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1
Musanganya, Isabelle, Chantal Nyinawumuntu, and Pauline Nyirahagenimana. "THE IMPACT OF MICROFINANCE BANKS IN RURAL AREAS OF SUB-SAHARAN AFRICA." International Journal of Research -GRANTHAALAYAH 5, no. 9 (September 30, 2017): 80–90. http://dx.doi.org/10.29121/granthaalayah.v5.i9.2017.2201.
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Many researchers consider microfinance as a tool for poverty reduction. Even more, especially in post-conflict African countries, micro-financial institutions are seen as an opportunity of reconciliation. Lending from microfinance institutions to that from traditional banks and examine their respective effects upon economic growth has been practiced in some sub-Saharan countries. Considerable progress in research has been found that microfinance loans raise growth comparatively to that of traditional banks. A lot of number of researches carried out in sub-Saharan countries even in other developing countries outside of Africa did not find strong evidence that bank loans raise growth. There is, however, some evidence that bank loans do increase investment, whereas microfinance loans do not appear to do so. Differently, other researchers highlighted clearly that microfinance can provide its contribution on poverty reduction and better access to finance needed for startup micro-entrepreneurs along the world. These results suggest that microfinance loans are not primarily invested as physical capital in developing countries, but could still augment total factor productivity, whereas banks may have been financing non-productive investments. Herein, we highlighted the impact of microfinance banks on developing countries economic growth. We also indicate how microfinances system incorporated in rural areas boosted the lifestyle of poor people in Sub-Saharan Africa.
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Amran, Afifa Malina, Intan Salwani Mohamed, Sharifah Norzehan Syed Yusuf, and Nabilah Rozzani. "Financial and Social Performances of Islamic Microfinance Service Provider With Mobile Banking." International Journal of Financial Research 10, no. 5 (June 10, 2019): 181. http://dx.doi.org/10.5430/ijfr.v10n5p181.
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In Malaysia, Islamic microfinance institutions (IMFIs) are part of Islamic financial institutions and have been established to provide Islamic microfinance products (interest free loans). Their aim is to promote trade activities among Islamic microfinance recipients in improving their standard of living. Information and data gathered can be used as evidence to prove that Islamic microfinance has traits that provide a support system for the poorest of the poor. This study hence intends to investigate the application of technology by Islamic microfinance institutions within a context of its accounting information system through the usage of mobile banking. This study is conducted using qualitative approaches via interviews to obtain in depth understanding of mobile banking usage at an Islamic microfinance institution. Financial data, as well as data on the total number of loan recipients (sahabats) is referred by the study in investigating another aspect of social performance in terms of vicegerency and accountability of the IMFI. Extensive application of vicegerency concept in explaining the findings is parallel to Shari'ah Foundation for Accountants in outlining characteristics of Muslim accountants in preventing them from doing prohibited actions.
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Bennouna, Ghita, and Mohamed Tkiouat. "Stochastic model of microcredit interest rate in Morocco." Risk Governance and Control: Financial Markets and Institutions 6, no. 4 (2016): 268–73. http://dx.doi.org/10.22495/rgcv6i4c2art3.
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Access to microcredit can have a beneficial effect on the well-being of low-income households excluded from the traditional banking system. It allows this population to receive affordable financial services to help them to meet their needs and to improve their living conditions. However to provide access to credit, microfinance institutions should ensure not only their social mission but also commercial and financial mission to enable the institution to perpetuate and become self-sufficient. To this end, MFIs (microfinance institutions) must apply an interest rate that covers their costs and risk, while generating profits, Also microentrepreneurs need, to this end, to ensure the profitability of their activities. This paper presents the microfinance sector in Morocco. It focuses then on the interest rate applied by the Moroccan microfinance institutions; it provides also a comparative study between Morocco and other comparable countries in terms of interest rates charged to borrowers. Finally, this article presents a stochastic model of the interest rate in microcredit built in random loan repayment periods and on a real example of the program of loans of microfinance institution in Morocco.
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Zioło, Monika, and Lidia Luty. "THE ACTIVITY OF MICROCREDIT INSTITUTIONS IN POLAND AGAINST THE BACKDROP OF OTHER EUROPEAN COUNTRIES." Annals of the Polish Association of Agricultural and Agribusiness Economists XXII, no. 4 (November 30, 2020): 206–18. http://dx.doi.org/10.5604/01.3001.0014.5615.
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The aim of this paper is to present the position of Poland against the backdrop of other European countries affiliated with the European Microfinance Network (EMN). In many cases, microenterprises have a problem obtaining external financing for their businesses. Support for small entrepreneurs is provided by microcredit institutions, which in many cases do not require a credit history or collateral from their clients. Microfinance, by limiting the phenomenon of financial exclusion and facilitating access to financial resources for those in need, can become a tool to stimulate entrepreneurship. Most of the institutions providing loans are affiliated with the European Microfinance Network. Analyses were conducted on three levels: activity of microenterprises in obtaining support for starting a business, loan portfolio quality, and the financial efficiency of institutions providing loans. Comparing Polish micro-entrepreneurs with companies from other European countries, it can be observed that Polish entrepreneurs pay their liabilities on time, as evidenced by the low percentage of lost loans, and institutions providing microloans generate small profits, but are able to finance their activities on their own. Poland also has favourable interest rates on microloans compared to other European countries. However, information showing a decrease in the number of borrowers and the value of loans provided in 2017 compared to 2016 can be assessed negatively.
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Singh, Vijeta, and Puja Padhi. "Dynamic Incentives and Microfinance Borrowers." Journal of Land and Rural Studies 5, no. 1 (January 2017): 67–92. http://dx.doi.org/10.1177/2321024916677609.
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In recent years microfinance has been recognised as one of the policy mechanisms to achieve the goal of financial inclusion. Different lending models have been appropriated in microfinance sector to provide micro-loans to microfinance borrowers and their likely socio-economic impact on microfinance borrowers varies across different lending models. In case of microfinance, credit contracts between lenders and borrowers are designed in such a manner that borrowers’ initial loans are smaller but increases with each loan cycle over a period of time, termed as progressive lending.2 The present study using primary data collected from Mirzapur district in Uttar Pradesh attempts to explore the determinants/variables that explain progressive loan demand by microfinance borrowers in self-help groups (SHGs) and joint liability groups (JLGs). Using logit model, the paper concludes that in both SHGs and JLGs, longer association with microfinance groups helps in availing progressive loans from SHGs/microfinance institutions (MFIs) followed by loans procured from other sources also compel microfinance borrowers to demand larger loans from MFIs primarily for paying loan instalments. In addition to this income, size of group, number of dependents in household and asset endowment characteristics of SHG/JLG members also affect progressive loan demand by SHG/JLG members.
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Danstun, Ngonyani, and Mapesa Harun. "The Effect of Credit Collection Policy on Portfolio at Risk of Microfinance Institutions in Tanzania." Studies in Business and Economics 14, no. 3 (December 1, 2019): 131–44. http://dx.doi.org/10.2478/sbe-2019-0049.
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AbstractThis paper presents the results of the study on the effect of credit collection policy on portfolio at risk of microfinance institutions in Tanzania. The study used cross-sectional survey data of microfinance institutions in three regions of Dar es salaam, Morogoro and Dodoma. Random sampling was employed to obtain a sample of 219 respondents in all three regions. Multiple linear regression analysis was used to determine the effect of credit collection policy on portfolio at risk of microfinance institutions. Results show that, there is a positive relationship between interest rates charged and portfolio at risk of microfinance institutions. On the other hand, the variable for grace period on loans and loan sizes to borrowers had a negative relationship with portfolio at risk of microfinance institutions. The study recommends that, microfinance institutions in Tanzania need to reconsider the interest rates charged to their clients to enhance sustainability of their loan portfolios. Moreover, microfinance institutions need to enhance provision of grace period to their customers. Also, establish efficient loan product sizes which suffice diverse client’s needs. That would encourage and broaden client repayments, contribute to financial performance and reduced risk of portfolio of microfinance institutions.
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Anglin, Aaron H., Jeremy C. Short, David J. Ketchen, Thomas H. Allison, and Aaron F. McKenny. "Third-Party Signals in Crowdfunded Microfinance: The Role of Microfinance Institutions." Entrepreneurship Theory and Practice 44, no. 4 (April 12, 2019): 623–44. http://dx.doi.org/10.1177/1042258719839709.
