Microfinance Research Articles

Uncovering the Dimensions to Increase Islamic Job Satisfaction in Socially Nuanced Economic Institutions

This study aims to explore the dimensions of Islamic Job Satisfaction that will be useful to increase Islamic job satisfaction in socially nuanced economic institutions. Samples were taken from employees of Islamic Microfinance Institutions (IMFI, LKMS, KSSPS BMT) at convenience. Data collection from 30 respondents using a questionnaire instrument was then analyzed using quantitative descriptive methods. The results showed that Islamic Job Satisfaction achieved a very high score for employees of social economic institutions (KSPPS, BMT) was very high (4,088 or 81.76%). The spiritual dimension of Islamic Job Satisfaction received the highest rating (4,386 or 87.72%), while the economic dimension received the lowest rating (3,908 or 78.16%). Future research suggestions take respondents from other socially nuanced economic institutions (educational institutions, health institutions) or other institutions (economic, governmental, social)

Fraud risk management and financial performance of microfinance institutions in Kenya

Fraud is a thorn in the flesh of many organizations in both local and global business ecosystems, more so in the financial sector because of the liquid nature of their services. To curb this menace, Financial Institutions including Microfinance institutions implemented fraud risk management practices. While larger financial institutions afford raft measures for curbing fraud, MFIs contend with less sophisticated practices in spite of them being the most susceptible to financial improprieties. Further, the determination of the overall effect of these practices on financial performance is critical in evaluating their success. The objective of this study therefore was to find out how fraud risk management practices affect the financial performance of Microfinance Institutions in Kenya. The study was anchored on the fraud management life cycle theory and focused on twelve deposit-taking Microfinance Institutions that were in operation in the Nairobi region of Kenya between 2016 to 2020. The study adopted a descriptive research design using cross-sectional data computed from the average financial results for five years 2016-2020. The study used purposive and stratified Random sampling methods to select a sample of 281 respondents from finance, ICT, operations, Audit, and Litigation managers and staff. The study used descriptive and inferential statistics to analyze the data. The results showed that fraud risk management positively and significantly affected financial performance by curbing incidents of fraud and concluded that to improve financial performance microfinance institutions should implement fraud risk management since they had a positive and significant effect on financial performance. The study recommended that firms should invest substantially in fraud risk management to reduce incidences of fraud and improve financial performance. Further, the management of Microfinance Institutions should continually evaluate and update their practices to keep abreast with the ever-changing fraud antics.

LOAN CHARACTERISTICS & LOAN CREDIT TERMS: DOES IT MATTER IN A MICROFINANCE CONTRACT?

This study examined the relationship between loan characteristics and loan credit conditions on loan repayment issues in order to assist Microfinance Institutions (MFIs) in Pakistan in improving their loan payback performance. The study also examines the link between loan credit terms and problems with loan repayment as well as the mediating function of client-business performance in the relationship between loan characteristics and loan repayment concerns. A measurement model and a structural model were both used in this investigation, which used a two-stage structural equation modelling methodology. The measurement model, also known as the outer model, was employed to evaluate the reliability and validity of the data collection technology. PLS-SEM bootstrapping was performed to test the hypothesis using the structural model (inner model). The results are consistent with the assumption that loan terms and conditions have a positive impact on microenterprise loan repayment concerns. The findings of this study also lend credence to the idea that client-business performance functions as a mediator in the relationships between loan characteristics and problems with loan repayment as well as between loan credit terms and problems with loan repayment. There hasn't been much research done in Pakistan to date on how loan characteristics and loan credit terms directly affect the challenges microenterprises face in repaying loans. The business performance of microenterprises is also investigated in relation to loan features, loan credit terms, and loan repayment issues.

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.

Female unemployment and the procedure that a woman has to go through to start a business: microfinance policy thresholds

PurposeThis study aims to examine how the starting of business by females can be promoted by assessing critical levels of microfinance institutions (MFIs) penetration that policymakers must endeavor to maintain and/or attain in order for female unemployment not to represent a constraint in the doing of business. A constraint in doing business is understood in terms of the procedure that a woman has to go through to start a business.Design/methodology/approachThe focus of the study is on 44 countries in Sub-Saharan Africa for the period 2004–2018, while the empirical evidence is based on interactive quantile regressions.FindingsThe following findings are established. The validity of tested hypotheses is exclusively apparent in the lowest and highest quantiles of the conditional distribution of the procedure women have to go through to start a business. MFI penetration levels needed to reverse the unfavorable incidence of female unemployment in doing business are provided. These are minimum MFIs penetration thresholds that are required in order for female unemployment not to negatively affect the procedure that a woman should go through to start a business.Originality/valueThe study complements the extant literature by assessing critical microfinance penetration levels that are needed to promote female doing of business, contingent on existing levels of female doing of business.

