Rethinking Microfinance in a Dual Financial System: An Agent-based Simulation
Authored by Sara Bourhime, Mohamed Tkiouat
Date Published: 2018
DOI: 10.2478/saeb-2018-0002
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Abstract
Critics concerning the real impact of traditional microfinance as a tool
for poverty alleviation are becoming frequent. In contrast, the
financial crisis brought out interest for Islamic finance, whose models
have been increasingly studied. Today, the real challenge lies in
evaluating the impact of microfinance in a complex environment, where
both Islamic and conventional microfinance institutions exist and
address evolving clients in constant interaction. New methods and models
are therefore needed in order to test the efficacy and assess the impact
of introducing Islamic microfinance products, compared to the
conventional system. In this context, this paper proposes an approach to
build an Agent-Based Modeling (ABM) framework, which is aiming to test
the effects of such products implementation using Islamic interest-free
group loans. It also helps assess the impact of the behavioral biases as
well as agents' interactions within the repayment process.
Tags
agent-based simulation
experimental economics
Impact
Dual-financial system
Islamic microfinance
Interest-free lending