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Crowdfunded microfinance research has routinely examined how campaign characteristics drive funding to crowdfunding campaigns but has neglected to examine the critical role of the microfinance institution (MFI). We leverage signaling theory to contend that entrepreneurs’ MFI affiliation is a salient third-party signal that shapes the performance of their crowdfunding campaign and examine how the financial and social performance of MFIs drive campaign funding. Our examination of 220,649 loans paired 173 MFIs supports our arguments. We provide insight into the importance of third-party signals in crowdfunding and into how investors seek to balance social motives with financial concerns in crowdfunded microfinance.
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Banerjee, Abhijit, Esther Duflo, and Richard Hornbeck. "Bundling Health Insurance and Microfinance in India: There Cannot be Adverse Selection if There Is No Demand." American Economic Review 104, no. 5 (May 1, 2014): 291–97. http://dx.doi.org/10.1257/aer.104.5.291.
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Microfinance institutions have started to bundle their basic loans with other financial services, such as health insurance. Using a randomized control trial in Karnataka, India, we evaluate the impact on loan renewal from mandating the purchase of actuarially-fair health insurance covering hospitalization and maternity expenses. Bundling loans with insurance led to a 16 percentage points (23 percent) increase in drop-out from microfinance, as many clients preferred to give up microfinance than pay higher interest rates and receive insurance. In a Pyrrhic victory, the total absence of demand for health insurance led to there being no adverse selection in insurance enrollment.
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Popoola, M. Ak, Am N. Brimah, and A. R. Gbadeyan. "Financial Institutions Micro Loans: A Strategy for Reducing Poverty in Nigeria." Financial Markets, Institutions and Risks 3, no. 3 (2019): 13–17. http://dx.doi.org/10.21272/fmir.3(3).13-17.2019.
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This article summarizes the arguments and counter-arguments in the scientific debate on the use of microcredit by financial institutions as a strategic direction for poverty reduction in Nigeria. This study is aimed at studying the impact of microcredit operations provided by commercial banks to business entities, poverty indicators of the country. Five commercial and five microfinance banks of the state of Nigeria were selected as the object of the study. Methodological support of this work includes a survey method (for accumulating primary information on obtaining correct data of respondents on the dynamics of poverty indicators, reducing unemployment, training, skills, expanding income opportunities, etc.). The article presents the results of empirical analysis, showed a significant impact of microcredit processes of financial institutions to reduce poverty indicators in Nigeria.The author notes the need for banks in Nigeria to introduce less aggressive mechanisms for profit, that is, formed on a socialist basis. Based on the results of the study, the author proposed the following recommendations: financial and institutional promotion of major microfinance banks in Nigeria; the increase in government spending on the organization of seminars to prepare and expand business opportunities for community representatives to establish their own business, simplification of mechanisms for the provision of microcredit (on the principles of gender sensitivity, in particular for women entrepreneurs) and reduction of interest rates for entrepreneurs, which will improve both the indicators of financial and economic development of the country, and will contribute to the well-being of society as a whole. Keywords: financial institutions, microfinance banks, microcredit, poverty reduction.
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Putera, Asrip, and Muh Yani Balaka. "Treatment strategies for bad loans to microfinancial institutions: evidence from Kendari, Indonesia." Investment Management and Financial Innovations 16, no. 1 (February 27, 2019): 144–53. http://dx.doi.org/10.21511/imfi.16(1).2019.11.
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The purpose of the research is to find the right strategic formula to resolve bad loans suitable to environment and characteristics of micro-financial institutions and their consumers. It applies qualitative approach by means of interactive method put forward by Milles and Huberman (2009) as analysis method. Data are obtained from indepth interview with superordinates, staff and consumers of microfinance institutions in Kendari city. A microcredit institution “Harum” needs several strategis to handle bad loans. It includes: institutional reinforcement (improvement in service procedure, increase in human resources’ skill, more branch offices, more new recuitments, the involvement of sub-district government, the use of information system), reinforcement of consumers’ capacity (tight selection process, counseling of business management, advisory service, and special relationship). The research results serve as solutions to microfinancial institutions in handling bad loans, from which development and sustainability can be assured. Consumers might make use of this information to develop their business. They also might serve as references for regional government in making the right policy for the development of micofinancial institutions and small business empowerment. This is the first study exploring formulation of strategy for microfinancial institutions in handling bad loans. The research explores internal and external aspects of microfinancial institution, with holistic view of the right policy in terms of institutions and consumers.
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Dhungana, Bharat Ram. "Does Loan Size Matter for Productive Application? Evidence from Nepalese Micro-finance Institutions." REPOSITIONING The Journal of Business and Hospitality 1 (November 20, 2016): 63–72. http://dx.doi.org/10.3126/repos.v1i0.16043.
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This paper examines the loan size and its productive application after involvement in micro-finance programme in western development region of Nepal. The paper is based on primary sources of data collected through structured questionnaires. The survey includes 500 clients from four districts of western development region both from government and Private microfinance institutions. The study shows that there is positive association between size of savings and loans, size of savings and loan application, current loan size and ethnicity, loan size and duration of membership, and finally loan size and its application. It has been found that clients who have taken small size of loans, they have mostly spent their loans on domestic purposes and found poor application of loans in micro-business whereas big loan size clients have greater application of loans in productive sectors. Micro-finance institutions should increase loan size (as per the provision of monitory policy) with necessary entrepreneurship skills that will help to enhance productive application of loans however, strict monitoring and supervision is essential. Thus, MFIs should give equal priority for non-financial services such as financial literacy and provision of entrepreneurship skills through government and non-government organizations that ultimately helps to utilize micro-credit into productive sectors.Repositioning Vol.1(1) 2016: 63-72
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Burki, Ajab Khan, Aamir Sadiq, and Hanif Ullah Burki. "Financial sustainability and microfinance institutions from an emerging market." Risk Governance and Control: Financial Markets and Institutions 8, no. 4 (2019): 30–37. http://dx.doi.org/10.22495/rgcv8i4p4.
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The purpose of this paper is to estimate the determinants affecting Financial Sustainability (FS) of Micro Finance Institutions (MFIs) working in Pakistan. The determinants are based on financing charges, size of loans, the age of the firm, size of Microfinance Institute, and proportion of female borrowers. These variables discern the important contribution to the effective financial sustainability of Microfinance institutions working in Pakistan. Data were collected from 25 Microfinance Institutions of their annual reports from 2008-2015. The multiple regression technique was used to measure financial sustainability with the given determinants. The results of this study show that financing charges, outreach and the proportion of female borrowers significantly explain the financial sustainability of MFIs. These are crucial determinants for alleviating poverty in Pakistan and attaining sound financial sustainability and survivorship of MFIs. This is one of the contributing studies in justifying various determinants affecting the financial sustainability in MFIs of Pakistan. This article is helpful for policymaker and management of MFIs to revitalize their focus to address the weaker parts of their capabilities and resources.
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Twesige, Daniel, Alexis Uwamahoro, Philippe Ndikubwimana, Faustin Gasheja, Isaie Kadhafi Misago, and Uzziel Hategikimana. "Causes of loan defaults within Microfinance institutions: Learning from micro and small business owners in Rwanda: A case of MSEs in Kigali." Rwanda Journal of Social Sciences, Humanities and Business 2, no. 1 (April 4, 2021): 27–49. http://dx.doi.org/10.4314/rjsshb.v2i1.3.
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The study analyse the factors that causes loan defaults within Microfinance institutions learning from the perception of entrepreneurs in Rwanda. Explanatory research design was used. Data was collected from primary and secondary sources using questionnaire and documentation. The study population included microfinance institutions within Kigali. The target population included MSEs that are classified within a portfolio of nonperforming loans. Structural Equation Modeling (SEM) was used to analyse the correlation between the study variables. The findings from the survey showed that loan delay, loan shortage, loan deviation, interest rate, improper management, business environment have a significant impact on nonperformance. The researcher recommended that entrepreneurs should be trained on financial discipline and how to manage the loan finance
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Simonin, Irving, Marc Brooks, and Luis Enrique Nieto Barajas. "Portfolio recommendations to improve risk of default in microfinance." CIENCIA ergo sum 28, no. 1 (December 14, 2020): 1–7. http://dx.doi.org/10.30878/ces.v28n1a6.
