Female Borrowers Research Articles

Corporate governance and performance of microfinance institutions: recent global evidences

Using a global data set of 456 MFIs, this study investigates whether a MFI’s ownership structure and corporate governance influences its social performance. An attempt has been made to analyze the impact of ownership structure of MFIs on its social performance, taking five indicators into consideration. The study is based on secondary data which are obtained from rating reports from the five micro lender rating agencies: MicroRate, Microfinanza, Planet Rating, Crisil and M-Cril etc. The hypotheses are tested by performing an unpaired sample t test to investigate the statistical significant difference between the two types of ownerships on social performance. The result shows that socially oriented MFIs (NGOs and cooperatives) have shown their stronger focus on social goals by having a higher percentage of female borrowers and a lower average loan size than commercially oriented MFIs (banks and NBFIs), which indicates the importance of ownership type for social performance of MFIs. The findings of this study can lead to important contributions that provide better understanding of the role of ownership structure as well as corporate governance in the MFIs’ performance. MFIs have mostly been evaluated on their financial performance and there are very limited number of previous academic studies on ownership structure in the microfinance sector and its impact on MFIs mission of social impact. This study aims to cover this gap in the literature by making a cross-country study of examining the influence of ownership structure on the social performance of MFIs.

The Gender Gap in Peer-to-Peer Lending: Evidence from the People’s Republic of China

We document and analyze the gender gap in the online credit market. Using data from Renrendai, a leading peer-to-peer lending platform in the People’s Republic of China (PRC), we show that lending to female borrowers is associated with better loan performance, including a lower probability of default, a higher expected profit, and a lower expected loss than for their male peers. However, despite the higher creditworthiness, we don’t find any measurable gender impact on funding success rate, meaning that female borrowers have to compensate lenders by providing higher profitability to achieve a similar funding probability to their male peers. This evidence indicates the existence of a gender gap that discriminates against female borrowers. Further analysis implies that this gender gap is independent of the amount of information disclosed by borrowers.

Does gender affect loan default

We examine the effects of gender on loan default in an emerging market context. Specifically, we investigate whether female borrowers are less risky to loan default than male counterparts. Using logit and 3,717 loan clients' dataset from a big financial institution in Sierra Leone over the period 2007 to 2014, we find that female is positively related to loan default but not statistically significant. This finding has implication on theory, practice and policy on loan default in emerging market context. This study's finding does not only contribute to an important but neglected area of research, but also practice and policy, due to the size, growth and impact of loan default in emerging markets.

Financial sustainability and microfinance institutions from an emerging market

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.

Determinants of defaulting by collateral lending groups in microfinancing: A probit regression approach

Orientation: Despite the use of group lending, microfinance institutions (MFIs) are still faced with the risk of default by borrowers and the absence of physical collateral means that there is no recourse to borrower assets for repayment. It is therefore imperative to understand characteristics of loan default as a means to reduce possible erosion of the capital base of MFIs.Research purpose: The study identified determinants of loan default for collateral lending groups in microfinancing.Motivation for the study: Default on loans, which can be caused by characteristics of the lending groups themselves, has the undesirable effect of eroding the capital base of MFIs and threatening their continued existence. This study aims to identify those characteristics of loan default which could erode the capital base of MFIs.Research design, approach and methods: The study used the probit regression model to identify characteristics of loan default by collateral lending groups in microfinance in order to assist MFIs with insights regarding which factors to eliminate and which to enhance in the design of the groups to which they lend.Main findings: The key findings of the study indicate that probability of default decreases with larger groups, more female borrowers in a group and larger borrower savings. The results also indicate that probability of default increases with larger loan amounts and with borrowers who have more business experience.Practical and managerial implications: Microfinance institutions should consider having a feeder programme where borrowers whose businesses have become successful and larger can be passed on to bigger commercial banks instead of continuing to borrow from the MFIs as part of a group lending scheme.

