Microfinance Providers Research Articles

Microfinance Providers and Rural Lending in the Province of Carniola Before 1914: a Case Study of the District Credit Cooperative Litija

The study provides new insights and compares two different types of microfinance intermediaries and their role and impact on the economic and financial situation of the rural population before the beginning of World War I. The abolition of serfdom in the Habsburg monarchy in 1848 had a significant impact on traditional life in the second half of the 19th century. Peasants became landowners, and their participation in the market and monetary economy became crucial. The development of microfinance intermediaries, such as savings banks and credit cooperatives, was essential for the financial inclusion of the rural population. The article shows the development of credit operations in a rural environment using the example of the District Credit Cooperative Litija.

Nexus between good governance and financial sustainability: evidence from microfinance sector of India

PurposeMicrofinance emerged as an essential catalyst for socio-economic development and financial inclusion to reduce poverty. Microfinance institutions cannot meet their primary objective of poverty reduction if they are not sustainable financially. With the theoretical support of profit incentive theory, this paper aims to investigate the impact of organizational structure (OS), growth outreach (average loan per borrower [ALPB] and number of active borrowers), women empowerment (percentage of women borrowers [PWB]), liquidity, leverage and cost efficiency (cost per borrower) on the financial sustainability of microfinance providers (MFPs) in India and explore the possible moderating effect of the national governance indicators (NGIs).Design/methodology/approachA financial sustainability index has been developed by using principal components analysis, including both conventional measures (return of assets and return on equity) and efficiency measures (operational self-sufficiency and financial self-sufficiency). Due to the existence of endogeneity and heteroskedasticity, this study uses two-step system generalized method of moments estimates to examine the relationships for a period of 2006 to 2018.FindingsThe finding reveals that there is a strong significant relationship between financial sustainability and its influential factors. Organizatioanl Structure, loan size, women borrowers, Gross Domestic Products and inflation enhance the financial sustainability of India’s microfinance sector. However, a number of borrowers, liquidity, leverage and operating costs negatively affect the financial sustainability of MFPs of India. The estimates demonstrate that NGIs significantly moderate the association between financial sustainability and its influential factors. The NGIs negatively affect the positive impact of Organizatioanl Structure on financial sustainability. National governance increases the positive effect of loan size (ALPB) and reduces the negative effect of a number of borrowers and leverage on the financial sustainability of MFPs of India. However, NGIs negatively affect the positive relationship between Percentage of Women Borrowers and Financial sustainability of Microfinance Providers of India.Originality/valueTo the best of the authors’ knowledge, this study is the first of its kind that incorporates all of the six dimensions of the National Governance Indicators (NGIs) and uses as a moderator. Secondly, a financial sustainability index has been developed for measuring the financial sustainability of Microfinance Providers (MFPs).

Giving and Receiving: Faith and the Sustainability of Institutions Providing Microfinance Services for Development

Topic: This review explores the important issue of the ‘institutional sustainability’ (IS) of faith-based development organizations (FBDOs) providing microfinance services to the poor in the developing world. IS has often been equated with the financial self-reliance of microfinance service providers, with income from credit charged on loans as well as other fees being used to pay for the service. While the approaches and tensions inherent in the attainment of IS by microfinance providers seeking to help the poorest in society have been well explored in the literature, there has been no specific analysis of FBDO providers and the special challenges they may face. Methodology: This paper is based on a review of the literature using a combination of search terms such as ‘microfinance’, ‘development’, ‘institutional sustainability’, ‘financial self-reliance’ and ‘faith’, with a special emphasis on the literature published between the 1990s and 2023. Results: One of the main findings is that Christian and Hindu FBDOs providing microfinance largely follow the financial self-reliance conceptualization of IS applied by secular providers and apply much the same set of responses regarding the setting of interest rates and other charges and the management of repayment amongst their client base. However, FBDOs of the Islamic faith take a broader perspective on IS and include the need for spirituality and religious development amongst their clients. Future directions: This paper makes a number of suggestions for future research, including (1) the reasons why religious development and spirituality do not appear to be strong issues for Christian and Hindu FBDOs relative to their Islamic counterparts; (2) the potential for inter-faith collaboration between FBDOs and secular providers, between FBDOs of different faiths as well as FBDOs from versions of the same faith (e.g., Protestant and Catholic); and (3) whether FBDOs are more naturally predisposed and able to engage and collaborate with the informal microfinance sector than secular microfinance providers.