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This article presents an exciting application of machine learning for loan origination in microfinance. Microfinance targets people who cannot build a credit history and therefore cannot access loans from banks or other financial institutions. We use data from a Mexican microfinance company that operates in several regions throughout the country. The objective is to guide intermediate lenders to choose their clients and achieve a lowerr credit default risk. We use several statistical models such as principal component analysis, clustering analysis and a regression tree. We obtain, as a result, a series of recommendations based on the characteristics of the clients.
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Batinge, Bibiana K., and Hatice Jenkins. "Gender and Poverty Reduction in Ghana: The Role of Microfinance Institutions." International Journal of Economics and Finance 13, no. 8 (July 25, 2021): 71. http://dx.doi.org/10.5539/ijef.v13n8p71.
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Inequality between men and women is widely acknowledged across many parts of the globe. For example, among paid employees in Ghana, women’s average hourly earnings were around 67% of men. The disparity in earnings perpetuates poverty. Access to financial resources is widely regarded as crucial machinery to addressing this gender disparity and reducing poverty among women. Microfinance is a conduit to increasing access to finance among poor urban and rural women who usually lack the collateral to access loans from traditional financial institutions. Notwithstanding the vital role microfinance institutions play, there is no consensus on the assertion that its impact is generally favourable. Therefore, this study investigated the role of microfinance on health, education, and standard of living, as dimensions of poverty reduction in the Techiman Municipality of Ghana. The results indicate that access to microfinance services positively correlates to health, education, living standards and poverty reduction. Therefore, it is essential to extend the reach of microfinance services to increase access further to finance and, consequently, accelerate the rate of poverty reduction within the Municipality.
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Antoh, Ernestina Fredua, and Albert A. Arhin. "Advancing Sustainable Development Goals (SDGs): An Analysis of How Non- Financial Services of Microfinance Insitutions Facilitate Human Capital Development of Clients in Ghana." Journal of Sustainable Development 11, no. 4 (July 29, 2018): 257. http://dx.doi.org/10.5539/jsd.v11n4p257.
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In 2015, the United Nations General Assembly adopted the 2030 Agenda for Sustainable Development, together with seventeen goals that are collectively called the Sustainable Development Goals (SDGs). This study examined the effects of non-financial microfinance services on human capital development of clients and discusses its implications on the achievement of the Sustainable Development Goals. The case is drawn from Sinapi Aba Trust (SAT), which is a microfinance institution of Ghana. Primary data were collected from 361 clients in seven districts of the Ashanti Region, Ghana. The results of the ordinary least square (OLS) regression showed that non-financial services offered by SAT had positive significance on human capital development of the clients. This finding shows how additional services from microfinance institution could help clients to maximise the value of loans offered to support income-generating economic activities. For clients, the study also draws attention to the need for them to take non-financial services offered by microfinance institutions seriously to improve on their own human capital development in the context of the SDGs.
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Abdallah Alshammari, Ahmed Mahmoud, and Wan Mohd Nazri Wan Daud. "The Effect of Microfinance Bank Services on Women Empowerment: The case for Women Entrepreneurs in Irbid, Jordan (SMEs)." Journal of Entrepreneurship and Business 9, no. 1 (June 30, 2021): 38–49. http://dx.doi.org/10.17687/jeb.v9i1.415.
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Generally, women, entrepreneurs face problems in accessing funding due to factors that stem from cultural values, ??societal needs, family ties, illiteracy, gender discrimination, strict government policies, economic crisis, and the lack of training in entrepreneurship and skills acquisition that hinders entrepreneurial activities. This study was conducted to examine the impact of microfinance bank services in empowering female entrepreneurship in Irbid Governorate. The study used a cross-sectional survey research design consisting of 20,000 registered businesswomen. A total of 392 working women were selected using stratified sampling technique and the data was analysed using Least Square Structural Equation Modelling (PLS-SEM) with the help of SmartPLS3 software. The results showed that microfinance loans, microfinance savings, and financial interventions or donations had a significant, positive impact on empowering women's businesses in Irbid, Jordan. The study concluded that microfinance deposits could elevate women’s income and act as a guarantee to obtain loans and other microfinance services. Consequently, microfinance institutions (MFIs) should empower more women-owned businesses. In addition, the government through the Central Bank of Jordan should reduce the interest rate of microfinance banks to attract more female entrepreneurs and create more microfinance bank plans and financial intervention packages to enhance financial services to ensure donations and funds reach women entrepreneurs.
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Karki, Karun Kishor, Nirajan Dhungana, and Bhesh Bahadur Budhathoki. "Breaking the Wall of Poverty: Microfinance as Social and Economic Safety Net for Financially Excluded People in Nepal." Molung Educational Frontier 11 (June 17, 2021): 26–53. http://dx.doi.org/10.3126/mef.v11i0.37835.
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Microfinance is a financial service aimed at economically underprivileged people who have no or limited access to formal financial institutions such as banks due to the lack of financial resources, collateral, or low income. Microfinance institutions provide a collateral-free loan to low-income individuals with the principle of financial inclusion, which allows them to invest in various self-employment activities. In this article, we critically review the development of microfinance and its issues and challenges in Nepal. More specifically, using the concept of the Grameen Bank model and its relevance in the context of Nepali microfinance institutions, we explore how microfinance can be an effective tool of financial intervention to alleviate rural poverty in Nepal. Methodologically, we utilize secondary data sources such as government and non-government reports and existing empirical studies. We offer recommendations for policymakers to establish appropriate modalities, programs, and microfinance services targeting the socio-economic transformation of rural communities in Nepal. We conclude that the government and financial institutions can stimulate microfinance institutions through multidimensional interventions and facilitation to advance the socio-economic status of financially underprivileged people in rural communities in Nepal.
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Saeed, Muhammad Sajid. "Microfinance Activities and Factors Affecting the Growth of Microfinance in Developed & Developing Countries." International Finance and Banking 1, no. 1 (April 13, 2014): 39. http://dx.doi.org/10.5296/ifb.v1i1.5473.
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Microfinance Institutions (MFIs) have served millions of poor people around the world by offering them small loans with easy repayment terms. This review paper highlights the microfinance activities performed by the MFIs and also indicates the critical factors that hinder the growth of microfinance in developing and developed nations. It is found that the foremost factors obstructing the adoption of microfinance are: lack of financial stability, uncontrolled growth, cultural and value impede, systematic frauds, bureaucratic obstacles, state intervention, methodological defects, and shortage of credit rating agencies.
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Bhusare, Shital Prakash, and Ruby Chanda. "Micro-Finance & Micro-Credit for Sustainable Development." IRA-International Journal of Management & Social Sciences (ISSN 2455-2267) 6, no. 3 (March 27, 2017): 365. http://dx.doi.org/10.21013/jmss.v6.n3.p4.
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<div><p><em>Poverty is one of the biggest challenges to the development of a developing country like India where a major population is living in rural and semi-urban areas. Institutional credit is considered as a powerful tool for alleviating poverty. Microfinance is the supply of loans, savings, and other basic financial services to the poor. As the financial services of microfinance usually involve small amounts of money – small loans, small savings etc. the term "Microfinance" helps to differentiate these services from those of commercial banks. Microfinance in India has been through two channels of credit delivery to poor and low-income households–Self Help Group Bank Linkage Programme (SBLP) and the Microfinance institutions lending through groups as well as directly to individuals. This study was with the overall objective of conducting a detailed analysis of interest rates, costs and margins of microfinance institutions. </em></p><p><em>This study highlights the reach and the impact on the customers and the channels used by these firms for the effectiveness of Micro Finance and Microcredit schemes. For the purpose of analysis the statistical tools like Mean, Standard deviation, coefficient of co-relation and regression have been used. </em></p><p><em>Microfinance is playing a very important role in decrease poverty. Microfinance to the rural SHGs is a way to raise the income level and improve the living standards of the rural peoples. Thus, it can be concluded that the self-help groups contribute substantially in pushing the conditions of the rural population up.</em></p></div>
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Tamanni, Luqyan, and Mohd Hairul Azrin Haji Besar. "Profitability vs Poverty alleviation: has banking logic influences Islamic microfinance institutions?" Asian Journal of Accounting Research 4, no. 2 (October 14, 2019): 260–79. http://dx.doi.org/10.1108/ajar-05-2019-0039.