Internal governance mechanisms and the performance of decentralized financial systems in Niger

PurposeThe purpose of this paper is to study the effect of internal governance mechanisms on the financial and social performance of Niger’s decentralized financial systems (DFS).Design/methodology/approachThis paper investigated the impact of the board size and the CEO/chairman duality on financial performance and sustainability, respectively, measured by the return on assets (ROA) and operational self-sufficiency on one side and social performance measured by the size of loans granted and the percentage of female borrowers on the other side.FindingsThe results show that board size positively and significantly affects the ROA. The author also concludes that the duality of decision and control functions promotes the financial viability of the DFS. Regarding the impact of internal governance on social performance, the author finds that board size positively and significantly affects loan size.Research limitations/implicationsThis study focuses on Niger’s 13 largest DFSs. However, an analysis that also includes smaller firms may show different results.Practical implicationsA board size of between 5 and 15 members is recommended. This would help to incorporate key skills and the active involvement of all members.Originality/valueThis research highlights the importance of including internal governance mechanisms, underscores an interesting problem and answers questions raised in the existing literature by invalidating or confirming the results that have been obtained thus far. As the players in the microfinance sector recognize that sound governance is an important factor for a successful outcome in any microfinance institution objective, the paper helps shed some light on the situation of DFS in Niger.

Children's schooling in Nicaragua: What is the link between educational achievement, borrowing, and gender?

AbstractThe impact of credit has been widely studied, and yet little is known about the effect of formal versus informal loans. In this paper, we contrast the two and their impact on children's schooling using longitudinal data from Nicaragua. To address endogeneity, we utilize both household fixed effects and locality–year fixed effects. Our results indicate that, on average, children from borrowing households fare worse than children from nonborrowing households, with male borrowers having a disproportionately negative effect on boys, and vice versa for girls and female borrowers. Informal credit is found to have a protective effect on school attendance, but the effects of formal and informal credit on cumulative schooling are found to be statistically equivalent. However, this appears to mask considerable heterogeneity within informal borrowing.

The impact of ethnic diversity on microenterprise start-ups

ABSTRACTUntil recently, factors determining the decisions made by microfinance institutions (MFIs) to extend loans to business start-ups had not been explored. Recent evidence shows that MFI performance with regard to funds issued for small business start-ups depends on MFI-level characteristics such as profit orientation. We argue that these decisions do not only depend on MFI-specific practices or characteristics, but also on the role ethnic diversity plays. Using data on microfinance lending activities for business start-ups, we examine the impact of ethnic diversity on microenterprise start-ups. Results show that ethnic diversity negatively affects the provision of financial capital for business start-up. Furthermore, results also suggest a negative association between ethnic diversity and the share of female borrowers recorded by MFIs. We examine social networks and outreach as potential channels through which ethnic diversity affects business start-ups.

EDUCATION PREMIUM IN THE ONLINE PEER-TO-PEER LENDING MARKETPLACE: EVIDENCE FROM THE BIG DATA IN CHINA

We study the education premiums in the online peer-to-peer (P2P) lending marketplace in which individuals bid on unsecured microloans applied by individual borrowers. Using more than 100,000 consummated and failed listings from the largest online P2P lending marketplace in China — Paipaidai.com, we examine whether higher education level lead to lower interest rates and lower risk of default. We find that controlling for other characteristics of borrowers, borrowing rates of borrowers with bachelor’s degrees is 0.141 percent higher than that of borrowers with associate’s degrees, and that female borrowers’ education premiums were higher than their male counterparts. With regard to loan performance, borrowers with bachelor’s degrees are 13% less likely to default than the borrowers with associate’s degrees. Therefore, the education premiums in the P2P lending marketplace are rational.

English

Available statistics confirmed that men have access to credit more than women in Nigeria because men have assets which serve as collateral for accessing credit. Credit is essential to farmers, especially the small-scale farmers who have limited capital for their production but constitute the greatest force in food production in many developing countries. The study was carried out to investigate micro-loan sizes accessed by male and female small-scale agro-entrepreneurs in the Niger Delta region of Nigeria on a comparative basis. Multi-stage sampling technique was used to collect data from 373 respondents who were either client of formal, semiformal or informal microcredit institutions. Z-test results revealed that loan sizes accessed from formal source showed that there was no significant difference between the mean amount accessed by men and women borrowers. Also for the informal micro-credit, there was no significant difference (p>0.50) between the mean amount of loan accessed by male and female agro-entrepreneur borrowers. The result of the semiformal loans showed that there was a significant difference (p<0.05) between the mean amount of loan, accessed by male and female borrowers. The study recommends that micro-credit schemes which are the major strategy for formal financial inclusion in Nigeria have really impacted positively on women’s loan sizes, and should be sustained to close the gap existing between men and women in accessing microcredit. Key words: Gender, micro-credit, male agro-entrepreneurs, female agro-entrepreneurs, loan size, formal and informal sources, borrowers.