Migration speculation: microfinance and migration in the Global South

Across the Global South, microfinance providers have begun offering formalised pre-departure loans as part of their broader efforts to promote migrant financial inclusion. This article critically examines the logic behind these migration loans, drawing on data from Bangladesh to denaturalise the discursive shifts justifying these programs. Advocates of formalised migration loans view them as enabling the ‘worthwhile investment’ of migration, while reducing migration costs and risks. Yet these claims ignore the systemic precarity of migrant labour, the potential for abuse and dispossession via microcredit, and the ways that formal debt can heighten vulnerability for migrants. In making these claims, I draw attention to the infrastructures that have enabled contemporary forms of migration lending, highlighting that migration loans are now possible precisely because financial institutions have found ways to reshape the risks of lending to mobile populations. As such, I make the case for seeing migration loans as a form of migration speculation—in which migrant experiences become a site of investment and profit for microfinance institutions.

What Drives Microfinance Provider's Financial Sustainability: The Moderating Role of National Governance Indicators (NGIs)

Microfinance providers have been known to provide programs to reduce poverty in rural areas. However, they are still facing the issue of sustaining the operations on a long-term basis. This study investigates the impact of organizational structure, outreach, leverage, liquidity, and operating cost on the financial sustainability of microfinance providers in South Asia, moderated by national governance. A financial sustainability index has been developed by using Principal Components Analysis (PCA), considering both conventional (ROA & ROE) and efficiency (OSS and FSS) measures. This study uses the two-step system GMM estimates to examine the impact of factors affecting the financial sustainability of microfinance providers in South Asia, covering 85 MFPs from India, 34 from Pakistan, and 30 from Bangladesh from 2006 to 2018. The finding reveals a strong and significant relationship between financial sustainability and its determinants. The average loan per borrower has a significant positive, and the cost per borrower has a significant negative impact on financial sustainability. Further analysis demonstrated that national governance indicators significantly moderated the association between financial sustainability and its determinants. The finding indicates that microfinance banks are more sustainable than non-bank microfinance providers. Further results reveal that GDP and inflation significantly impact the financial sustainability of microfinance providers in South Asia.

Financial and social efficiency of microcredit programs of partner organizations of Pakistan Poverty Alleviation Fund.

This paper examines the financial and social efficiency of the microcredit programs offered by the Pakistan Poverty Alleviation Fund partner organizations. Panel data concerning variables of interest are collected from Pakistan Microfinance Network, covering a minimum of 14 partner organizations (in 2005) to a maximum of 35 partner organizations (in 2014). The data is analyzed using the Data Envelopment Analysis, assuming both constant and variable returns to scale scenarios and the operational scale of the partner organizations. Trends in average efficiency scores have been analyzed to assess the mission drift of the partner organizations. Results reveal that managerial inefficiency is more pronounced than the sub-optimal production scale in all three scenarios under consideration. Moreover, trends in the efficiency scores indicated a slight mission drift of the microfinance providers. About 77.5% of the partner organizations were financially sustainable over the entire study period. The study recommends providing objective-oriented training, workshops, and seminars for managing microfinance providers.

Developing an Index for the Measurement of Financial Sustainability of Microfinance Providers: A Theoretical Review

Measurement of financial sustainability is still an unresolved and debatable issue. Utilizing multi-dimensional structures, the Finanical sustainability Index is essential in determining the actual financial position. The capacity of a microfinance institution (MFI) to operate sustainably by offering services to certain populations that traditional financial institutions neglect can be used to define sustainability. This study aims to design an indicator that can gauge a microfinance institution's financial sustainability. Due to the deficiencies of the present sustainability assessment, this paper's main focus is on examining the literature on assessing MFI financial sustainability. Additionally, this study is the first of its type to suggest a thorough index that takes into account both conventional measures (ROA & ROE) and efficiency measures (OSS and FSS) as components of the index. Principal Components Analysis (PCA) has been used to assign weight to the indicators to develop the index. This financial sustainability index will reflect an accurate picture of the operational capability of the MFIs, which can help to reduce poverty and empower women. This index will reflect an accurate picture of the operational and financial health of the MFIs for long-term operation. This study is limited to the financial sustainability of microfinance providers. It can be enhanced to the sustainability index by including others factors such as outreach, institutional and environmental factors.