A COMPARATIVE STUDY OF CREDIT RISK MANAGEMENT IN PUBLIC AND PRIVATE SECTOR BANK (WITH SPECIAL REFERENCE TO MUDRA YOJANA)

Government of India (GoI) launches various financing schemes for promoting Medium and Small Enterprises (MSMEs). One such scheme is MUDRA Yojana and loan under this Yojana is called MUDRA loan. This Yojana is performing well as amount of loan sanctioned in it rising year by year. But the matter of concern is along with it the NPA of bank relating to this scheme is continuously rising. The NPA of public sector bank is more in comparison of private sector bank in context to this Yojana. So, in this paper a comparative study of public and private sector banks on different parameters such as credit appraisal, monitoring and credit risk management in respect of MUDRA Yojana has been done. It is an analytical research based on primary data. In order to find out significance level factor analysis has been applied. The result of study shows that there is no considerable difference between above stated parameters among the sampled sectors bank. Keywords: MUDRA Yojana, credit appraisal, monitoring and credit risk management. Introduction Banks are financial institution which deals with mainly two functions first accepting deposit and secondly lending money i.e. granting loan. The function of granting loan is most crucial function of banks as it involves risk. Risk of nonpayment of loan called as credit risk and managing this risk is called credit risk management. Banks grant loans for various purposes either on individual demand or under government schemes. On individual demand bank faces less credit risk as they can deny granting of loan if they found that loan is uncovered by guarantee or if bank’s grant loans then on its own favorable term and condition but in case of government sanctioned schemes banks are bound to issue loan on the features or conditions government has launched. The features or conditions of government schemes are public favorable rather than banks favorable. One such government scheme is MUDRA Yojana launched in April 8, 2015 with the purpose of financing micro small and medium enterprises so that income as well as employment can be generated. In this Yojana MUDRA loan is given under 3 categories

Capital Convertibility: Empowerment Strategy For Micro-Entrepreneurs In Babelan Village, North Bekasi Regency

This study examines capital convertibility in Huripjaya Village, Babelan District, North Bekasi Regency. Capital convertibility refers to the ability of capital or economic resources to switch between forms or sectors to improve people's welfare. The main objective of this study is to analyze the dynamics of capital convertibility, the factors that influence it, and its impact on village development. The research method used is a combination of literature studies, field observations, and interviews with key stakeholders in Huripjaya Village. The results showed that the convertibility of capital in this village was influenced by internal and external factors, including geographical conditions, natural resources, institutions, and regional economic development. Factors such as economic diversification, the role of microfinance institutions, and community involvement in local decision-making play an important role in increasing capital convertibility. In addition, the existence of community economic training and education programs was also identified as a factor that contributed positively to economic structural changes in Huripjaya Village. In the context of development impacts, this study presents findings that increasing capital convertibility can make a significant contribution to improving the welfare of rural communities. This can be seen from the increase in population access to better health services, education, and infrastructure. This research provides valuable insights for policy makers, local governments, and other relevant parties to design more effective and sustainable development strategies at the village level.

INFLUENCE OF MICROFINANCE SERVICES ON FINANCIAL PERFORMANCE OF MICRO, SMALL AND MEDIUM ENTERPRISES IN KIRINYAGA COUNTY, KENYA

<p>This study sought to ascertain the influence of microfinance services on the financial performance of MSMEs in Kirinyaga County. Specifically, the study sought to determine how microcredit services, micro-saving services and business consultancy services offered by Microfinance institutions influenced the financial performance of MSMEs within the county as operationalized by growth in their sales turnover. The study was anchored on the theories of Information Asymmetry and Financial Intermediation. The study’s target population comprised the MSMEs operating within Kirinyaga County and adopted the descriptive research design. The studied MSMEs were purposively selected from the townships of Sagana, Kerugoya, Kutus, Kagio, and Kagumo. Primary data was collected using structured questionnaires and analysis of the collected data was performed using descriptive and inferential statistical techniques. The results were presented using tables and charts. The study found that all the services offered by microfinance institutions had a positive and significant influence on the financial performance of MSMEs. Effectively, the study recommended that the owner-managers of the MSMEs should have more strategic engagement with the Microfinance institutions in tapping the services extended by them. Further, sustained efforts should be made by policy formulators to promote and strengthen microfinancing in pursuit of Vision 2030.</p><p><strong> </strong></p><p><strong>JEL</strong>: L10; L20; M10; G20</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0018/a.php" alt="Hit counter" /></p>