Microcredit and Food Security: Evidence from Rural Households in Uganda

AbstractThis study investigates the effect of participation into a microcredit program on household food security parameters of female borrowers in a rural setting in Uganda. We explore the modes of food acquisition, dietary diversity, caloric and protein intake, and qualitative food insecurity measures for different categories of respondents. We conduct a cross-sectional analysis comparing old clients to newly registered first time borrowers. Next, we compare first time borrowers and non-borrowers using a panel design. While the cross-sectional analysis allows the comparison of women that similarly self-selected into borrowing, the panel analysis complements by providing insights into changes of food security parameters. In both cases, we use Kernel matching, or difference-in-difference with Kernel matching, to control for potential bias in observables, and perform a sensitivity analysis with respect to unobservables using Rosenbaum bounds as well as an individual fixed effects panel analysis. Results show a decline in food security following the uptake of microcredit. In particular, the analysis reveals robustly lower dietary diversity among long-time borrowers than new borrowers, and larger reductions in dietary diversity scores among new borrowers, after 1 year, compared to controls. The reduction in dietary diversity was traced to a reduction in animal-source food, fruit and sugar intake. We find indicative evidence that this is partly explained by a shift from own production to reliance on food purchase by households. Other household members relegating the burden of food provision to women after borrowing may also help explain the observed result.

Finance and Social Responsibility in the Informal Economy: Institutional Voids, Globalization and Microfinance Institutions

We examine the heterogeneous effects of globalization on the interest rate setting by microfinance institutions (MFIs) around the world. We consider MFIs as a mechanism to overcome the institutional void of credit for small entrepreneurs in developing and emerging economies. Using a large global panel of MFIs from 119 countries, we find that social globalization that embraces egalitarian institutions on average reduces MFIs’ interest rates. In contrast, economic globalization that embraces neoliberal institutions on average increases MFIs’ interest rates. Moreover, the proportions of female borrowers and of poorer borrowers negatively moderate the relationship between social globalization and MFI interest rate, and positively moderate the relationship between economic globalization and MFI interest rate. This paper contributes to understanding how globalization processes can both ameliorate and exacerbate challenges of institutional voids in emerging and developing economies.

Role of microfinance institutions on the empowerment of female Borrowers: Evidence from West Bengal

Empowerment becomes a necessity not mere a choice for growth and development. Microfinance institutions are continuously struggle to offer their services for those who are financially excluded, economically backward and not empowered, especially women. It is a forwarding step for better tomorrow. Empowerment can be defined by various dimensions. This paper is an attempt to focus the role of MFIs towards economic empowerment in Purulia district of West Bengal. It deals with primary data surveying with structured questionnaire and collected data of 200 borrowers. Applying ordered logistic regression, it has been observed that MFIs do act as a supportive role for economic empowerment of female beneficiaries of the selected district.

LOOKING BEYOND FARM LOAN APPROVAL DECISIONS: LOAN PRICING AND NONPRICING TERMS FOR SOCIALLY DISADVANTAGED FARM BORROWERS

AbstractThis study utilizes Farm Service Agency lending data to verify if previous racial and gender bias allegations still persist in more recent lending decisions. Beyond loan approval decisions, this study focuses on trends in direct loan packaging terms for approved single proprietorship farm borrowers. Results indicate that although no significant disparities were noted in loan amounts and maturities prescribed for various racial and gender minority groups, nonwhite male and female borrowers were usually charged higher interest rates than the others. Loan pricing differentials could have been the lenders' strategy for price management of borrowers' credit risks.