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Purpose The purpose of this paper is to shed some lights on the process of mission drifting or abandoning poverty objective by Islamic microfinance institutions (IMFs). The paper investigates whether the extensive use of banking logic changes IMFs, from focusing on both development and financial objectives to only considering sustainability as their primary mission. Design/methodology/approach This paper adopts mixed methods by analyzing 7,200 microfinance data from Microfinance Exchange Market and reviewing annual reports and websites of 25 IMFs to examine their vision and mission statements and other related information. Findings The finding shows Islamic microfinance has not changed, despite increasing adoption of financial or banking performance measures. However, size and age of the institutions may affect the outcome in the future. The authors find that smaller microfinance institutions maintain genuine objective to serve the poor, as the grow larger they would be more inclined toward sustainability objectives. Research limitations/implications The research is limited on the sample size as data on Islamic microfinance globally is limited. However, the paper looked at the global data rather than local data to compensate for this limitation. Future study would be further taking the study through qualitative methods to support the study. Originality/value This paper aims to shed some lights on the process of mission drifting or abandoning poverty objective by IMFIs. The paper investigates how has the extensive use of financing logic has changed IMFIs from focusing on both development and financial objectives to only considering sustainability as their primary mission. Arun and Hulme (2009) argued that the interaction of multiple logic within microfinance institutions, i.e. financial vs social, could pose some serious management dilemmas within microfinance institutions. Further, commercialization puts pressure on the field staffs to achieve financial targets and often neglect their poverty outreach mission to the poor. The well-known crisis in Andhra Pradesh, India where clients of microfinance institutions committed suicide after being shamed by field officers who tried to collect payments of loans (Mader, 2013; Taylor, 2011), provides a powerful case of the impact of financialization to microfinance clients.
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Maloba, Michelle, and Abdul Latif Alhassan. "Determinants of agri-lending in Kenya." Agricultural Finance Review 79, no. 5 (October 7, 2019): 598–613. http://dx.doi.org/10.1108/afr-10-2018-0094.
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Purpose The purpose of this paper is to examine the factors that influence financial institutions’ lending to the agricultural sector in Kenya. Design/methodology/approach The paper employs a panel data of 15 licensed financial institutions (commercial banks and deposit-taking microfinance institutions) from 2011 to 2016. The random effects and ordinary least squares panel corrected standard errors estimation techniques are employed to estimate the effect of liquidity, size, equity, lending rate (LR), type of financial institution and non-performing loans on agri-lending. Findings The results indicate that only 3.9 per cent of loan portfolio of the sampled financial institutions were advanced to the agricultural sector over the study period. From the panel regression analysis, the paper finds agricultural credit risk to reduce lending to the agricultural sector while size, LR and type of financial institution were observed to significantly increase agricultural lending. Compared to 2011, agri-lending was also observed to have declined between 2012 and 2015. Practical implications The findings highlight important indicators for enhancing lending to the agricultural sector in Kenya and other emerging economies. Originality/value As far as the authors are concerned, this presents the first empirical evidence on the determinants of agri-lending by financial institutions in Kenya.
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Pakkana, Mukhaer, and Lincolin Arsyad. "Microfinance Institutions and Empowerment of Women in Rural Area: A Case in Tangerang." Signifikan: Jurnal Ilmu Ekonomi 6, no. 1 (February 15, 2017): 69–86. http://dx.doi.org/10.15408/sjie.v6i1.4637.
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The purpose of this study is to discover the performance of the financial independence, the members’ welfare, and accessibility of microfinance institutions to the rural areas in the Tangerang District. To measure the financial dependence is using financial ratios. Measuring levels of performance of the members’ welfare and accessibility using Chi-Square. The results found that, first, the level of welfare of members. The coastal areas have a higher loan value than other regions. Expenditure and income of members, industrial areas have high levels of spending and revenues higher than other regions. The performance of a range to members based on a group basis. Second, the performance of financial independence, categorized as "Healthy". The coastal area is 86.40, the area around the industrial area is 85.71 and agricultural area is 83,73. Third, the level of non-performing loans, the coastal area is 0.03, the industrial area is 0,26, and the agricultural area is 0.19.DOI: 10.15408/sjie.v6i1.4637
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Hemtanon, Wittawat, and Christopher Gan. "Microfinance Participation in Thailand." Journal of Risk and Financial Management 13, no. 6 (June 11, 2020): 122. http://dx.doi.org/10.3390/jrfm13060122.
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Income inequality is a major problem in Thailand. A key determinant of income inequality in Thailand is the lack of financial access to financial institutions for low-income families. Microfinance institutions (MFIs) play an important role in enabling poor households to access financial resources at a reasonable cost. The purpose of this paper is to investigate factors that affect Thai households participating in microfinance programs in Thailand. A multinomial logit model is used to investigate the factors that impact the Thai households’ access to microfinance. The study employs secondary data from the Thai Socioeconomic Survey (cross-sectional data in 2017) to identify factors affecting Thai household participation in microfinance programs. The results show that the Village Fund (VF) targets low-income rural households and encourages those with older household heads who have lower levels of education, and female household heads, to participate in their program. Larger households are more likely to access the VF. Households with higher dependency ratios are less likely to borrow from the VF. Households with well-educated, young household heads in regional areas are more likely to borrow money from Saving Groups for Production (SGPs). SGP borrower households have higher household incomes than VF borrower households. Our findings indicate that VFs and SGPs are credit sources in the rural credit market; these sources enable rural households to access credit to meet their needs. In addition, rural Thai households borrow from many sources so that they can rotate their loan repayments. Low-income households refinance their loans by borrowing from different sources.
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Maishanu, Umar Aliyu, and A. K. Siti-Nabiha. "EXPLORING THE ADVANCEMENT AND ROLES OF ISLAMIC MICROFINANCE INSTITUTIONS IN MICROENTERPRISE DEVELOPMENT IN NIGERIA." International Journal of Industrial Management 7 (September 1, 2020): 52–59. http://dx.doi.org/10.15282/ijim.7.0.2020.5754.
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This paper discusses the advancement and roles of microfinance institutions, specifically Islamic microfinance institutions in microenterprise development in Nigeria. Microfinance institutions play a key role in financial inclusion and microenterprise development, especially in developing countries. The key aim of microfinance initiatives is to eradicate poverty by providing access to a wide range of financial products and services for those who are financially excluded. The emergence of microfinance in Nigeria appears to be promising, as these institutions support Nigerians of average or poor means by improving their living conditions. However, the nature and conditions of the schemes do not satisfy the sensitivities and requirements of a substantial number of people including poor Muslims who need funding but are unable to take advantage of conventional microfinance services, as loan conditions are seen as being contradictory to Islamic teachings. Islamic microfinance, therefore, can alleviate poverty through the development of microenterprises.
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Bourhime, Sara, and Mohamed Tkiouat. "Rethinking Microfinance in a Dual Financial System: An Agent-based Simulation." Scientific Annals of Economics and Business 65, no. 1 (March 1, 2018): 13–29. http://dx.doi.org/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.
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Arhin, Solomon. "The narrow and broad argument of microfinance impacts on small- and medium-sized enterprises in Ghana." International Journal of Learning and Teaching 11, no. 4 (October 31, 2019): 118–27. http://dx.doi.org/10.18844/ijlt.v11i4.4320.
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Microfinance has become a popular and fashionable word in financial and development circles. In practice, the term was often used more narrowly to refer to loans and other services from providers that identify themselves as microfinance institution. Indeed, the concept of microfinance was not new in Ghana. Microfinance plays a very crucial role in the area of addressing the market failures with regard to the provision of financial services to the low-income customers who until recently were receiving little or no help from the conventional financial service providers. This study examines the impact of microfinance on the operations of small- and medium-scale industries in Ghana – focusing on Tafo area of Ashanti region. The study uses sampling size of 91 clients. Data were collected through questionnaire. The findings reveal that most of the microfinance clients take loans to expand their personal businesses. The study recommends an effective monitoring system to be put in place to correct the poor collection mechanism that is currently facing the firms.