Prospects of Islamic Microfinance: Maqasid Shariah Perspective

Islamic microfinance is one of the instruments that has been scientifically demonstrated to help the poor and needy. The instrument aims to help the underprivileged by giving them access to financing based on Shariah principles for lucrative activities, primarily small and micro-businesses. Notwithstanding that the Islamic microfinance providers claim that they comply with the Islamic rulings (hukm), little attention has been paid to the extent to which the practice addresses the maqasid (objectives) shariah. Such claim of Shariah-compliant practice will be rendered meaningless if maqasid shariah are not realised. Hence, the present paper aims to explore the significance and prospects of the Islamic microfinance practice from the standpoint of maqasid shariah. The library research, inductive, deductive and analytical techniques are employed consistently. The findings reveal that Islamic microfinance has a significant roles in realising the major maqasid shariah, namely: safeguarding the religion, human life, intellect wealth and progeny. These prospects convey the perception that much effort needs to be done to encourage the offering of Islamic microfinancial products at the Islamic finance sectors at large. Future studies may propose maqasid shariah guidelines for the better practice of Islamic microfinance. Keywords: Islamic Microfinance, Maqasid Shariah, Poor Population, Prospects

Lessons for African microfinance providers and regulators in the aftermath of COVID-19

This paper is concerned with microfinance in Africa post Covid-19, a crisis from which the continent is still recovering while new crises such as climate change challenges emerge. The resilience of the microfinance sector to crises must not only address operational weaknesses revealed by the pandemic, but also exploit the post-crisis potential to build resilience in areas such as digitalization and smallholder agriculture. New rules and regulations should target microfinance providers (MFPs) and enable them to quickly comply with new rules and those normally in force. This paper calls for the inclusion of all forms of MFPs, allowing for customized applications of policies and regulations. Moreover, measures for regulators include re-defining post-COVID-19 target groups, enhancing liquidity and MFP risk-based management, ensuring sustainability and best practices, activating prompt monitoring of the sector, and ensuring a consultative and coordinated culture. Measures for MFPs include increased micro-saving, avoiding subsidies, unlocking the full potential of smallholder farmers, a strong movement towards inclusive digital finance, product development, and partial movement towards crises-resistant, non-interest types of lending in countries with Muslim minorities.

Examining the role of microfinance: a creating shared value perspective

PurposeThe purpose of this study is to simultaneously examine the role of microfinance from the business and social lenses by using the creating shared value (CSV) framework by Porter and Kramer (2011) in the context of Indonesia.Design/methodology/approachA survey among more than 170,000 borrowers of two specific credit schemes by PT Bank Rakyat Indonesia Tbk., the largest microfinance provider in Indonesia, was conducted to understand the perceptions of borrowers on the benefits of microcredit under the CSV framework.FindingsThe result confirms that, overall, the debtors acknowledged the importance of the loans in various aspects of CSV. The highest levels of importance were recorded in the case of stimulating the increase of business revenue growth, business productivity and fulfilling the needs of consumers. Disaggregating the results based on respondents’ demographic characteristics, it is shown that the findings in both credit schemes have a relatively similar pattern in terms of origin, business sectors and the borrowing purpose from.Originality/valueThere have been limited studies that examine the impact of microfinance from both the business and social perspectives. Most studies only use one of these. Implementing the CSV framework allows the authors to fill in the gap and understand how microfinance provides business and social benefits.

The Role of Integrative Approach for Enhancing Credit Union Sustainability: A Reflection on The Indonesian Credit Union Movement

Most Indonesian credit unions still focus on providing financial services, paying less attention to the roles of credit unions in education, empowerment and flourishing social solidarity of their members. This condition makes credit unions hardly compete with other microfinance providers in Indonesia. While threatening their sustainability prospect, this condition also reduces the capacity of credit unions to empower their members. Inspired by the maximalist approach and the Ledgerwood’s system framework, we suggest an integrative approach for credit union services that is empowered by the optimization of network collaboration.

