Female Borrowers Research Articles

Female leadership and financial sustainability of MFIs: the moderating role of female borrowers

PurposeThe purpose of this study was to investigate whether the percentage of female borrowers moderate the effect of female leadership on financial sustainability of microfinance institutions (MFIs).Design/methodology/approachThe study collected an unbalanced panel data of 821 MFIs between 2007 and 2018 from the Microfinance Information Exchange (MIX). MFIs’ financial sustainability was measured as operational self-sufficiency (OSS). The data were analyzed using the fixed effect regression model.FindingsThe study found that having women participation in managerial and board positions has a positive effect on OSS. The results further demonstrated that the proportion of female loan officers and female borrowers had a negative effect on OSS. In addition, the study’s findings revealed that the percentage of female borrowers moderated the relationship between female board members, female managers, female loan officers and OSS.Practical implicationsThese findings may offer important insights to policymakers and practitioners in formulating strategies to improve financial inclusion for women by examining the inherent link between female borrowers and women’s participation in leadership roles within MFIs, which affects the financial sustainability of these entities.Originality/valueThis study is among the few that have examined the interaction between the proportion of female borrowers and other forms of female participation, including loan officers, managers and board members, and its effect on the financial sustainability of MFIs.

Influence of Demographic Factors on Loan Portfolio Quality in the Savings and Credit Cooperatives Societies in Tanzania

This study determined the influence of demographic factors on loan portfolio quality in Tanzania, focusing on the Hazina SACCOS. The sample of the study was 134 out of 423 borrowers from Dar es saalam and Dodoma cities, whose loans did not exceed Tanzanian Shillings 5 millions. Only 100 questionnaire sheets were returned. Out of those, only 75 were correctly filled, hence used for analysis. Data analysis took place through descriptive and regression analysis. The study concludes that demographic factors affected loan portfolio in different ways. While female borrowers had higher loan repayment rates than their male counterparts, younger, employed, business operators and married borrowers repaid their loans earlier than their counterparts, which promoted the loan portfolio quality. Borrowers with higher education and more dependents had a loan repayment challenge, which weakened the loan portfolio quality. Therefore, loan profitability relates with demographic factors. In order to promote earlier loan repayment, hence loan portfolio quality, the SACCOS should offer demographic-centric financial products and support programs. The SACCOS should offer loans to meet the employment diversity, including flexible loan terms to accommodate wage-employed, self-employed and other employed members. Tailored financial counseling, flexible loan terms and practical financial management training could help mitigate the negative impacts observed in the study.

Achieving the SDGs: Challenges and Solutions for MSMEs Against Predatory Digital Loans

Predatory digital lending poses significant challenges to the sustainability of micro, small, and medium enterprises (MSMEs) in Indonesia. This study explores the reasons, consequences, and impacts of predatory digital loans on MSMEs, focusing on how these practices hinder economic well-being and growth. The research employs a qualitative method, utilizing content analysis from secondary sources, including academic journals, reports, and government documents. Data were collected through an in-depth review of literature and case studies of MSMEs affected by predatory loans. The findings reveal that many MSMEs, particularly in rural areas, lack sufficient financial literacy, which increases their vulnerability to predatory lending. Legal frameworks, such as POJK 35/POJK.05/2018, are inadequate in regulating debt collection ethics, allowing illegal practices to flourish. Additionally, gender disparities affect loan approval rates, with female borrowers facing higher risks of harassment. The study concludes that improving financial literacy, strengthening government regulations, and fostering collaboration between MSMEs, government bodies, and financial institutions are essential for protecting MSMEs from predatory digital lending. By doing so, MSMEs can achieve sustainable growth and contribute more effectively to Indonesia's economic development and the achievement of the Sustainable Development Goals (SDGs).

Gender diversity and profit efficiency of microfinance institutions: A Sub-Saharan study.