Keywords: Microfinance, small- and medium-sized enterprises, Tafo district
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Shaik Mohammed, Wasiullah, and Khalid Waheed. "Interest-free microfinance in India." Journal of Islamic Accounting and Business Research 10, no. 5 (October 14, 2019): 695–709. http://dx.doi.org/10.1108/jiabr-11-2017-0176.
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Purpose The purpose of this study is to understand the operations of interest-free microfinance institutions, find the issues and recommend possible solutions in the Indian context. Design/methodology/approach This paper is based on the case study of Sanghamam Multistate Cooperative Credit Society. This research uses both primary and secondary data. The institution is assessed in terms of two major performance aspects, namely, outreach indicators and financial performance indicators. A brief comparative study of Sanghamam with the aggregate performance of the Indian microfinance industry has also been included. Findings It is found that Sanghamam has been successfully providing interest-free microfinance services in India. The performance of Sanghamam on selected industry benchmarks is in line with the performance of the Indian microfinance industry. However, a few issues such as potential liquidity risk, lower penetration in the poorer sections of the population, Shariah issues in the method of determination of service charges on demand loans and in the structure of group deposit scheme and profit-sharing business loans have been highlighted. Research limitations/implications Sanghamam is evaluated from only outreach and financial performance aspects and not from the aspect of the impacts of its services. Practical implications This study would help in documenting the operations of Sanghamam. Moreover, the recommendations provided, if implemented, would help Sanghamam in further growth. Social implications This study would help create awareness in the society about the practices of interest-free microfinance. Originality/value This paper highlights the interest-free microfinance practices in India that have not received the needed attention. The authors have discussed the key issues related to the interest free microfinance and recommended the possible solutions.
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Kanga, Mahazarin, Juhi Bansal, Siddharth Verma, and Ishani Bandaranayake. "The Equity and Efficiency of Microfinance." Deakin Papers on International Business Economics 3, no. 1 (July 1, 2010): 11–17. http://dx.doi.org/10.21153/dpibe2010vol3no1art188.
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Banks are for people with money rather than for people without money. However, microfinance is banking for the unbankables. It brings credit, loan, savings and other essential financial services within the reach of millions of people who are too poor to be served by regular banks, i.e. almost 60-90% of the global population. It is one of the most intriguing features of financial economics today. In the aftermath of the 2006 Nobel Peace Prize being awarded to the Bangladeshi, Mohammed Yunus, who is a champion of the cause for microcredit, the common presumption has been that microfinance create s undeniable social benefits such as poverty alleviation and more equal social opportunities. Indeed, this is true to a large extent; however, less acknowledged are the problems that lurk behind this facade of ‘social service’. Donning the caps of economists, this pa per discusses the economic rationality of microfinance as an effective tool for achieving poverty alleviation. We ask the question on whether the theoretical objective of microfinance for ‘helping the poor’ is sullied in practice by rent seeking, profit seeking and corruption. We assess the fundamental economic model for the basis on which Microfinance Institutions (MFIs) provide loans to the poor and as whether the poor people eventually benefited from this financial innovation.
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Muharremi, Oltiana, Edlira Luҫi, Filloreta Madani, and Erald Pelari. "Evaluating the Impact of Microfinance at the Individual Level in Albania, Particularly in the Region of Vlora and Fier." Journal of Economics and Management Sciences 1, no. 1 (June 7, 2018): p143. http://dx.doi.org/10.30560/jems.v1n1p143.
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Microfinance is defined as the provision of financial services such as micro-credit, micro savings, and micro insurance for individuals with low income. Although access to micro credit is seen as a right to have credit, it rather represents a right to development and economic initiatives that could change the borrower’s way of life. The purpose of this article is to examine the impact of microfinance loans in improving the living conditions of borrowers. This study is based on an empirical investigation of 384 structured questionnaires directed at microfinance institutions in the regions of Vlore and Fier, Albania.
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Khisamitova, Alsu, Anastasia Stepanova, and Maria Kokoreva. "Go for a Woman if you Feel Risky: Evidence from Gender Diversity in MFIs." Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438 13, no. 3 (December 22, 2019): 19–34. http://dx.doi.org/10.17323/j.jcfr.2073-0438.13.3.2019.19-34.
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This paper contributes to the literature on management and corporate governance in microfinance institutions. Themicrofinance market is one of the rare markets with a large representation of women in management and governanceroles. The objective of our paper is to reveal the effects of women’s presence on the financial and social performance ofmicrofinance institutions.To achieve this, we develop a model that allows for capturing the influence of gender diversity in the microfinance fieldwhilst controlling for risks. We focus on the role of women as loan officers, on boards of directors, and involved inmanaging the creation of microfinance institutions. Our model utilises two sets of panel data regressions, one for socialperformance and one for financial performance, and is tested on data from 193 microfinance institutions across EasternEurope and Central Asia for the financial years 2010 through 2014.The results of our investigation indicate that the activity of female members of management, CEOs, and boards ofdirectors could increase performance indicators for riskier microfinance institutions. This is illustrated particularly inthe case of projects with greater stakes in portfolios that are more than 90 days in arrears. We also provide evidencethat women on boards tend more towards promoting a strategy utilising large quantities of small loans with greaterinterest. The social performance of microfinance institutions is crucially determined by the microfinance institutions’size. For the largest microfinance institutions, questions of social performance lie in the field of boards of directors, whilesmaller institutions’ social performance is mostly driven by CEOs and staff, with significant evidence of a positive femaleinfluence on performance indicators.The novelty of this study is demonstrated the scope of our research. We combine several contemporary issues of peculiarcross-disciplinary interest, and offer succinct and compelling results which will be of immediate applicability in a widerange of academic and professional fields. Our results will be of interest to scholars of gender, social studies, psychology,business, corporate structure, and more. More specifically, we add to the evolving sub-field of study of microfinanceinstitutions, which has the potential to develop rapidly in the near future. This paper represents a cross-section ofcommercial and business research across a wide territory, with a large sample size, and provides compelling conclusions,which add to these fields of study by both validating existing research, and highlighting new areas for future analysis.
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Mawardi, Imron, Tika Widiastuti, Muhammad Ubaidillah Al Mustofa, and Ari Prasetyo. "Do Indonesian Islamic Microfinance Institutions Need Lender of the Last Resort?" al-Uqud : Journal of Islamic Economics 4, no. 2 (July 1, 2020): 235. http://dx.doi.org/10.26740/al-uqud.v4n2.p235-249.
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Liquidity risk is one of significant risk managed by financial intermediaries including Islamic Microfinance Institutions (IMFIs). The financial intermediaries accept short-term deposits and disburse these deposits in the form of long-term loans. This situation makes IMFI desperately need a lender of last resort (LOLR). Nevertheless, there has been no formal LOLR for Indonesian IMFIs. This study intends to construct the LOLR model for IMFI in Indonesia. This qualitative study applies a case study analysis. This study's subjects are IMFIs in East Java Province that was selected purposively with thirty managers as the key informants. Research findings show that the best model of LOLR is developing a secondary cooperative since the majority form of IMFIs in Indonesia are cooperative entities. With all members of a secondary cooperative deposit for reserve requirements, they can place excess liquidity in the secondary cooperative and ask for financial support.
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Vidya Rajaram Iyer and Jivraj Patki. "Reaching the Poor with Microfinance: A Case of Rural South India." Think India 19, no. 3 (October 15, 2016): 29–37. http://dx.doi.org/10.26643/think-india.v19i3.7781.
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Microfinance has been recognized as one of the important instruments to meet the financial requirements of the low income customers or commonality lending groups including consumers and self-employed personnel, who lack access to banking and other related financial services (Mehta, 2008). Scheduled banks are not able to penetrate the rural prospective customers and usually are not keen in giving small loans to low-income families without security. Microfinance is one of the financial institutions that work towards achieving the national goal of ‘financial inclusion. The purpose of this paper is to explore the scope of micro finance firm in rural South India and understand various financial requirements of poor and middle class people residing in villages and their profit and contribution level of the businesses.
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Mhella, Deogratius Joseph. "The Role Of Mobile Money In Moderating Financial Exclusion: A Tanzanian Experience." SOCIAL Review. International Social Sciences Review / Revista Internacional de Ciencias Sociales 9, no. 2 (August 13, 2020): 83–104. http://dx.doi.org/10.37467/gka-revsocial.v9.2614.