Analisis strategi Pusat Investasi Pemerintah dalam menghadapi holding ultra mikro dengan pendekatan porter’s five forces

As an entity engaged in the distribution of ultra-micro financing, Badan Layanan Umum Pusat Investasi Pemerintah (BLU PIP) has several competitors. This has an impact on conditions of high competition among these ultra microfinance providers. The competitors as referred to can be in the form of Public Service Agencies, Banks, Non-Bank Financial Institutions, or Peer-to-Peer Lending Fintech Platforms. In addition to being faced with these competitive conditions, BLU PIP is also faced with a new threat, namely the implementation of ultra micro holding carried out by PT Bank Rakyat Indonesia Tbk together with PT Pegadaian and PT Permodalan Nasional Madani. This study aims to determine the strategy analysis and strategy implementation of BLU PIP in dealing with ultra micro holdings. The analytical technique used in this research is descriptive qualitative with the Porter’s Five Forces approach. The data were obtained from document reviews and in-depth interviews. From the results of research using Porter's five analyses, it is concluded that BLU PIP has a fairly high level of value on the assessment of competitive conditions in similar industries, the threat of new entrants, the bargaining power of suppliers, and the bargaining power of buyers. Meanwhile, there is no threat to substitute products. This study recommends several things to BLU PIP, namely to focus more on initiating cooperation with new cooperatives using a direct distribution scheme, differentiating aspects of assistance to debtors, and distributing financing through direct lending mechanisms.

The Role of Islamic Microfinance in Uplifting B20 Communities in Malaysia in The Covid-19 Pandemic

The purpose of this study is to review the Islamic microfinance model that best suited the bottom of the wealth pyramid (B20) communities in Malaysia. Islamic microfinance products and services that are friendly to the B20 communities are crucial to ensure they are not lacking behind from the current development where everybody has access to the financial services. Most current Islamic microfinance products use debt-based financing that similar to the banking products. These products are not suitable to the B20 communities because it creates debt and burdens them to pay back the financing. Therefore, this paper reviews the potential of equity-based financing models that suit to the B20 communities. The study reviews past literature obtained from scholarly databases including Web of Sciences, Scopus, and Google Scholar. In addition, data from microfinance providers are also collected through their website, news published, and bulletin. The findings reveal that equity-based financing via musharakah mutanaqisah seeing as the innovative Islamic microfinance model that suit to the B20 communities compares to debt-based financing.

Islamic Microfinance and Women Entrepreneurship Performance during COVID-19 Pandemic

Purpose: In the contemporary era, women are playing a vital role in changing the global economy as entrepreneurs, workers, and consumers, yet they encounter many problems and obstacles in the development of entrepreneurship. This study aim is to investigate the impact of Islamic microfinance on women entrepreneurship performance: mediating role of social capital and moderating role of opportunity for social interaction in South Punjab, Pakistan.
 Design/Methodology/Approach: Data were collected from 183 women entrepreneurs, who were using Islamic microfinance, through the convenience sampling technique. Convenient sampling technique was used to collect the information. PLS-SEM was employed to statistically test the data.
 Findings: This study results indicate that microfinance had a negative relationship with women's entrepreneurship performance. However, when Islamic microfinance led to the formation of social capital among women that eventually caused the women entrepreneurship performance. Moreover, the extent to which microfinance provisions affected the social capital of clients was dependent upon the microfinance providers facilitated social interaction among clients. .
 Implications/Originality/Value: This paper will give benefit to academics in preparing a plan for future research. Moreover, findings will also assist policymakers and IMFIs to set out microfinance initiatives that will improve the betterment of clients and will maximize their enterprising results.

Performance of Microfinance Providers; Does Social Efficiency matters?

Performance of Microfinance Providers; Does Social Efficiency matters?

Islamic microfinance in Mauritania: an investigation into involuntary factors affecting usage

Purpose This study aims to identify the involuntary barriers of financial inclusion which are affecting the usage of Islamic microfinance services in PROCAPEC institution located in Nouakchott-Mauritania. Subsequently, it also examines the effect of gender as a moderator in the model. Design/methodology/approach Primary data was collected through a cross-sectional questionnaire from 381 beneficiaries of PROCAPEC – a major Islamic microfinance provider in Mauritania. In methodology, the study uses confirmatory factor analysis to identify relevant involuntary factors affecting usage, followed by structural equation modelling to test the impact of these factors on the usage of Islamic microfinance (IsMF) products. Findings Two of the four factors are statistically significant in affecting the usage of IsMF products, namely, affordability and eligibility. Gender is a moderator in the relationship between affordability and usage, as well as eligibility and usage. Practical implications Policymakers, practitioners and managers of Islamic microfinance institutions can consider these factors and focus on strategies, including pricing and promotion, which aim to further develop the Islamic microfinance industry in Mauritania. Also, reducing documentation required from clients and adopting lenient rules to provide suitable products will enhance the use of IsMF products, which may lead to more customers’ attraction. Originality/value Although several researchers have articulated financial inclusion, this study sheds light on a specific dimension of financial inclusion to determine the factors impacting IsMF products’ usage. In Mauritania, there are few studies about microfinance. This study will be amongst the pioneer contribution to the geographical gap.