Irrespective of the promising opportunity to improve profit efficiency by at least 73%, microfinance institutions operating in Sub-Saharan Africa are efficient only for 27%, far below the average value. The conclusion is drawn after analyzing the profit efficiency of the microfinance institutions using the stochastic frontier approach applied to data obtained from 128 microfinance institutions operating in 34 Sub-Saharan African countries. The study results suggest the presence of uniform profit efficiency experience across time among microfinance institutions. Microfinance institutions operating in low-income countries and credit union form microfinance are economically more efficient than their counterparts. Furthermore, the profit efficiency of microfinance institutions is significantly affected by total assets, cost per loan, loan per staff, legal status, and the county's income group of microfinance. Notably, the profit efficiency of microfinance institutions is adversely affected by the presence of female borrowers and female loan officers suggesting that gender diversity plays a role in the efficiency of microfinance institutions. Finally, we recommend that the managing body of microfinance work more on improving labor efficiency, earning asset utilization, loan collection efficiency, women's involvement and the hottest technology implementation.

Mainstreaming Microfinance: Balancing Financial Performance and Outreach

There is an unsolved dilemma in the Sri Lankan microfinance sector: whether microfinance institutions target low-income earners or seek profitability. To contribute to this debate, this research investigates the effect of financial performance on outreach and the effect of outreach on financial performance. Balancing financial performance and outreach of microfinance institutions have been conducted in various countries and regions, but specifically not for Sri Lanka after implementing No.06 of 2016 Microfinance Act. This study used an empirical data set for ten years, from 2010 to 2019. Data was collected from 16 MFIs and the panel data regression model was used for the analysis. According to the results MFIs can achieve financial and social objectives simultaneously when serving a larger number of customers and a high percentage of female borrowers. But providing services to the core poor people diminishes their financial performance. As per the findings, policy makers are required to make a roadmap to protect both customers and organization financial sustainability. This study emphasizes the importance of having a proper reporting system for the microfinance sector and future research may wish to consider more MFIs by considering a long period and future research can occupy financial performance and outreach variables which are good at forecasting.

What are the determinants of the financial and social performance of MFIs in Togo? Does gender borrower matter on financial performance?

Using the panel generalized method of moments, we scrutinize the key factors of financial and social performance of Microfinance institutions (MFIs) in Togo. We report that a higher increase in equity leads to MFIs' financial sustainability while an increase in debt leads to unsustainability. Furthermore, the increase in staff expenditure and operational efficiency decreases financial performance. Interestingly, in the context of Togo, the percentage of male borrowers contributes more strongly to the profitability and sustainability of MFIs than female borrowers. However, in terms of loan repayment, female borrowers contribute more to the sustainability of MFIs than male borrowers

How do loan officer-borrower gender-driven behavioural differences impact on the microfinance lending market?

This paper analyses the impact of the gender of the loan officer-borrower pair on the loan-size, credit availability and time spent in managing the credit application. By using 3,020 lending transactions from Ecuador during 2016–2019, we document that the loan officer-borrower pair gender drives differences in the microcredit portfolio management. We find that female loan officers grant smaller microcredits to both male and female borrowers. However, the loan-size increases when matching the loan officer-borrower gender. We also demonstrate that female loan officers have greater loan approval rates, mainly in the segment of higher loan-sizes granted to male clients. Finally, our results show that the microcredits that have the fastest evaluation process are those that have a lower loan-size and are granted by female loan officers to female borrowers. Our findings have practical implications for the analysis of the credit availability for entrepreneurs as well as the loan portfolio management.