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Prior to the advent of mobile money, the banking sector in most of the developing countries excluded certain segments of the population. The excluded populations were deemed as a risk to the banking sector. The banking sector did not work with cash stripped and financially disenfranchised people. Financial exclusion persisted to incredibly higher levels. Those excluded did not have bank accounts, savings in financial institutions, access to credit, loans, and insurance services. The advent of mobile money moderated the very factors of financial exclusion that the banks failed to resolve. This paper explains how mobile money moderates the factors of financial exclusion that the banks and microfinance institutions have always failed to moderate. The paper seeks to answer the following research question: 'How has mobile money moderated the factors of financial exclusion that other financial institutions failed to resolve between 1960 and 2008? Tanzania has been chosen as a case study to show how mobile has succeeded in moderating financial exclusion in the period after 2008.
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Riaz, Madiha. "In competency Aspects of Microfinance Industry: Via SFA approach." Journal of Economics and Behavioral Studies 7, no. 1(J) (February 28, 2015): 1–12. http://dx.doi.org/10.22610/jebs.v7i1(j).558.
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Microfinance is a well known terminology used for microcredit and financial services for financially deprived community. Through informal, semi-formal and formal ways different institutions has been providing these services. Expenditure of the industry is considered to be high because of its inherent structure, dealing with small loans and having high risk of recovery. Therefore, expected inefficiency is greater than its profit. There are several factors and reason. Through this study, we analyzed few factors which have a positive or negative relation with the inefficiency of Microfinance in Pakistan. Stochastic frontier analysis (SFA) is used for weighing up a relationship between inefficiency and its determinants. It is seen that the average efficiency of this sector is low, on average the highest technical efficiency score is 87 only. Age and number of clients have a negative relationship with inefficiency whereas for other variable's relationship is conditional on Microfinance Institutions (MFIs) working status. The number of women borrowers and average loan balance has been incorporated in the study to analyze the focus of MFIs, either on mission drift or achievement. We found that microfinance banks (MFBs) are drifting away, however, Non Government Organizations (NGOs) and Rural Support Programs (RSPs) are fulfilling their social mission efficiently. We did not find a strong evidence of mission drift in the industry because microfinance banks considered their social mission on second priority. Hence, if MFBs are drifting away from their social services, it is not unexpected.
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Niti Bhasin and Preeti Gupta. "Drivers of Sustainability of Indian Microfinance Institutions." Think India 19, no. 3 (December 12, 2016): 1–16. http://dx.doi.org/10.26643/think-india.v19i3.7778.
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Microfinance is the most preferred way of satisfying the essentials of poor which are generally not taken care of by formal financial institutions. It is the way to facilitate them to uphold self-employment through various financial services like provision of funds, insurance, credit etc. Microfinance institutions cater to the need of major section of society by providing access to funds and other financial services, which basically lack access to these services. To accomplish this moral objective microfinance institutions (MFIs) need to be profitable and sustainable. Thus most important question arises is: what factors drive the sustainability of MFIs. The aim of microfinance is to alleviate poverty with the help of increasing access to finance. For well-being of the poor, good sustainable performance of MFIs must be achieved. Therefore, the present study attempts to explore different factors which might affect sustainability of Indian MFIs. Panel regression analysis is used to identify the determinants of sustainability of Indian MFIs. Due to non-availability of data for most of the MFIs, five years (2009-2013) data for 46 MFIs shall constitute our sample size. Results of the study exhibit that variables such as average loan balance, borrowers per staff member, return on asset, and yield on gross loan portfolio are major determinants of sustainability (financial and operational sustainability) of Indian MFIs.
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Gyimah, Prince, and Williams Kwasi Boachie. "Effect of Microfinance Products on Small Business Growth: Emerging Economy Perspective." Journal of Entrepreneurship and Business Innovation 5, no. 1 (June 1, 2018): 59. http://dx.doi.org/10.5296/jebi.v5i1.12378.
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Small businesses play significant role to the economic stability and development of emerging economies, and access to financial services is crucial to their growth and performance. This study seeks to ascertain whether microfinance products such as loans, savings, insurance, and education effects small business growth in Ghana. The study uses descriptive and inferential statistics on responses of 248 small business owners for data analysis. Using a multiple linear regression analysis, the study found that all the microfinance product or services positively affects small business growth, and the greatest influence is micro loans. This study contributes massively to exact literature to the growth of microfinance institutions (MFIs) and small businesses in emerging economy, Ghana. The study can assist MFIs to assess the effectiveness of their product or services, and can also serves as a guide to an effective utilization of available scarce resources leading to growth of small businesses in emerging economies.
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Muharremi, Oltiana, Filloreta Madani, and Erald Pelari. "Evaluating the Impact of Microfinance for Women in Albania." Journal of Business Theory and Practice 4, no. 2 (October 20, 2016): 233. http://dx.doi.org/10.22158/jbtp.v4n2p233.
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<p class="Default"><em>Microfinance is defined as any activity involving the offering of financial services such as loans, savings and insurance to individuals with low income.</em><em> </em><em>Creating social value includes reducing poverty and having a better impact to improve living conditions through capital for micro-enterprises; insurance and savings deposits for reducing risk and boosting consumption. Worldwide microfinance actors promote access to basic financial services by developing new tools, a variety of products and the adoption of an integrated banking access.</em></p><p class="Default"><em>Initially, microfinance was largely gender neutral: it sought to provide credit to the poor who had no assets to pledge as collateral. It quickly emerged, however, that women invested their business profits in ways that would have a longer-lasting impact on their families and communities. Consequently women became fundamental to the success of the microfinance model as a poverty alleviation tool. The purpose of this article is to examine the impact of microfinance loans in improving the lives of women borrowers, as well as in strengthening their social influence and the microcredit impact in promoting savings. This study is based on an empirical investigation of 384 structured questionnaires and surveys directed at microfinance institutions and their clients in the regions of Vlore and Fier, Albania.</em></p>
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Hemtanon, Wittawat, and Christopher Gan. "An empirical analysis of Thai village funds and saving groups’ financial performance." Banks and Bank Systems 15, no. 2 (June 16, 2020): 153–66. http://dx.doi.org/10.21511/bbs.15(2).2020.14.
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Microfinance institutions (MFIs) play an important role in enabling poor households to escape poverty. MFIs cannot help borrowers if their own performance is poor. This study evaluates financial performance of Village Funds (VFs) and Saving Groups for Production (SGPs) to determine how well the MFIs are performing financially and how to improve the institutions’ future performances. The study evaluates MFIs’ performance, including MFI characteristics, outreach, productivity, financial structure and financial performance. Data are collected from the annual reports of MFIs between 2014 and 2016. VF and SGP annual reports were collected by the Government Savings Bank between 2014 and 2016. Data are analyzed using descriptive statistics, such as means, to compare the VFs’ and SGPs’ performance. The result shows that SGPs are bigger than VFs in terms of the average number of members and borrowers. However, VFs provide more loans than SGPs to poorer clients. In terms of loan management, SGP staff are more efficient than VF staff. SGPs’ profits are significantly higher than VFs’ profits. In the context of financial structure, SGPs are funded through member deposits, while VFs receive government subsidies. The results indicate that both VFs and SGPs are profitable and financially sustainable.
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Costa, Ruan Rodrigo Araújo da. "The relationship between the performance and legal form of microfinance institutions." Revista Contabilidade & Finanças 28, no. 75 (July 20, 2017): 377–89. http://dx.doi.org/10.1590/1808-057x201703660.
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ABSTRACT This paper investigates the relationship between the legal forms adopted by microfinance institutions (MFIs) and their performance within three scopes: financial performance, social performance, and efficiency in resource allocation. The MFIs studied are classified into four groups: banks, non-governmental organizations, cooperatives, and a fourth group formed of for-profit institutions not characterized as banks, made up of non-bank financial institutions (NBFIs) and rural banks. The data used are annual and cover the six years from 2007 to 2012. The quantitative regression model with panel data was used together with dummy variables to compare between the four groups of legal forms, except for the group made up of NBFIs and rural banks, which was not represented by any dummy variable. 304 MFIs from 59 countries made up the sample. In the study it was observed that larger MFIs have higher profits, higher returns, and higher operational self-sufficiency rates than smaller MFIs, indicating that MFI growth could enable consolidation in the microfinance market. The results also indicate that for smaller MFIs the way to consolidate and improve the indicators could be through assimilating or merging with other MFIs. It was also noted that non-bank financial institutions and rural banks are able to serve more customers and that cooperatives provide smaller loans, causing a bigger social impact, and that they obtain higher returns and profits. The results indicate that these legal forms may be the most appropriate for the microfinance market.