THE PERFORMANCE OF MICROFINANCE PROVIDERS ON POVERTY ALLEVIATION AMONG YAM FARM HOUSEHOLDS IN SELECTED LOCAL GOVERNMENT AREAS OF NIGER STATE, NIGERIA

The study examined the performance of microfinance providers on poverty alleviation among yam farm household in some selected Local Government Areas of Niger State, Nigeria. Multi-stage sampling technique was used to draw up respondents for the survey. Data were collected from 120 respondents using structured questionnaire and were analyzed using descriptive statistics, poverty gap index, Foster-Greer-Thorbeck index, head count ratio, severity index, farm budget technique, and Gini coefficient. The results revealed that most (89.17%) yam farm household were males and married (87.50%). The average age of the respondents was 37.83 years; 75% were into poultry farming; 44.17% and 30.83% obtained credit from commercial and microfinance banks, respectively. Also, average income of the respondents before and after the loan was N38, 401.04 and N83, 329.21, respectively. The results also revealed even though credit had positive impact on the livelihood of the respondents in the area, the result of the Gini coefficient (0.6631) showed that there was inequality in income distribution among the respondents in the area. The study therefore, recommended that additional microcredit providers be established in the study area to increase its impact among the respondents especially in poverty alleviation. Also, integrated community development effort should be encouraged to provide rural infrastructures in the study area.

PROSPECTS FOR ISLAMIC MICROFINANCE UNDER THE EXISTING LEGAL AND REGULATORY FRAMEWORK IN LIBERIA

There is no specific regulation or legislative framework for Islamic microfinance operations in Liberia. This is largely due to the non-application of Islamic laws in the country, despite the increasing economic strength of Muslims in the country. This article aims to examine whether the existing laws in Liberia permit the establishment and operation of Islamic microfinance. The research employed a qualitative analytical approach, which examines legal and regulatory framework for the microfinance sector in Liberia. The materials and data which include related laws were collected, and analysed inductively to suit the needs of the research. This article argues that, the existing laws including the Liberian constitution and other relevant financial regulations such as, the Central Bank of Liberia Act of 1999, the New Financial Institutions Act of 1999 and the Microfinance Policy and Regulatory & Supervisory Framework for Liberia (MPRSFL) have no objection to the introduction of Islamic microfinance in the country. This research is a first to appraise critically some relevant laws on the legal framework of microfinance in Liberia and its relevance to Islamic microfinance. The Financial Institutions Act of 1999 confers on the Central Bank of Liberia the powers to regulate and supervise all financial institutions in the country, including the microfinance providers. The article concludes that the stakeholders need to continue supporting the microfinance sector, including Islamic microfinance in Liberia by building an appropriate legal ecosystem that providing for a smooth running of microfinance programmes in the country.

Impact of microfinance health interventions on health-related outcomes among female informal workers in Pakistan: a retrospective quasi-experimental study

ObjectiveThe purpose of this study is to assess the impact of microfinance health interventions (health insurance and health-awareness programmes) on health-related outcomes among female informal workers in Pakistan.DesignWe conducted a...

‘If You Fall, Stand Up Again’: The Moral Nature of Financial Literacy in the Global South

ABSTRACTOver the past decade a range of development actors have begun to implement financial literacy training in low‐income countries. These programmes have become a key pillar of financial inclusion projects targeting the rural poor but, to date, they have received little scholarly attention. This article draws on ethnographic observation of two financial literacy programmes implemented by microfinance institutions in Cambodia to examine the current practices of financial education in the global South. The findings highlight that while financial literacy training purports to be a technical, skill‐building intervention aimed at enabling knowledge, its practices work primarily to impress upon borrowers moral lessons associated with creditworthiness, while also stressing individual responsibility for debt stress. In this way, it furthers the goals of financial providers, but fails to address the complex and real problems of debt stress. The authors suggest that financial literacy, at least where it is enacted by microfinance providers, is unlikely to moderate the problems of over‐indebtedness faced by rural borrowers.