Risk Management and Performance of Microfinance Industry

Purpose: The purpose of this study was to understand the significance of the relationship between risk management and sustainability of the microfinance industry. Furthermore, how does effective risk management could be used towards sustainable growth in microfinance. The findings of the study revealed that there is a positive relationship between risk management and sustainability of microfinance industry.
 Design /Methodology/Approach: The study was conducted in three administrative districts in Sri Lanka, using 376 MF female borrowers, who represent from different businesses. The cluster sampling technique was selected for the survey. Primary data was collected using personally administered questionnaires and the sample frame was selected from two leading MFIs that consented to participate in the research. The conceptual frame work was developed based on the two variables risk management and sustainability of the microfinance industry. Simple liner regression analysis was taken to determine the significance of the relationship. 
 Findings: The study was able to find a positive relationship between effective risk management and industry sustainability. It was observed that that effective implementation of risk management process in the industry would certainly essential for long-term sustainability of microfinance institutions (MFIs). The findings showed that there were several strategic management measures that could have been put in place by key stakeholders in the industry.
 Research, Practical & Social Implications: The study found that although there has been potential growth in the industry vulnerability is very highly compared to other industries. Instead of the growth potential, MF is fighting for survival and sustainability. Mission drift, commercialization, and a lack of understanding among stakeholders, negatively impact the sustainability of the microfinance industry. It is significant to keep pace with the inculcating risk management culture among key stakeholders in the industry. Microfinance Institutes, Female Borrowers, Regulators. If not combined with the development of social capital, the financial programs have the possibility of creating a divided, dependent and unsustainable community.
 Implications/Originality/Value: To the best of the authors’ knowledge, no study has been conducted on uncovering and exploring the significance of the relationship of two key variables in microfinance industry. Most of the previous studies discussed these factors in isolation not as a collective wisdom to find a solution. This article is an industry contribution for inculcate risk management culture among stakeholders in microfinance and enhance different approaches to promote financial literacy levels of female borrowers who are key to sustainability in the industry.

Group Lending Models As An Alternative Empowerment Model: Assessing Gendered Socio-Economic Impacts in the Global South

Grameen Banks and other microcredit banks specialised towards collective empowerment in rural Bangladesh. The research reviews case studies alongside open-source data on group lending initiatives and models data on creditworthiness, upward mobility, and financial security of women in Bangladesh to examine the potential for the Grameen Bank’s replication for other marginalised economic groups in countries in the Global South, including India, Pakistan, and Sri Lanka. The study aims to identify successes and failures in building community solidarity, the extent of women’s exclusion from other formal credit institutions, and the psychological well-being of female borrowers. It explores the long-term sustainability of group lending programs in specific Global South economic contexts (with widening income gaps across class and gender divides, and growing polarisation) and assesses their broader economic impacts on community development and growth in the identified countries. The study revealed that high repayment rates and the social dynamics of group lending with female borrowers translate into a sustainable and profitable model for lenders, as well as being an alternative system of empowerment benefiting both borrowers and lenders. The paper will analyse the impact of microfinance in developing economies. How far has this concept enabled women’s empowerment in Bangladesh? Has this resulted in encouraging adequate skills for women in other marginalized sections of these economies? What are the models on which this concept works? How effectively have these been used in other developing economies like Pakistan, Shri Lanka and India? Has the model changed in the country in which this model originated? What are the advantages and disadvantages of this system of microfinancing? These and other similar questions will be addressed in the course of this paper.

Effects of Transformation on Outreach Performance of Microfinance NGOs in Kenya

This research examines how transformation affects the outreach performance of microfinance NGOs in Kenya. Specifically, it analyzes the impact of various transformation indicators on outreach performance. Utilizing a quantitative research approach, the study utilizes unbalanced panel data spanning 19 years (1997 to 2015) obtained from the Microfinance Information Exchange (Mix) Market databank, focusing on six surveyed transformed microfinance NGOs in Kenya. Panel data regression models and instrumental variables estimation methods are employed for model specification. The findings reveal that outreach, measured by the average loan balance per borrower, is significantly and negatively influenced by the debt-to-asset ratio but not significantly affected by the debt-to-equity ratio or deposits-to-total assets ratio. The percentage of female borrowers is significantly influenced by the debt-to-equity ratio and debt-to-asset ratio, while the number of active borrowers is significantly influenced by the debt-to-asset ratio, deposits-to-total assets ratio, institutional size, and institutional age. These results suggest a necessity for microfinance NGOs facing capital funding challenges to devise policies that facilitate the utilization of commercial capital sources to expand outreach to impoverished individuals. Nonetheless, the management of transformed microfinance NGOs must implement safeguards ensuring that the pursuit of commercial funding options and public deposits does not compromise their mission of serving the most vulnerable populations.

