Loan Disbursement Research Articles

Measuring Financial Performance for the Sustainability of Microfinance Institutions in Sierra Leone before the Ebola Outbreak

This paper uses an accounting ratio technique to evaluate the financial performance of microfinance institutions in Sierra Leone before the Ebola outbreak, with particular emphases on profitability, sustainability, asset and liquidity management, portfolio quality, efficiency and productivity using the parameters of other deposit-taking institutions. The survey considered Community Banks (CBs) and Financial Service Associations (FSAs) and their clients in the four (4) districts of Kenema, Kailahun, Kono and Koinadugu. A sample of 3 FSAs per district and a total of 5 CBs were in the 17 institutions for the survey. Profitability basis, the performance of the sampled FSAs showed a steady improvement in ROCE, ROA and NOPM for the period 2011 to 2012 but slumped drastically in 2013. Among other reasons, the catalyst for high performance in 2011 period was that the institutions’ loan portfolio grew exponentially alongside favourable interest rates coupled with low operating costs and extremely low provisions for bad loans. Operational Self-Sufficiency (OSS) in the periods 2011 and 2012, of 166%, and 114% respectively appeared stable and encouraging but as profit dwindled, the OSS fell sharply in 2013 to 45%; implying that the sampled FSAs could only cover 45% of operating expenses from revenue generated from operations. If the situation persists, the need to subsidize operations of the FSAs may be inevitable in the near future. Portfolio at Risk (PAR) kept an upward trend over the years. The ratio grew from 0.03 in 2010 to 0.06 in 2011 and doubled again to 0.12 in 2012, implying that the collection effort of the sampled FSAs had not been robust enough to keep pace with the growing size of loan disbursement. If the trend continues, sustainability could be threatened as the need for further huge write-off in subsequent years might be inevitable.

Risks in Nepalese Microfinance Institutions (MFIs): A Review of Best Practices

This article aims to analyze possible risks in microfinance institutions (MFIs) in Nepal during the loan disbursement decision. Effective risk management allows MFIs to capitalize on new opportunities and to minimize threats to their financial viability. MFIs consciously take a risk to fulfill their dual mission of sustainability and outreach to the poor. Consequently, they are exposed to a spectrum of risks which include institutional risk, operational risk, financial risk, and external risk. MFIs need to manage these risks for their survival and sustainability. They take risks every day by lending money to people without credit histories, without business records, and often without collateral. Each MFI takes risks to operates as a successful microfinance institution. But it is important to take calculated risks. Risk Management is always focused on the process of taking calculated risks. It includes both the prevention of potential problems and the early detection of problems. Risk management is an ongoing process of systematically identifying, measuring, monitoring, and managing risks in MFIs. It is important to ensure that MFIs operate in a safe, responsible, and sound manner towards their mission.

The Chinese infrastructural fix in Africa: lessons from the Sino-Zambian ‘road bonanza’

ABSTRACT This article scrutinises the surge in Chinese-funded road development in Zambia with the help of David Harvey’s theory of spatio-temporal fixes. The ‘moving out’ of Chinese surplus capital and material to Africa has been facilitated by an extensive disbursement of loans and export credits for infrastructure projects. Transcending Harvey’s analytical ‘imperio-centrism’, the article shows that the actualisation of the Chinese infrastructural fix has been contingent upon Zambia’s ambitious, debt-financed infrastructure development agenda. Particularities of Chinese loan financing have thereby fostered ‘not so public’ procurement processes and accelerated Zambia’s rapid debt accumulation. As rising debt has imposed structural constraints, the recent shift in the financial governance of road development towards private project finance is analysed with reference to the Lusaka-Ndola dual carriageway. The renaissance of public-private partnerships and the gradual privatisation of Zambian roads signify new rounds of accumulation by dispossession, as the Chinese infrastructural fix enters its next stage.

The impact of financial development and globalization on environmental quality: evidence from South Asian economies.

Climate change resulting from the higher concentration of greenhouse gases in the atmosphere is a threat to the sustainability of life on earth. To ensure sustainable development, the study analyzed the impact of financial development, globalization, and energy use on the environmental quality of South Asian economies over the period 1990-2014. To account for cross-sectional dependence, Breusch-Pagan-Lagrange multiplier, Pesaran-scaled Lagrange multiplier, bias-corrected-scaled Lagrange multiplier, and Pesaran cross-sectional dependence tests are used. The second-generation tests are used to determine the stationarity level of the variables. Furthermore, the Westerlund panel cointegration test confirms cointegration among the variables. For long-run association, fully modified ordinary least squares, dynamic ordinary least squares, and pooled mean group estimators are used. The results suggest that financial development contributes to carbon emissions, whereas globalization has the potential to control emissions. The study also used Dumitrescu and Hurlin's (2012) panel causality test to explore the causal relationship among the variables. Unidirectional causality is observed from economic growth, globalization, and financial development to environmental degradation and from emissions to energy use, respectively. As financial development deteriorates environmental quality, therefore, the government should monitor the disbursement of loans for research and development, green financing, and efficient production that reduce resource consumption and improves environmental quality. Financial development should not compromise environmental quality and endanger sustainability. Furthermore, South Asian countries should promote globalization to support the inflow of green technologies to enhance environmental quality.