Microfinance for Women: Are There Economical Reasons? Evidence from Latin America

In this paper, we use two samples of Latin American MFIs (41 MFIs from 2005-2014 and 102 MFIs from 2010-2014) to show that there is no relation between the percentage of female borrowers in an MFI portfolio and MFI economic outcomes. We verified the return on equity for companies focused on women tend to be smaller. Whilst the cost per borrower is smaller, this is not related to the loan portfolio size. When focusing on the portfolio-at-risk and gender the relation is not found when using a dynamic panel to account for serial autocorrelation, not accepting the hypothesis that women repay better than men. Thus, this paper suggests that MFIs lend more towards women for reasons that are beyond just “economical,” such as empowering women and help poor people, otherwise unable to access credit lines, get loans.

COLLATERAL REQUIREMENTS FOR SME LOANS: EMPIRICAL EVIDENCE FROM THE VISEGRAD COUNTRIES

The purpose of this paper is to examine the determinants of collateral for small and medium enterprises (smes) in the context of Visegrad countries: Czech Republic, Slovak Republic, Hungary and Poland. The data set for this paper was obtained from the Business Environment and Enterprise Performance Survey (BEEPS), which was conducted by the World Bank and the European Bank for Reconstruction and Development (EBRD) from 2012–2014. A binary logistic regression model with different specifications was employed to examine the effect of independent variables on the incidence of collateral. The results show that risky borrowers need to pledge collateral and the reduction of asymmetric information can lower the incidence of collateral for smes. Moreover, we find that female borrowers are more likely to pledge collateral than male borrowers are. The results also suggest that loans with a longer maturity are more likely to be collateralized than short-term loans. We find evidence that bank-borrower proximity can alleviate the incidence of collateral whereas bank concentration may increase collateral requirements. Policy makers may consider these results to implement policies that can promote bank competition and can lower collateral requirements for female borrowers. The paper contributes to the ongoing debate on the determinants of collateral.

Does Microcredit Really Bring Hope to the Female Borrowers in Bangladesh? Evidence from the Agribusiness Program of BRAC

ABSTRACTThe prime objective of the study is to assess the impact of microcredit program on the household income and expenditure of the landless, marginal, and small borrowers who took loan from BRAC for pursuing their agribusiness activities. Primary data were collected using the simple random sampling technique. The propensity score matching technique was used in this study to assess the impact of microcredit on the household income and expenditure. The study shows that the microcredit received by the borrowers has made a significant contribution to increase their household income and expenditure.

Socioeconomic Impacts of Microfinance Programs in the Development of Bangladesh

The study was conducted to find out what significant socioeconomic impact and how microfinance programs play the key role on the development of Bangladesh. To observe that we tried to find out in which way it is playing its role and what kind of socioeconomic impacts are related with microeconomic programs. Microfinance programs are providing a significant role in the development of Bangladesh by providing financial assistance to the lower income but self-employed people. They have turned into employed by getting the financial support from the different institutions especially from Grameen Bank, BRAC etc. The poverty level has minimized a lot from the rural area and household income increase by around one-third. Wages and marginal propensity to consumption (MPC) increased especially for women and it creates positive impact on children's schooling: A 1.05% increase in Grameen Bank female borrowers increases the probability of school enrollment by 1.8% for girls and 1.99% for boys. Microfinance also contributed to smoothening consumption level and reducing vulnerability of life of people. It plays a role in eradicating poverty, promoting education, improving health and empowering women.&#x0D;

Interaction and higher order effects of factors affecting the performance of microfinancing institutions