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Etim, Alice, David N. Etim, and George Heilman. "Gender Differences in ICT Use Among Small Business Owners in Ghana." International Journal of ICT Research in Africa and the Middle East 8, no. 1 (January 2019): 1–14. http://dx.doi.org/10.4018/ijictrame.2019010101.
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In the last two decades, microfinance institutions across regions have helped to financially build small businesses in areas of disadvantaged populations. The efforts in providing entrepreneurs with small non-collateralized loans (or micro-loans) along with developing cooperative programs for entrepreneurs were reported in earlier studies as being helpful in alleviating some borrowers from extreme economic poverty. However, early warning signals were raised about whether microfinance institutions were benefiting themselves more than the poor. This article assesses the differences in attitudes toward the use of information and communication technology among small business owners in Ghana that have access to micro-loans. The findings indicate significant differences between interest payers and interest non-payers based on region of the country, age, education, and membership in an entrepreneurship program.
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Sisodia, N. S., M. B. N. Rao, Vijay Mahajan, V. Leeladhar, M. P. Vasimalai, Rama Reddy, Brij Mohan, R. Srinivasan, and M. S. Sriram. "Rural Finance in Contemporary Times: Interface with Microfinance." Vikalpa: The Journal for Decision Makers 30, no. 2 (April 2005): 81–112. http://dx.doi.org/10.1177/0256090920050208.
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In India, when we talk about rural finance, the stereotype offered is that of a banking system that fails to reach out to the poorer clients and, when it does, fails to recover the money so disbursed. The counter-point offered is usually the magic wand of microfinance. This Colloquium was an interface between leading bankers and microfinance practitioners in India to examine where these two worlds meet and how they could learn from each other. The discussions were organized around three themes: a) the legacy of the banking system, b) the limitations of microfinance, and c) an assessment of the potential. On the issue of legacy, the message was clear that the intervention of the state in certain aspects has been undesirable. These areas were clearly identified as granting general pardon for loans, tinkering around with interest subsidies, and interfering with the commercial aspects of banking. The limitations of the microfinance institutions were in terms of their sustainability and their inability to draw commercial capital and grow rapidly. However, these limitations were partly seen as a consequence of regulatory apathy and support from the state both in terms of formulating and articulating a regulatory framework and also in terms of the central bank being reluctant to supervise the efforts. These did not help in enhancing the legitimacy of microfinance institutions. The participants saw a great potential in the rural markets which were beyond agriculture. The emerging sectors were identified as construction, non-farm enterprise, handloom, clusters that involve garment making and quarrying, etc. According to them, there was scope for both the banks and the microfinance institutions to intervene. The following points emerged from the discussion: Rural finance has suffered from interventions from the state in the past. While some interventions have been positive, they have harmed the sector when compromises such as write-offs have been made. Microfinance has emerged as an important mechanism to reach out financial services to the poor. There are interesting lessons from this for the banks to adopt. There are problems for the microfinance institutions in the form of regulatory and supervisory apathy. This leads to financial exclusion of large segments of the poor. There is a huge market for financial services — both loans and savings. Innovations across the world indicate important breakthroughs in delivery of financial services. These can be implemented provided the regulatory impediments are removed. The issue of risk management has to be systematically addressed. The role of the state, wherever positive, has been effective and, therefore, this should be sharply defined to see how the state could contribute to this sector. The issue of interest rates continues to be vexatious and needs to be addressed urgently.
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Bongomin, George Okello Candiya, Atsede Woldie, and Aziz Wakibi. "Microfinance accessibility, social cohesion and survival of women MSMEs in post-war communities in sub-Saharan Africa: Lessons from Northern Uganda." Journal of Small Business and Enterprise Development 27, no. 5 (June 30, 2020): 749–74. http://dx.doi.org/10.1108/jsbed-12-2018-0383.
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PurposeGlobally, women have been recognized as key contributors toward livelihood and poverty eradication, especially in developing countries in sub-Saharan Africa. This is due to their great involvement and participation in micro small and medium enterprises (MSMEs) that create employment and ultimately economic growth and development. Thus, the main purpose of this study is to establish the mediating role of social cohesion in the relationship between microfinance accessibility and survival of women MSMEs in post-war communities in sub-Saharan Africa, especially in Northern Uganda where physical collateral were destroyed by war.Design/methodology/approachThe data for this study were collected using a pre-tested semi-structured questionnaire from 395 women MSMEs who are clients of microfinance institutions in post-war communities in Northern Uganda, which suffered from the 20 years' Lord Resistance Army (LRA) insurgency. The Analysis of Moment Structures (AMOS) software was used to analyze the data and the measurement and structural equation models were constructed to test for the mediating role of social cohesion in the relationship between microfinance accessibility and survival of women MSMEs in post-war communities.FindingsThe results revealed that social cohesion significantly and positively mediate the relationship between microfinance accessibility and survival of women MSMEs in post-war communities in Northern Uganda. The results suggest that the presence of social cohesion as a social collateral promotes microfinance accessibility by 14.6% to boost survival of women MSMEs in post-war communities where physical collateral were destroyed by war amidst lack of property rights among women. Similarly, the results indicated that social cohesion has a significant influence on survival of women MSMEs in post-war communities in Northern Uganda. Moreover, when combined together, the effect of microfinance accessibility and social cohesion exhibit greater contribution towards survival of women MSMEs in post-war communities in Northern Uganda. Indeed, social cohesion provides the social safety net (social protection) through which women can access business loans from microfinance institutions for survival and growth of their businesses.Research limitations/implicationsThis study concentrated mainly on women MSMEs located in post-war communities in developing countries in sub-Saharan Africa with a specific focus on Northern Uganda. Women MSMEs located in other regions in Uganda were not sampled in this study. Besides, the study focused only on the microfinance industry as a major source of business finance. It ignored the other financial institutions like commercial banks that equally provide access to financial services to micro-entrepreneurs.Practical implicationsThe governments in developing countries, especially in sub-Saharan Africa where there have been wars should waive-off the registration and licensing fees for grass-root associations because such social associations may act as social protection tools through which women can borrow from financial institutions like the microfinance institutions. The social groups can provide social collateral to women to replace physical collateral required by microfinance institutions in lending. Similarly, the governments, development agencies, and advocates of post-war reconstruction programs in developing countries where there have been wars, especially in sub-Saharan Africa should initiate the provision of group business loans through the existing social women associations. This may offer social protection in terms of social collateral in the absence of physical collateral required by the microfinance institutions in lending. This may be achieved through partnership with the existing microfinance institutions operating in rural areas in post-war communities in developing countries. Additionally, advocates of post-war recovery programs should work with the existing microfinance institutions to design financial products that suit the economic conditions and situations of the women MSMEs in post-war communities. The financial products should meet the business needs of the women MSMEs taking into consideration their ability to fulfil the terms and conditions of use.Originality/valueThis study revisits the role of microfinance accessibility in stimulating survival of women MSMEs as an engine for economic growth in the presence of social cohesion, especially in post-war communities in sub-Saharan Africa where physical collateral were destroyed by war. It reveals the significant role of social cohesion as a social protection tool and safety net, which contributes to economic outcomes in the absence of physical collateral and property rights among women MSMEs borrowers, especially in post-war communities.
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EPSTEIN, MARC J., and KRISTI YUTHAS. "RURAL MICROFINANCE AND CLIENT RETENTION: EVIDENCE FROM MALAWI." Journal of Developmental Entrepreneurship 18, no. 01 (March 2013): 1350006. http://dx.doi.org/10.1142/s1084946713500064.
