consumption, while East Asian consumption tends to co-move more with lagged U.S. and Japanese consumption.