Financial leverage, percentage of female borrowers and financial sustainability of microfinance institutions

PurposeThis paper examines the influence of financial leverage on the financial sustainability of microfinance institutions (MFIs) and the moderating role of the percentage of female borrowers (PFB).Design/methodology/approachThe study uses a global sample of 646 MFIs drawn from the World Bank Mix Market and panel data for 2010–2018. The study employs ordinary least squares (OLS) and the one-step system generalized method of moments (SGMM) as regression estimation methods.FindingsThe findings of this study reveal that financial leverage and the PFB have a negative and significant effect on financial sustainability. The findings further show that the interaction between financial leverage and the PFB positively affects the financial sustainability of MFIs.Practical implicationsThe findings inform MFIs' managers on the adverse effect of financial leverage and the PFB in their quest for financial sustainability. The findings also demonstrate that MFIs can leverage female borrowers to reverse the adverse effect of financial leverage on financial sustainability of MFIs.Originality/valuePrevious studies examined the direct effect of financial leverage and reported incongruent results. Because female borrowers are at the epicenter of MFI lending, this study fills the gap in the literature by examining whether the proportion of female borrowers moderates the relationship between financial leverage and MFIs' financial sustainability using a global dataset.

Expanding Inclusive Markets through Corruption Control: A Multilevel Modeling Analysis for a Grand Challenge

To tackle the grand challenge of poverty alleviation, we investigate the role of microfinance institutions (MFIs) in fostering inclusive markets amid the influence of corruption. Corruption hampers MFI's efforts to reach out to women and the poor, leading to increased costs and resource wastage. Specifically, corruption negatively impacts financial inclusivity by affecting service costs, female borrower inclusion, and loan officer effectiveness. By adopting an institution-based view, we propose that corruption control can counteract this negative effect by enhancing information transmission and stakeholder cooperation within microfinance, thereby promoting inclusivity. Corruption control also moderates the effects of three firm-level factors, namely service cost, female borrowers, and loan officers on expanding inclusive markets. Leveraging a panel data set of 618 MFIs across 30 developing countries from 2005 to 2011, we employ multilevel modeling and find a positive association between corruption control and the breadth of MFIs' outreach.

Employee turnover and the depth of outreach of microfinance institutions: a non-linear approach

ABSTRACT By utilizing data of 1,336 Microfinance Institutions (MFIs) from 91 emerging and developing countries for the period 2010–2018, this study investigates the non-linear/quadratic relationship between employee turnover and the depth of outreach of MFIs. The data were analysed using conventional panel data econometric tools and techniques. In general, the findings revealed that employee turnover has an inverted U-shaped relationship with the depth of outreach of MFIs when proxied by the proportion of female borrowers. The study outcomes imply that a low to moderate level of employee turnover is good for MFIs, as it may overcome organizational blindness and groupthink, and favours the replacement of unproductive and inefficient employees that lack social or human capital related to their job. However, after a certain threshold, employee turnover was observed to generate an adverse impact on the depth of outreach of MFIs. Therefore, the management of MFIs should give due consideration to ensuring an optimal level of employee turnover that is beneficial for the intended organizational goals.

Effect of gender participation on determining the maturity of crossed-due loans: Evidence from microfinance companies of Nepal

The impact of gender participation on the maturity of crossed-due loans is observed in this study. Furthermore, the associations between maturity of crossed-due loans, their number, and loan issued on physical collateral and collective bail are also monitored using the unbalanced panel data of thirty microfinance companies. The study investigates the short- and long-term link between response and predictor variables. It is founded on an exploratory and descriptive research design. The Hausman test, fixed effect or LSDV model, Pedroni and Kao co-integration test are used to observe the relation and impact. The maturity crossed due loan number, total loan amount, loan issued against physical collateral, and loan allocated on collective bail are jointly significant to determine the maturity of crossed due loan amount of microfinance companies of Nepal. It is found that women are more conscientious in repaying loans on time compared to male borrowers. Per rupee 0.382 rupees, a maturity crossed due loan is found in microfinance companies where only women can borrow, but per rupee 0.404 rupees, a time crossed due loan is found where men and women can borrow. Policymakers of banks are not necessarily hesitant to provide loans to female borrowers.