Spectral Clustering and Cost-Sensitive Deep Neural Network-Based Undersampling Approach for P2P Lending Data

Peer-to-peer lending, also known as P2P lending, is the new generation loan disbursement process, where lenders and borrowers communicate through online services. Loans through P2P lending platforms are generally unsecured, due to the presence of borrowers with low credit scores. Lendingclub dataset, consisting of quantitative and qualitative information of borrowers from 2007 to 2011, is taken for the research. Machine learning models trained with such imbalanced dataset consists of biasing towards major class samples. The model performs significantly well on major class (safe borrowers) in terms of high precision but does not perform significantly well on minor class (defaulted) borrowers and provides low recall on minor class samples. To deal with the issue, a novel undersampling algorithm based on the combination of spectral clustering and cost sensitive deep neural network (SCCSDNN) is proposed. Experimental results showcased the outstanding performance of the proposed technique, and it outperforms state of the art undersampling, oversampling and ensemble resampling techniques.

Antecedents of Financial Inclusion: Evidence from Tripura, India

The present research assesses the determinants of financial inclusion of members of Self Help Groups (SHGs). The research work is done with primary data collection from around 380 members who are beneficiaries of 95 SHGs in Tripura, India. After performing factor analysis, six major factors named Physical Infrastructure, Financial Awareness, IT Infrastructure, Suitability of Financial Products, Ease of Banking and Economic Status of members of SHGs were identified as major factors that play a pivotal role in bringing financial inclusion of the members of SHG. In these 6 factors, some other factors were also added such as age, income, education, landholding, the regularity of income, earning members count, gender, caste, location, religion, etc. Fitting ordinal logistic regression model, it was found that, the important factors that have an impact on financial inclusion on the members of the SHGs are financial awareness, ease of banking and economic status of the members, the relevance of financial products, physical infrastructure, monthly income, landholding, education, age and their status with respect to the BPL category. The decision-makers in power should collaborate with financial institutions should consider and apply this finding during the disbursement of loans.

Agriculture Sector Credit and Output Relationship in Nepal

Purpose: The purpose of this study is to find out the condition of priority of commercial banks to provide loans to the agricultural sector and to find the relationship and impact of agricultural loans to the agricultural GDP of Nepal.
 Objectives: This study aims to compare the condition of loan disbursements in agricultural and manufacturing sectors. It further aims to compare loan percent with growth and contribution to the GDP of the agricultural and industrial sectors and tries to show the impact of agricultural loans to the agricultural GDP of Nepal.
 Methods: It was based on a descriptive and analytical research design. Statistical tools standard deviation, correlation, regression, etc. are used and Excel, and EViews software are used for the statistical calculations. Statistical calculations and graphs are simultaneously used to show and compare the condition of variables.
 Results: Commercial banks give higher priority to the manufacturing sector for loans than the agricultural sector. The Johansen Co-integration test indicates no long-run relationship between loans of commercial banks and agricultural output in Nepal. However, the least-squares method, it indicates that a positive causal relationship between agricultural loans and agricultural growth.
 Implications: The loans of commercial banks directly stimulate the growth of agriculture but the amount of growth is less noticeable. Thus, it is concluded that the commercial bank's loan alone cannot affect and control the growth of the agricultural sector of the Nepalese economy therefore the government should increase its expenditure on the agricultural sector.

Banks, Money and the Zero Lower Bound

We develop a New Keynesian model where all payments between agents require bank deposits, bank deposits are created through disbursement of bank loans, and banks face convex lending costs. At the zero lower bound on deposit rates (ZLBD), changes in policy rates affect activity through both real interest rates and banks’ net interest margins (NIMs). At empirically plausible credit supply elasticities, the Phillips curve is very flat at the ZLBD. This is because inflation increases NIMs, credit, deposits, and thereby output, while higher NIMs also dampen inflation by relaxing price setters’ credit rationing constraint. At the ZLBD, monetary policy has far larger effects on output relative to inflation, and inflation feedback rules stabilize output less effectively than rules that also respond to credit. For post-COVID-19 policy, this suggests urgency in returning inflation to targets, caution with negative policy rates, and a strong influence of credit conditions on rate setting.

