Environmental Shocks and Sustainability in Microfinance : Evidence from the Great Famine of Ireland

I study the effects of a major environmental shock on microfinance lending by analyzing the Irish Loan Funds during the Great Famine of Ireland. I find that funds in districts worse affected by blight experienced higher failure rates and greater credit retrenchment and flight-to-quality than funds i...

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Main Author:	Goodspeed, Tyler Beck
Format:	Journal Article
Published:	Published by Oxford University Press on behalf of the World Bank 2019
Subjects:	ENVIRONMENTAL SHOCK NATURAL DISASTER MICROFINANCE GREAT FAMINE CREDIT RETRENCHMENT
Online Access:	http://hdl.handle.net/10986/32785

id	okr-10986-32785
recordtype	oai_dc
spelling	okr-10986-327852021-05-25T10:54:37Z Environmental Shocks and Sustainability in Microfinance : Evidence from the Great Famine of Ireland Goodspeed, Tyler Beck ENVIRONMENTAL SHOCK NATURAL DISASTER MICROFINANCE GREAT FAMINE CREDIT RETRENCHMENT I study the effects of a major environmental shock on microfinance lending by analyzing the Irish Loan Funds during the Great Famine of Ireland. I find that funds in districts worse affected by blight experienced higher failure rates and greater credit retrenchment and flight-to-quality than funds in less affected districts. Though greater leverage was generally associated with a higher predicted probability of institutional survival, the reverse was true where blight infection was more severe, and though more profitable funds were generally no more likely to survive, higher pre-famine margins were positive predictors of institutional survival where blight infection was worse. Results further indicate that the primary mechanisms by which pre-famine balance sheet metrics influenced survival probabilities were differential balance sheet contraction and flight-to-quality during the famine. The results of this study, therefore, suggest that optimal lending models in ordinary circumstances may render microfinance institutions (MFIs) more vulnerable to tail-probability aggregate shocks, with higher leverage, lower paid staff, lower economic rents, and more extensive liabilities limiting the scope for credit retrenchment and flight-to-quality. Results further indicate that one cost of MFI resilience to adverse environmental change is substantially reduced outreach to borrowers of lower credit quality. 2019-12-04T22:50:39Z 2019-12-04T22:50:39Z 2018-06 Journal Article World Bank Economic Review 1564-698X http://hdl.handle.net/10986/32785 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Published by Oxford University Press on behalf of the World Bank Publications & Research Publications & Research :: Journal Article Europe and Central Asia Ireland
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	ENVIRONMENTAL SHOCK NATURAL DISASTER MICROFINANCE GREAT FAMINE CREDIT RETRENCHMENT
spellingShingle	ENVIRONMENTAL SHOCK NATURAL DISASTER MICROFINANCE GREAT FAMINE CREDIT RETRENCHMENT Goodspeed, Tyler Beck Environmental Shocks and Sustainability in Microfinance : Evidence from the Great Famine of Ireland
geographic_facet	Europe and Central Asia Ireland
description	I study the effects of a major environmental shock on microfinance lending by analyzing the Irish Loan Funds during the Great Famine of Ireland. I find that funds in districts worse affected by blight experienced higher failure rates and greater credit retrenchment and flight-to-quality than funds in less affected districts. Though greater leverage was generally associated with a higher predicted probability of institutional survival, the reverse was true where blight infection was more severe, and though more profitable funds were generally no more likely to survive, higher pre-famine margins were positive predictors of institutional survival where blight infection was worse. Results further indicate that the primary mechanisms by which pre-famine balance sheet metrics influenced survival probabilities were differential balance sheet contraction and flight-to-quality during the famine. The results of this study, therefore, suggest that optimal lending models in ordinary circumstances may render microfinance institutions (MFIs) more vulnerable to tail-probability aggregate shocks, with higher leverage, lower paid staff, lower economic rents, and more extensive liabilities limiting the scope for credit retrenchment and flight-to-quality. Results further indicate that one cost of MFI resilience to adverse environmental change is substantially reduced outreach to borrowers of lower credit quality.
format	Journal Article
author	Goodspeed, Tyler Beck
author_facet	Goodspeed, Tyler Beck
author_sort	Goodspeed, Tyler Beck
title	Environmental Shocks and Sustainability in Microfinance : Evidence from the Great Famine of Ireland
title_short	Environmental Shocks and Sustainability in Microfinance : Evidence from the Great Famine of Ireland
title_full	Environmental Shocks and Sustainability in Microfinance : Evidence from the Great Famine of Ireland
title_fullStr	Environmental Shocks and Sustainability in Microfinance : Evidence from the Great Famine of Ireland
title_full_unstemmed	Environmental Shocks and Sustainability in Microfinance : Evidence from the Great Famine of Ireland
title_sort	environmental shocks and sustainability in microfinance : evidence from the great famine of ireland
publisher	Published by Oxford University Press on behalf of the World Bank
publishDate	2019
url	http://hdl.handle.net/10986/32785
_version_	1764477291419664384

Environmental Shocks and Sustainability in Microfinance : Evidence from the Great Famine of Ireland

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