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Microfinance institutions (MFIs) have largely focused on urban markets, leaving the rural poor underserved. The high costs of serving rural markets has often been identified as the key impediment to serving these markets, resulting in saturation and heavy competition in urban markets while poor rural clients remain unserved. In this paper, we provide evidence from a sample of over 10,000 microfinance loans in Malawi, that the cost argument has an important flaw. Results show that client retention, a critical aspect of financial sustainability, is significantly higher in rural markets. In addition to being a key financial indicator in an industry where annual client exit rates can exceed 50 percent, client retention is also a key measure of social impact. By operating in rural markets, MFIs may be able to increase both social impact and financial performance.
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Aziz, Atif, and B. D. Pandey. "A Case Study of Safa Baitul Maal- An Islamic Micro Finance Institution in Hyderabad India." Journal of Management and Strategy 11, no. 4 (November 16, 2020): 41. http://dx.doi.org/10.5430/jms.v11n4p41.
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Islamic Microfinance refers to interest free microfinance in which no interest is charged from the poorest members of the society who are (areas in which poor people are living) marked negative by commercial banks i.e. the people are not given any loans. The main aim of any Islamic microfinance institution is to help the financially backward people to set up their small businesses without adding any further financial burden on them. The other objective of Islamic Microfinance is poverty alleviation and brings the poorest of the poor in the main stream. Unlike commercial banks and conventional microfinance, the objective of Islamic Microfinance is not to make profit but to earn reward from Allah (the Creator of Universe) both in this world and Hereafter. Islamic Microfinance or Interest free microfinance is most important tool to protect poor and poorer from the clutches of Sahukars (money vendors) who give meagre amount of Rs 800-1000 to small vendors in the morning and ask for principal and interest in the evening. In this paper, the authors have taken up the study of Safa Baitul Maal (SBM) interest free microfinance based in Hyderabad India. The selected institution has also been evaluated on various aspects such as its modus operandi, current status, outreach. The institution is fairly new which started its microfinance activities in 2014 in Kishan bagh Hyderabad Telangana India. The findings are very impressive, the shariah compliance is strictly followed. The loan amount distribution which was Rs 0.1 million in 2014 has now increased to 1 million in 2019. Initially only 20 persons were given interest free loan now this number is increased to 1500 persons in 2019 and 1800 in 2020.
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Quartey, Joyce Ama, and Bernice Kotey. "Effect of Regulation on Outreach of Microfinance Institutions in Ghana." International Journal of Accounting and Financial Reporting 9, no. 1 (January 3, 2019): 317. http://dx.doi.org/10.5296/ijafr.v9i1.14405.
Full textAbstract:
Microfinance institutions (MFIs) play an important role in enhancing the growth potential of small businesses. However, while regulation ensures that MFIs are financially sustainable, compliance compels them to make large-sized loans to wealthy clients in order to reduce the risk of lending and minimize administrative costs, a situation that compromises their main goal of reaching out to the poor. The study therefore, examined the effect of regulation on breadth and depth of outreach by microfinance institutions (MFIs) in Ghana. The purpose of the study is to find out whether regulation has enabled MFIs to increase their outreach (breadth and depth) thereby improving their sustainability. A mixed methods research design was employed, involving initial hypotheses testing with 31 self-regulated and 24 Central bank-regulated MFIs. The findings were then triangulated with a qualitative research design involving 13 Central bank-regulated and 20 self-regulated MFIs. The results showed that regulations increased the client base of MFIs but reduced the percentage of poor clients served, largely women. It is recommended that the government set up a fund for poor clients to be accessed by well-performing MFIs for provision of financial services to the poor to assist in poverty reduction.
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Dorfleitner, Gregor, Davide Forcella, and Quynh Anh Nguyen. "Microfinance and Green Energy Lending: First Worldwide Evidence." Credit and Capital Markets – Kredit und Kapital: Volume 53, Issue 4 53, no. 4 (October 1, 2020): 427–60. http://dx.doi.org/10.3790/ccm.53.4.427.
Full textAbstract:
The increasing requirement for action on climate change in developing countries has led to the inclusion of environmental aspects in microfinance objectives, in addition to social and financial performance, and hence to the appearance of green microfinance. To date, financing for modern energy service has proven to be an attractive option to offset adverse climate change related effects for the poor. This article sheds some light on factors predicting clean energy finance involvement of MFIs. By using a worldwide survey among microfinance institutions on rural lending and IT solutions implemented by YAPU Solutions, this study investigates how institutional characteristics and economic growth relate to green energy micro-credit. The findings provide evidence of a significantly positive relationship between the maturity and business sustainability of an MFI and the likelihood of offering green energy loans. Moreover, MFIs managed by female managers and located in wealthy countries are less willing to commence the finance of green energy.
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Gudjonsson, Sigurdur, Kari Kristinsson, Haukur Freyr Gylfason, and Inga Minelgaite. "FEMALE ADVANTAGE? MANAGEMENT AND FINANCIAL PERFORMANCE IN MICROFINANCE." Business: Theory and Practice 21, no. 1 (February 6, 2020): 83–91. http://dx.doi.org/10.3846/btp.2020.11354.
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The purpose of the article is to investigate whether female presence in microfinance institutions’ management team, i.e. board members, managers and loan officers, will improve their financial performance. We combine financial data on MFIs that is available from the MIX Market database with original data on the gender composition of MFIs’ management team, who include board members, managers and loan officers. This original dataset of 223 MFIs is analyzed using Logit-Tobit regression models with return on assets (ROA) as the dependent variable and proportion of female board members, female loan officers and female managers as the main independent variables. We find that a higher proportion of female managers and female loan officers improve financial performance in microfinance, while a higher proportion of female board members does not. Our results indicate that a major contributor to the financial sustainability of microfinance institutions is having a higher rate of women in vital decision-making roles, especially lower level management positions.
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Saputri, Apik Anitasari Intan. "Implementation of Financing Compass for Welfare Partner Operational System Grameen Bank in Banyumas Regency." Ijtimā'iyya: Journal of Muslim Society Research 3, no. 1 (August 29, 2018): 21–36. http://dx.doi.org/10.24090/ijtimaiyya.v3i1.1674.
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Indonesia has a variety of microfinance service providers such as Commercial Banks, Rural Banks, Non-Bank Financial Institutions (LKBB), Micro Finance Institutions (MFIs), Savings and Loans Cooperatives (KSP) and other semiformal and informal institutions operating at the local community level. One Non-Bank Financial Institution operating in Indonesia is an institution with a group finance system - commonly referred to as Grameen bank. Its business objectives are to tackle poverty or other problems such as education, health, access to technology, and environmental issues that may threaten people and society. The research method used is field research with a sociological juridical approach. With the establishment of a poverty alleviation program involving many women, Grameen banks became one of the integrated institutions in public health programs by establishing sanitation and water programs as a health support product of its partners. This product is called KOMPAK and aims to develop financing products for the development of water quality and sanitation improvement among low-income people. Women Grameen bank actors are not only a target in the development of the business world, they also provide education on improving the quality of life and raise awareness of the importance of water hygiene and sanitation health. The company offers loans to economically active but low-income women especially those living in urban and rural areas.
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KUMAR, NAVEEN. "Cost Components of Interest Rate Charged By Indian Self Help Groups Financed By Not-For Profit Microfinance Institutions." Journal of Global Economy 9, no. 4 (December 28, 2013): 302–22. http://dx.doi.org/10.1956/jge.v9i4.316.
Full textAbstract:
Although, interest rate charged by microfinance stimulate of lot of ethical debate. Very few studies in microfinance detail the cost components of interest rates paid by the borrowers. Setting the optimal interest rate with a dual goal of financial sustainability and fighting against poverty is a complex task for microfinance lending. In this backdrop, this paper examines the various cost components of interest rate changed by Indian Self-Help Groups (SHGs) that are financed by not-for profit Microfinance Institutions (MFIs). The study uses neo-classical framework for the analysis of interest rate determinants like cost of funds, administrative (operating) cost, opportunity cost, travel costs and some margin to sustain the business. The data have come from a survey of 106 women SHGs in ten villages in the state of Karnataka, India. The study finds that the cost of fund and other costs associated in microfinance significantly influence the rate of interest and the SHGs need to reduce efficiently other costs associated with writing and maintaining the accounts, auditing, and hospitality offered, through innovative cost management methods of lending. As a result, there would be a welfare gain for the borrowers through reduced interest rate on loans.