Constraints to the promotion of financial inclusion in India: an empirical study of implementing agencies under Pradhan Mantri MUDRA Yojana

PurposeThe study aims to discern the primary obstacles confronted by the implementing agencies in their efforts to foster financial inclusion through the “Pradhan Mantri MUDRA Yojana” (PMMY).Design/methodology/approachTo collect primary data, a semi-structured questionnaire was developed. Around 120 loan officers from the implementing agencies (Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Non-Banking Financial Companies (NBFCs) and Micro- Finance Institutions (MFIs)) of Haryana were randomly selected to fulfill the objectives. To categorize the perceived problems into discrete factors, the “factor analysis” technique was employed. The scales were then regressed on factors linked to the demographic characteristics of the loan officers to validate the hypotheses.FindingsThe study highlighted the primary obstacles impeding the advancement of financial inclusion, which encompass a range of factors. These include challenges in management, infrastructure, politics, finance and technology. Furthermore, the study established the association of the explanatory variables, namely gender, age, educational qualification, location and experience of the officers, with the extracted constraints. Notably, the experience of loan officers emerged as the most influential variable contributing to the promotion of financial inclusion through the scheme.Originality/valueThe current body of literature lacks any empirical investigation focusing on the perspectives of the implementing agencies regarding the challenges they encounter in advancing FI. Given the significance of FI in India, where access to formal financial services remains a critical issue, this research adds value by addressing the gaps in understanding the problems encountered.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-06-2023-0462

Impact of agricultural credit sources heterogeneity on rice production efficiency in Côte d'Ivoire

PurposeThis study examines the impact of agricultural credit on rice farmers' technical efficiency (TE) in Côte d'Ivoire by considering the heterogeneity among credit sources.Design/methodology/approachA multistage sampling technique was used to collect data from 588 randomly sampled rice farmers in seven rice areas of the country. The authors use the endogenous stochastic frontier production (ESFP) model to account for the endogeneity of access to agricultural credit.FindingsOn the one hand, agricultural credit has a significant and positive impact on rice farmers' TE. Rice farmers receiving agricultural credit have an average of 5% increase in their TE, confirming the positive impact of agricultural credit on TE. On the other hand, the study provides evidence that the impact of credit on rice production efficiency differs depending on the source of credit. Borrowing from agricultural cooperatives and paddy rice buyers/processors positively and significantly influences the TE, while borrowing from microfinance institutions (MFIs) negatively and significantly influences the TE. Moreover, borrowing from relatives/friends does not significantly influence TE.Research limitations/implicationsFuture research can further explore the contribution of agricultural credit by including several agricultural productions and using panel data.Originality/valueThe study provides evidence that the impact of agricultural credit on agricultural production efficiency depends on the source of credit. This study contributes to the literature on the impact of agricultural credit and enlightens policymakers in the design of agricultural credit models in developing countries, particularly Côte d'Ivoire.

Challenges And Risks In Ghana's Microfinance Sector: Is The Islamic Alternative Any Better?

Ghana fares well on some indicators of financial inclusion compared to other Sub-Saharan African countries, and is comparable to lower middle-income countries. However, it lacks a clear strategy for financial inclusion and development of microfinance institutions (MFIs) and other methodologies of making financial services more widely available. This paper summarizes the situation and development of microfinance institutions in Ghana, reviews progress and problems in implementing the BoG regulations for MFIs, highlights current risks and challenges, and proposes strategies for mitigating risks. The analysis includes three different levels: BoG and Government of Ghana (GoG); MFIs and their associations; and the public. It is aimed at providing information on the complex issues in the microfinance sector as a basis for dialogue on concrete reforms.

Enhancing Socio-Economic Empowerment through Financial Inclusion Initiatives: A Case Study of Rwanda Union of the Blind