Impact of Agricultural Loan Disbursement and Chemical Fertilizer Use on the Rice Production in Bangladesh

Agriculture is one of the important issues of Bangladesh, where a larger share is related to it for livelihood, food, and socio-economic activities. Agriculture draws considerable attention and is the backbone of the Bangladesh economy. Besides enhancing food and raw materials, agriculture also enhances employment opportunities to a vast number of the population. Agriculture is affected by many factors; among those two crucial factors are agricultural credit and chemical fertilizer. This paper examined the effect of agricultural loan & chemical fertilizer on the total rice production in Bangladesh during the time 1995 to 2016. The study has used data from the economic review 2017. Data are found stationary at the difference at 1% and 5% level of significance using Augment Dicky Fuller (ADF) test. Then the study adopted multiple regressions to see the influence on agricultural loan and chemical fertilizer on total rice production. The result showed that agricultural credit has a positive & statistically significant effect on total rice production, and chemical fertilizer has a positive effect on the total rice production of Bangladesh but not statistically significant. Keyword(s): Total rice production, agricultural loan, chemical fertilizer, multiple regression. J.E.L. Classification: Q10, Q14, O13, C19.

The Challenges of Savings on Credit Unions in Creating Wealth: A Case Study of Zambia Army Savings and Credit Union

Purpose: The aim of this study was to identify the challenges of savings on Zambia Army Savings and Credit Unions in creating wealth and recommend possible solutions.Methodology: The study used mixed research methods to collect qualitative and quantitative data, as both could not give the satisfactory results due to weaknesses in each method. Eighty (80) respondents were sampled of which seventy were sampled from members of ZASCU in survey questionnaire and the other ten (10) were for in-depth interview from management. Top management of six (6) respondents and four (4) respondents from operation level were purposively sampled for expert sampling and in-depth interviews were used as a data collection technique. The other respondents were randomly sampled selected using probabilistic sampling, where every individual had an equal chance of being selected. Quantitative data was analyzed using SPSS version 21 and qualitative data was analyzed using thematic content analysis and document review. The research study’s results collected through the questionnaire, in-depth interviews and document review showed that ZASCU had challenges of savings in creating wealth.Findings: The results showed the following challenges: 26% of participants cited delay in disbursing of money, 14% respondents identified inadequate online system and 19% was for lack of skilled personnel. Members had another concerned of limitation in loan facility as 21% of the respondents cited it and 20% had a concern for underutilization of funds at ZASCU. ZASCU needs to be as strategic in the market as it faces stiff competition from other lending institutions providing similar services.Unique contribution to theory, policy and practice: The study recommended that ZASCU needed to have modern technologies for online system, skilled personnel, prudence in financial management, paying on time and increase on loan disbursements. The challenges of savings are affecting negatively on ZASCU in creating wealth and this has caused loss of confidence by stakeholders, and the sooner the solutions to mitigate the saving challenges are found and implemented the better.

Credit Score Analysis for Loan using Raw Data Through Third Party Application

Credit Score Analysis for Loan using raw data through third party Application has the potential to meet the needs for high speed Credit Information Bureau India Limited (CIBIL) score calculation. The aim is to increase fairness and reduce human intervention in this calculation process by passing all the data through software process and following the unbiased flow. The need to increase fairness among the disbursement of Loans has pushed this process to its limits. In this paper the required process flow to obtain CIBIL score is discussed.

Role of Finance in Resource use Efficiency and Constraints in Banana Cultivation in Uttar Pradesh

The study was conducted using purposive cum random sampling technique and two hundred respondents comprised of 100 each borrowers and non-borrowers were selected from two block of district including marginal, small and medium categories of farm size. Primary data were collected through personal interview technique and required secondary information was taken from the record available at district and block level. Simple tabular and functional analysis and Garrett ranking were done to draw inferences. As per the result obtained from the study, no much difference was seen between the resource use efficiency of borrower and non-borrower farms and constraints faced by borrower. Since banana is a cash crop and it needs initial costs for its establishment, and after harvesting the crop regular source of income was generated by selling of suckers (seed) plant and its fruits. It’s by-product, leaves, etc. also used for various purposes. Minute inspection of the analysis showed that finance played important role for initiating the cultivation of banana crops showed the resource use efficiency that there is no considerable difference found on sample farms of borrower and non-borrower categories. Constraints faced by majority of the farmers were mainly delay in disbursement of loan and lack of the repayment period insufficient and improper management for withdraws on KCC.