PurposeThe purpose of this paper is to find the factors that affect the “performance” of microfinancing institutions (MFIs) around the world and to further analyse the interaction and higher order effects of these factors on the performance. Although MFIs can have various objectives from a commercial focus to a social focus when performing their operations, this study analyses the factors that contribute to “performance” of MFIs in relation to their ability to “alleviate poverty in a sustainable manner”.Design/methodology/approachBased on the data relating to 234 MFIs across 63 countries, this study analyses eight factors that can affect performance of MFIs (as defined in this study) and their higher order and interaction effects using multiple regression models.FindingsThe results show that gender (female), literacy level of the borrowers, operational efficiency, offering only loans (not diversifying), age and emphasis on profitability have a significant effect on the performance. Analysis of higher order effects shows that the relationship of age with performance is a downward concave curve and that with operational efficiency is an upward concave curve. The interaction effects of gender and literacy, age and emphasis on female borrowers, and also age and emphasis on profitability were found to be significant.kOriginality/valueThe findings contribute to understanding the factors that affect the performance of MFIs to alleviate poverty in a sustainable manner and help the policy makers and managers of MFIs to improve their performance in this area. Considering the hundreds of millions of dollars injected into microfinancing, improvement in performance as a result of these findings can lead to savings in millions of dollars.

MITIGATING LOAN REPAYMENT TROUBLES DURING MICROFINANCE EXPANSION: EVIDENCE FROM A LARGE PANEL

(ProQuest: ... denotes formulae omitted.)1.INTRODUCTIONOne of the core objectives of microfinance institutions (MFIs) is the provision of banking/financial services to non-traditional customers known as poor and low-income households or businesses. A significant challenge facing these institutions is the struggle for financial self-sufficiency. This means controlling most of the risks in the loan portfolio through adequate loan collection and timely loan repayments. Doing so, provides for further extension of funds to other borrowers, resulting in further outreach and development (Crabb and Keller, 2006).Examining this challenge in the presence of uncontrolled is of importance, since fast microfinance could pose substantial strain on MFIs' mission, making it harder for them to operate sustainably in such an unconventional market structure. In addition, the 2004-2008 surge in microfinance provides a great opportunity to test this hypothesis.There is a paucity of empirical work on the effects of the unprecedented rapid microfinance expansion that occurred between 2004 and 2008. Practitioners have speculated that this phase in microfinance activities has led to increased loan delinquency. According to Gonzalez (2009), the increase in the number of borrowers during the expansion averaged 21 percent per year while loan portfolio jumped by a staggering 34 percent per year on average.Chen et al. (2010) and Stephens (2009) examine some of the emerging economies qualified as high growth markets and show that in 2008, these markets1 experienced devastating loan delinquency rates. These studies feed into the narrative that aggressive in microfinance lending may pose higher credit risk to MFIs as loan recovery efforts become more challenging. Chen et al. (2010) identified key contributing factors to poor loan repayment rates among which microfinance is mentioned. However, they present no empirical evidence.In this paper, we use a new and improved proprietary comprehensive dataset that includes a large cross-section of MFIs to estimate the effect of rapid microfinance expansion on loan delinquency. The use of such a comprehensive data mitigates that kind of measurement error that plague many microfinance studies (missing data) and allows us to estimate linear panel models. Given that the effects of microfinance expansion may not be visible during the boom years (2004-2008), we extend our dataset from 2003 to 20132 to include post-boom years. For proper identification of the effect of microfinance expansion on loan delinquency, we control for aspects of microfinance (micro) and beyond-microfinance (macro) design.2.DETERMINANTS OF LOAN REPAYMENTLoan repayment is the most revealing of the five3 performance areas of a MFI (Rosenberg, 2009). So, the ability to collect loans is critical to the success of MFIs. We use the loan loss rate to proxy loan repayment.... (1)The loss loan rate measures how well a MFI collects its loans and our presumption is that higher values of loan loss rate are associated with lower repayment rates.To measure the impact of microfinance on loan delinquency, it is important to control for factors that may explain changes in loan repayment. The choice of control variables is motivated by the literature. We hypothesize that loan repayment is influenced by the of lending,4 the percentage of female borrowers,5 other (micro) institutional factors6 such the personnel allocation ratio (percent of staff devoted to credit control), the quality of prudential regulation, the quality of technical assistance, operational self-sufficiency, financial intermediation and credit risk (portfolio at risk more than 30 days) and macroeconomic variables7 (GNI per capita rate and inflation) that may affect the ability of the MFI to recover loans.Following the Microfinance Information Exchange (MIX) Market definition, operational self-sufficiency is calculated as follows:. …