The research defines financial inclusion as the process of making sure vulnerable groups, like low-income individuals and the less privileged, have access to financial services and reasonable credit when they need it, at an affordable cost. This study focused on enhancing financial inclusion and socio-economic empowerment among individuals with disabilities in the Rwanda Union of the Blind. Using a descriptive and correlation research design, the researcher employed two primary data collection methods: questionnaires and interviews with structured questions for the respondents. The study involved 2400 members of the Rwanda Union of the Blind, with a sample size of 96 visually impaired individuals selected using the Yamane formula. Both quantitative and qualitative methods were used for data analysis, with Pearson’s correlation coefficient used to establish relationships between variables. The study's findings highlighted a 43% positive impact of financial inclusion on the socio-economic empowerment of people with visual impairment. Some respondents, particularly those who accessed loans from banks, acknowledged that financial services enabled them to excel in economic activities. Nevertheless, most respondents faced challenges due to discrimination and the absence of collateral, especially among disabled youth, hindering their access to finance. To achieve full financial inclusion, the study recommended that Microfinance Institutions or Banks should ensure equal opportunities and access to credit and financial services for individuals with disabilities. This can be achieved by providing information in formats accessible to them and making service points physically accessible. The government should promote awareness and involvement of visually impaired individuals in incomegenerating activities. Additionally, it was suggested that people with visual impairment should be encouraged to confidently apply for financial services. Keywords: Financial inclusion, Visual impairment, Socioeconomic empowerment, Financial services, People with disabilities.

Peran Lembaga Keuangan Syariah Dalam Mengembangkan Bisnis Mikro dan Kecil di Indonesia

This study aims to analyze the role of Islamic microfinance institutions in developing micro and small businesses in Indonesia through the distribution of funds based on sharia principles. The method used is a literature review to identify how Islamic financing schemes, such as mudharabah and musyarakah, contribute to increasing access to capital for small business actors. The results of the study show that Islamic microfinance institutions provide more inclusive and fair financing and business assistance and management of social funds such as zakat, infaq, and sedekah. This supports the growth of micro and small businesses and improves the community's economic welfare. However, several challenges remain, such as low Islamic financial literacy and limited capital. Therefore, this study recommends the need for innovation in Islamic financial technology and increased public education to expand the reach and effectiveness of Islamic financial services for micro and small businesses.

<b>Efficiency of Microfinance Banks and Institutes: In Creation of Self-Employment in Pakistan</b>

The aim of this research is to make comparison between the microfinance banks and microfinance institutes in creation of self-employment in Pakistan. The data extract from the years 2018-2022, the 4 financial banks and institutes has been taken. The different types of profitability ratio are used in this research. The population of the research is twenty-seven but the sample size of this research is eight and the random sampling technique is used. The SPSS was used and the t-test was applied to the data. To analyze for the purpose of investigating for their performances. The various ratios to apply for their productivity, rates of lending loans as well as how much people got loans from them and what are the criteria of lending loans, feasibility of lending the loans and profitability trend in each sector. This research concludes that after applying all the ratios analyzing its return and seeing the efficiency of microfinance banks and institutes, as their major focus is to make the country prosperous by lending the loan to the people as it has consumed less days to grants loans that creates self-employment in Pakistan. The researcher comes to this point that from considering all the facts and figures, terms and conditions, rules and regulations of all aspects of microfinance banks and institutes. The basis of this research, its profitability is more, the customers are more attracted towards it. The less working days it consumes than the other ones. Its liabilities and expenses are less than the others.

Empirical Investigation Into the Consequences of the Banking Sector Cleanup on Microfinance Sustainability in Ghana

The pivotal role of microfinance institutions in poverty reduction and inclusive development has garnered recognition, prompting extensive research into their economic sustainability. While existing studies focus on institutional and client factors, there's a notable gap regarding the impact of regulatory factors on economic sustainability. The recent microfinance sector clean-up by the Bank of Ghana provided an opportunity for this investigation. Using independent t-tests, the study assessed improvements in operating cost, operating income, and operating profit post-clean-up. Results reveal a lack of significant enhancement in operating costs and income, with a decline in operating profit. This suggests that regulatory measures in Ghana have not yet effectively promoted economic sustainability in the microfinance sector, emphasizing the need for a nuanced understanding of regulatory dynamics in fostering lasting impact.

Impact of dairy contract farming adoption on household resilience to food insecurity evidence from Ethiopia

Contract farming has increased in importance in countries trying to improve the living standards of smallholder farmers, particularly those who base their livelihoods primarily on agricultural products. For this study, we looked into the assertion that dairy contract farming would boost farmers' incomes while lowering their vulnerability to food insecurity. We analyzed the data collected from 380 sample households using the structured questionnaire using PSM, SEM, and descriptive statistics. By food calorie intake consumption, 45.5% of the households were food insecure, with dairy contract participants and non-participants making up 31.21% and 68.79% of these households, respectively. The average level of resilience to food secured attained by study households is 54.5%, compared to 88.41% and 11.59 for participants and non-participants in the dairy contract. The results of the SEM for the disaggregated variables demonstrate that a household's capacity to manage food insecurity is significantly influenced by stability (educational level), asset ownership (total livestock), access to public services (access to microfinance institution services), social safety nets (access to assistance from relatives), and income & food access (total calories consumed and income access from farm activity). The results of the PSM showed that households' resilience to food insecurity was significantly increased through dairy contract farming by 18% (4967.49 Ethiopian Birr). Therefore, governments and other stakeholders should promote smallholder farmers' access to contract farming to boost household resilience to food insecurity.