Public Guarantees for Small Businesses in Italy during COVID-19

This paper investigates whether the private sector can efficiently allocate public funds during a crisis. Using loan-level data, we exploit the unique features of the Italian public guarantee scheme during COVID-19 to study lenders’ incentives to distribute government guaranteed credit. Our results indicate that two key bank characteristics facilitated loan disbursement: size and information technology. These factors are important because of the high volume of online applications and low interest margins on guaranteed lending. Pre-existing relationships matter for the allocation of guaranteed credit, as banks lend more in their core markets and where they have a larger share of branches.

Determinants of Savings and Community Loans in Ngawi District, 2010 - 2018 A Macro Economic Approach

This study aims to analyze (1) the effect of income on community savings; (2) the effect of savings interest on community savings; (3) the effect of savings on community lending (4) the effect of loan interest on community lending; (5) the influence of external funds on community lending; (6) the right theory is applied in order to increase the receipt of savings and lending to the people of Ngawi Regency. This research is a type of quantitative research. The unit of analysis in this study is inter-time development data on the amount of savings and public loans, the determination of the interest rates for savings and loans on average per year, external funds, and income in Ngawi Regency during 2010-2018. Data analysis techniques using multiple linear regression in the form of log-linear. The results of the study found that: (1) Revenue did not have a real impact on the savings of the people of Ngawi Regency. (2) The determination of savings interest does not support the receipt of savings from the people of Ngawi Regency in BRI and Bank Jatim. (3) Savings can increase community loans in Ngawi Regency. (4) The policy for determining loan interest rates carried out at BRI and Bank Jatim is less able to have a real impact on the distribution of loans to the people of Ngawi Regency. (5) External funds are able to encourage the fulfillment of Ngawi Regency community loan disbursement. (7) Savings and less interest can be used to increase the savings and loans of the people of Ngawi Regency. This shows that the right theory applied to increase the receipt of savings and lending Ngawi Regency is Keynes's theory

Factors Determining the Success of Pradhan Mantri MUDRA Yojana : A Study of North India

The present study was a primary data-based research work in which attempt was made to identify the determinants of Pradhan Mantri MUDRA Yojana. For this study, data were collected with the help of a designed questionnaire and the respondents for the study were branch managers, assistant managers, and other responsible employees of public and private sector commercial banks. A total of 161 questionnaires were filled, although we approached more than 480 respondents at their branch locations. The reliability and validity of the collected data were tested by employing Cronbach's alpha. Furthermore, the data were analyzed by employing exploratory factor analysis with the help of SPSS. The study found six determinants of success of PMMY, and these determinants are responsible for creating awareness in weaker sections about start-ups and job creator non-funded individuals. This scheme is suitable for both banks and borrowers because this scheme does not require any collateral. Therefore, it should be continued by the Central government as it is a very close substitute of the other loan schemes. The results of this study will be quite useful for the Government of India, commercial banks, and other financial institutions in the marketing of this scheme in disbursement of loans to the rural & urban unemployed and non-funded individuals.

Financial Appraisal of RRBs: Evidence from Eastern Uttar Pradesh

India’s major population lives in rural area and adequate financial credit supply are much needed for speedy economic development of this region. Regional Rural Banks (RRBs) was established with the objective to provide financial support in rural areas. RRBs have been working as an economic agent and disbursing loan to the rural people since its inception. RRBs have performed to a great extent in terms of rural credit disbursement but Non Performing Assets (NPA) has become a key trouble. For the last few years RRBs have been facing a primary challenge of mounting NPAs, which is clogging the smooth credit supply in the rural areas. The present study aims to analyze the loan disbursement towards agriculture sector, overdue and NPAs of RRBs working in Eastern Uttar Pradesh.

Woman Microfinance in Indonesia: Present Status and Future Direction

Microfinance has broadly been used to alleviate poverty and empower women in Indonesia. Many studies have already examined the microfinance performance but mostly on the basis of a client versus non-client comparative method. In this study, we measure the outreach of and impact of microfinance on poverty alleviation through random sampling of poor households. A case study was conducted at the district of Purbalingga to assess the most widespread woman microfinance in Indonesia, Savings and Loans for Women ( Simpan Pinjam Perempuan, SPP). While the SPP has a good repayment rate and asset growth, its performance in poverty alleviation is low. Only 18 per cent of the respondents ever benefitted from the SPP, which indicates low outreach to the poor. The impact on income generation and development of social capital as well as empowerment of the poor is weak. The causes are limited fund, lack of prioritisation to the poor and inexistence of assistance to loan utilisation. Institutionally, the SPP is not connected to the local government. These create a low sense of belonging and fund allocation from the local authorities. The continuity of the SPP requires a closer institutional linkage with the local government and bank institutions in order to have better assistance and budgeting while maintaining informality of loan disbursement.