Does gender diversity affect nonperforming loans? International evidence from microfinance institutions

The paper uses the data on 1212 microfinance institutions in 106 developing countries to document the impact of gender diversity on boards and gender diversity among borrowers on nonperforming loans (NPLs) during the period 2010–2018. The results show that microfinance institutions with a higher proportion of female borrowers have fewer NPLs than otherwise similar microfinance institutions with a lower proportion of female borrowers. Regarding female board members, the results show no relationship between the proportion of female board members and NPLs. The findings remain qualitatively the same after several sensitivity checks. We also show that characteristics specific to microfinance institutions moderate the relationship between gender diversity and NPLs.

Female borrowers and credit risk in microfinance institutions: an international study

Female borrowers and credit risk in microfinance institutions: an international study

Microfinance for Poverty Reduction in Pakistan: A Sectoral Analysis

The study analyzes the impact of microfinance provided by Khushhali Microfinance Bank Limited (KMBL) for poverty reduction in district Sargodha. It explores explicitly the sectors in which credit usage is more helpful for poverty alleviation. For this purpose, we collected the primary data of 300 households from KMBL. The findings revealed that microfinance played a vital role in poverty eradication. The binary logistic regression implied that males were more likely to be poor than female borrowers. There was a negative and statistically significant relationship between educational attainment of the respondent and poverty level of the household. The existence of the market and poverty level were negatively correlated. Most importantly, the trading and services sectors had a significant contribution to poverty reduction among all the sectors. Hence, there is a need to increase female participation in the credit program. Special attention should be given to the borrowers to utilize their loans in the trading and services sectors, which are more helpful in coming out of poverty.

Credit risk in Islamic microfinance institutions: The role of women, groups, and rural borrowers

Using international data, we find that Islamic MFIs experience reduced credit risk by offering more groups loans, serving more women, and serving more borrowers in rural locations. Conventional MFIs benefit from fewer group loans, less loans to rural borrowers, and a greater focus on female borrowers. Our results contribute to microfinance and financial inclusion literature by highlighting the potential of tapping into the social dynamics within Muslim communities. We present encouraging insights for Islamic MFIs donors and managers on the possibility of promoting the financial inclusion of women and rural borrowers without compromising the quality of the credit portfolio.

Small sums, big impact: Corruption and microfinance institutions

Microfinance institutions (MFIs) have been promoted worldwide as developmental platforms that can help eliminate some of the major global challenges such as poverty and economic development. The effectiveness of using MFIs to fulfil such expectations depends on their performance, which can be affected by a range of institutional factors such as corruption, rule of law and financial sector development. However, there is a lack of clarity on whether these factors are performance inhibitors or promoters. Using gender as a mediating factor, this study develops and tests these relationships on MFI performance, with the aim of contributing to research on institutions and corruption in the Global South. Drawing on the MFI performance model, the study uses data on MFIs operating in 33 African countries. The results reveal that the control of corruption reduces MFIs’ operating expenditure, while it increases MFIs’ operating income. Drawing from the essentialist perspective of the theory of social construction of gender, it is argued that female borrowers from MFIs are shown to have a mediating impact on the relationship between the variables tested (such as control of corruption) and MFI performance. The study also has public policy relevance for nations seeking to use MFIs as means of fostering entrepreneurship and economic development.

Social and financial performance of microfinance institutions and its drivers: Evidence from MENA region

AbstractThe paper examines the determinants of social and financial performance of microfinance institutions using a database obtained from the MIX, consisting of 79 MFIs from the MENA region. The results reveal the existence of a possible trade‐off between profitability and outreach since MFI, oriented toward female borrowers, are likely to be less profitable than others. Another interesting finding is that non‐profit non‐governmental organizations (NGO) perform better in operational self‐sufficiency than MFIs with a different legal status. Overall, the specific institutional variables and macroeconomic factors appear to be critical determinants of the social and financial performance of MFIs.