Baitul Maal wa Tamwil (BMT) Phenomenon on Mosque-Based Syari'ah Economy

This research aims to analyse how to develop the sharia economy of mosques through Baitul Mal wa Tamwil (BMT) in Solok City. BMT Solok City is a non-governmental organisation in the economic sector that has become an icon of Solok City to realise its mission, namely to become the "City of Medina Rice Terraces". The research method used in this research is qualitative research with a case study approach, data analysis used with case studies with data collection techniques through interviews, observation and distributing questionnaires via Google Form. This research shows that BMT management is carried out using the concept of qardh al hasan; institutionally, this institution does not have a legal entity, and its members are active congregants of the local mosque. Regarding BMT activities in Solok City, they are limited to lending and collecting funds and do not have financing service products like other microfinance institutions.

Microfinance, Microcredit, and Women’s Empowerment: An Exploration of the Grameen Bank Experience for Social Inclusion

Microfinance, originating in the mid-1800s but gaining modern prominence with Muhammad Yunus's Grameen Bank in 1970, has emerged as a potent tool for poverty alleviation. This paper explores the profound impact of microcredit on marginalized communities globally, particularly the empowerment of women, who constitute a majority of borrowers. Microcredit not only provides financial opportunities but also fosters confidence and belief in women's potential, transcending religious and national boundaries. Examining the origins and operations of microfinance, notably Grameen Bank, the paper distinguishes microfinance institutions from traditional banks. It addresses concerns about interest rates and presents compelling evidence linking microfinance access to poverty reduction. The core contribution of this research lies in its exploration of microcredit's dual function as an instrument for socioeconomic development and a catalyst for women's empowerment. We provide insights into how microcredit can contribute to fostering a more equitable world characterized by reduced poverty.

Motif Tanggung Jawab Sosial Lembaga Keuangan Mikro Syariah dalam Perspektif Ekonomi Syariah

The primary issue addressed in the text is the importance of corporate governance, specifically within Sharia microfinance institutions, in achieving profitability and success. The study emphasizes the role of market share as an indicator of operational success for Sharia microfinance institutions, with a focus on meeting the needs of small communities. This study uses the library research method by extracting data from primary sources such as economics books and Sharia microfinance institutions. Data analysis is carried out using critical analysis and content analysis. The research findings highlight that these institutions use corporate social responsibility (CSR) as a strategic tool to promote their products and services. This, in turn, contributes to an increase in market share by introducing the company to the public. The text suggests that the implementation of CSR by Sharia microfinance institutions is motivated not only by economic considerations, such as marketing and promoting products but also by social motives, including a desire to assist others. In the context of Islamic or Sharia-compliant finance, the study underscores the integration of economic activities with ethical and socially responsible principles. The economic motive is evident in the use of CSR as a marketing tool to reach a wider community and promote financial products. The findings suggest that in the pursuit of economic goals, Sharia microfinance institutions also align themselves with social values by engaging in activities that benefit the broader community. This dual motive reflects the unique intersection of economic and ethical considerations within the framework of Sharia-compliant financial practices.

Microcredit Risk Management Strategies and Loan Portfolio Quality of Microfinance Institutions in Kenya

The study investigated the effects of Microcredit risk strategies on the loan portfolio quality of microfinance institutions in Kenya. The analysis is based on a panel dataset of 14 microfinance institutions in the period 2017 to 2021. The study was guided by the following theories the institutional theory, the theory of information asymmetry, the theory of delegated monitoring and the modern portfolio. The study will be useful to the MFIs managers and will help them devise good policies to ensure borrowers are well screened to improve portfolio quality while improving the cases of loan defaults. The study adopted a desktop methodology. Desk research refers to secondary data that which can be collected without fieldwork. The quality of loan portfolio has been affected most by nonperforming loans and has affected largely the microfinance institution’s profitability and their financial performances, there have not been adequately featured in any of the studies reviewed. To the academicians and researchers, they will be furnished with relevant information regarding microcredit risk management and loan portfolio quality of the Microfinance institutions in Kenya. This will also contribute to the general body of banking sector and form a basis for further research. The regulators of Bank Sector will use it to formulate stringent policies to tame the rising cases of non-performing loans, evaluating how successive their approach has been identifying the gaps and adjust.