Assessment of the Effect of Bank of Agriculture Loan on Female Farmers’ Agricultural Production in Ekiti State, Nigeria

The study assessed the effect of Bank of Agriculture (BOA) loan on female farmers’ production in Ekiti State, Nigeria. A well-structured questionnaire was used to collect information from respondents in the study area through interview schedule. A multi-staged sampling procedure was used to select respondents for the study. Purposive sampling technique was used to select two (2) out of the three (3) Local Government Areas (LGAs) which BOA branches are established in Ekiti State i.e. Ado Ekiti and Ijero Ekiti. Then, 45 respondents were selected and interviewed, using convenience sampling in each of the LGA selected. In total, sample size of 90 respondents were interviewed for this study. Data collected were subjected to descriptive analysis, i.e. mean, percentage, frequency, standard deviation, minimum and maximum values were used to describe the socio-economic characteristics of the respondents. The result showed that the average age of the respondents was approximately 40 years and majority of the respondents (48.9 percent) had 7-12years of education. Also, 88.9 percent of the respondents had heard about BOA and 32.2 percent had received ₦50,000 or less. Results further showed that 77.8 percent of the respondents experienced increase in production capacity while 58.9 percent of the total respondents experienced better standard of living. Result from Probit regression model showed that ownership of land, awareness of BOA, and past and current credit use had statistically significant effect on loan accessibility. It further showed that marital status, ownership of land, awareness, past and current credit use and collateral had positive effect on loan accessibility. Contrarily, age, educational level, income, membership of association were inversely correlated with loan accessibility. About 69 percent of the respondents were faced with the challenges of need for guarantor, 61.1 percent of the respondents faced with the problem of bureaucracy i.e. unnecessary delay in provision of the loan, while 46.7 percent had challenges due to the location of BOA branches. It is therefore recommended that government should include access to credit in any agricultural development programs in Nigeria, and provide funds to BOA so as to reduce bureaucracy in loan disbursement. Also, Women farmers should be encouraged and educated by extension workers to belong to cooperative associations so as to enjoy benefits emanating from being members of agricultural association

Impact Of Demonetization On The Economic Parameters That Affect The Growth Of Nonperforming Asset Of Indian Banks

The demonetization decision by the government of India affected almost all service sectors of Indian economy, out of which the banking sectors were affected the most. Due to demonetization bulk amount of old currency notes of INR 500 and INR 1000 were deposited to banks; that not only increased the capital base of banks, but those un-used cash boosted the liability of loan disbursement. Again the reducing interest rates, providing account opening facility and issuing loan to the depositors by banks without judging their repayment ability resulted a chance of increasing number of defaulters and the value of nonperforming assets. Considering the scenario the present research work tried to focus on the impact of demonetization towards the movement of nonperforming assets of Indian banks. A multivariate regression analysis was performed by considering income, expenditure and net profit ratio as internal and the percentage change of India’s GDP, inflation and foreign exchange rate as external independent variables towards the net nonperforming assets changes of Indian public and private sector banks as dependent variable from financial year 2016-17 to 2018-19. Though the outcome of the study revealed that demonetization helped to reduce the nonperforming asset values in short run but in long run it would stimulate the growth of nonperforming assets.

Resolving the Constraints in Accessing Microcredit: The Neglected Views of the Smallholder Farmers

Access to financial resources by smallholder farmers remain a daunting challenge in spite of increasing numbers of Microfinance Institutions (MFIs) in Ghana. This paper contributes to the debate in addressing gaps created by an ever increasing numbers of MFIs yet the declining number of small businesses, particularly smallholder farmers having access to credit. Using data from 104 smallholder farmer microcredit borrowers of Ada East in the Greater Accra Region, the paper analysed the constraints preventing borrowers from accessing microcredit. Random sampling was used to obtain information from farmers using semi structured questionnaire. The Kendell Coefficient of concordance was used to analyse the result to establish the level of agreement among farmers perception about the constraints associated with application and granting of loans. High interest rate (1.76 mean rank) was found to be the most critical constraint. Other constraints in accessing microcredit were credit inadequacy, short repayment duration and farmer based organizations (FBOs) membership requirements. It is recommended that MFIs should put in place mechanism to lower operational costs in order to reduce the cost of borrowing. Finally, simplifying loan application procedures and reducing bureaucracies to reduce delays in loan disbursement will minimize the constraints in access to microcredit.