Abstract
Together with Singapore, Malaysia is one of the successful cases in Asia achieving rapid economic growth. However the issues of poverty still being discussed today. Amanah Ikthiar Malaysia (AIM) is one of the dominant players contributing to the poverty eradication program in Malaysia engaging in microcredit program with supports from Malaysian government. Since microcredit has been effective as a poverty eradication agent among the poor, it is important to investigate the dimension of effectiveness of poverty eradication program carried out by AIM. The objective of this study is to investigate the dimension of effectiveness in microcredit program and to examine the determinants of total income after joining AIM program. Purposive sampling were applied to take a sample of 100 recipients of AIM microcredit program loan in Kuala Selangor, Hulu Langat, and Gombak in Selangor. Descriptive analysis, factor analysis, and multiple linear regression were used as a methodology to achieve the objective of the study. Factor analysis found four dimension of effectiveness in the microcredit program such as earning ability, payment scheme, member’s cooperation, and well-being. Similarly regression analysis identified 3 variables that are significantly influence the total income after joining the program. These variables are; duration of loans received, amount of loans and number of employee. There are certain issues that need to be addressed to improve the AIM program especially those related to payment scheme and also finding timing for the recipients to graduate from the program as successful entrepreneurs.
Highlights
Poverty has been one of the most controversial issues among developing countries
This study attempts to assess the factors that contribute to the effectiveness of microcredit finance instituted by Amanah Ikthiar Malaysia (AIM) to small business operators
Factors such as Earning Ability Payment Scheme, Members’ Cooperation, and Well-being have been identified as the factors that could be used as influential factors of the effectiveness of microcredit finance among the small business operators
Summary
World Bank reported that that in 2010, over 900 million poor people (78 % of the poor) lived in rural areas, with about 750 million working in agriculture (63 % of the total poor). Due to the impressive poverty reduction achievements in Southeast Asia, between 1990 and 2008, Southeast Asia reduced extreme poverty from 45 % of the population to 17 % respectively (Allwine and Allwine 2013). As Terano et al Journal of Global Entrepreneurship Research (2015) 5:22 reported by World Bank (2015), there are still a lot of work needs to be done as one billion people (14.5 % of the world’s population) could be classified as extremely poor. The World Bank Group’s interim target of reducing poverty to single digits by 2020 seems unachievable, unless some drastic measures or policies being formulate to take the challenges by the respective countries. In many countries microcredit programs have proved to be an effective tool in freeing people from poverty and have helped to increase their participation in the economic and political processes of society (United Nation 1995)
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