Microfinance Research Articles

CREDIT RISK ASSESSMENT PRACTICES AND FINANCIAL PERFORMANCE OF MICROFINANCE INSTITUTION IN RWANDA A CASE OF COPEDU PLC

Background: This exploration design, with a case study of COPEDU PLC, aimed to assess the influence of credit risk assessment practices on the financial performance of COPEDU PLC in Rwanda. This exploration design was structured around three specific objects originally, to estimate the influence of customer financial status analysis on the financial performance of COPEDU PLC in Rwanda secondly, to examine the effect of the 5Cs of credit on the financial performance of COPEDU PLC in Rwanda and eventually, to assess the influence of credit risk on the financial performance of COPEDU PLC in Rwanda. Materials and Methods: To achieve the exploration objects, a descriptive and correlation exploration design was used. Data was collected through a combination of both quantitative and qualitative styles, exercising interview attendants and questionnaires. Using tale approach in the slice process, an exploration population of comprising of staff population of 65 at COPEDU PLC headquarters were all be regarded as the sample size. Results: The collected data presented compelling findings grounded on numerical data. specially, the analysis of COPEDU PLCs financial pointers revealed positive comprehensions, with crucial numbers similar as a mean credit score of4.49(SD = 0.75) and a mean debt- to- income rate of4.51(SD = 0.73). These pointers demonstrated a predominant agreement among repliers, with49.23 agreeing on the significance of credit scores and47.69 admitting the significance of the debt- to- income rate. The study also explored the relationship between the 5Cs of Credit and financial performance, revealing specific numbers similar as a mean score of4.35 (SD = 1.15) for collateral and4.42 (SD = 1.13) for capacity. In addition, effective credit risk operation strategies were quantified, with mean probabilities indicating strong agreement (SA) from41.85 of repliers on diversifying the loan portfolio and46.15 on effective loan recovery strategies. The correlation analysis further stressed a robust relationship, with a Pearson Correlation measure of0.894 (p- value = .000), italicizing the statistical significance of the positive association between credit risk assessment practices and the financial performance of microfinance institutions. Conclusion:The exploration study concludes grounding of the findings revealed that COPEDU PLCs credit risk assessment practices significantly impact financial performance, with repliers feting the significanceof crucial financial pointers and the 5Cs of credit. In addition, those effective risk operation strategiesare pivotalfor financial success. still, the study recommends microfinance institutions to upgradecredit riskassessment criteria, train staff on the 5Cs of credit, diversify loan portfolios, ameliorate loan recovery strategies, establish a methodical review process, and invest in technology results to enhance credit risk operationand financial sustainability. Eventually, the study made suggestions for farther exploration on credit risk operation in microfinance institutions, including assayingindividual financial pointers, comparing practices across institutions, assessing risk operation strategies, and tracking long- term goodson financial sustainability and growth. It also suggests comparing variations in credit risk assessment practices and enforcing effective recovery strategies.

Microfinance Institutions and Diversification Benefits to Global Investors

Microfinance Institutions and Diversification Benefits to Global Investors

SMEs as catalysts for economic development: Navigating challenges and seizing opportunities in emerging markets

Small and medium-sized enterprises (SMEs) play a critical role in the economic development of emerging markets, acting as catalysts for innovation, job creation, and poverty reduction. They are often the backbone of these economies, driving growth through their adaptability and entrepreneurial spirit. However, SMEs also face significant challenges that must be navigated to fully capitalize on their potential. One of the primary challenges SMEs encounter in emerging markets is limited access to finance. Traditional banks often view SMEs as high-risk investments due to their smaller size and lack of collateral. This financing gap can stifle their growth and innovation capabilities. To address this, microfinance institutions and digital lending platforms have emerged as crucial alternatives, providing SMEs with much-needed capital. According to the International Finance Corporation (IFC), improving access to finance for SMEs could increase GDP growth rates significantly in emerging economies. Another critical challenge is the lack of infrastructure, which can impede business operations and logistics. In many emerging markets, inadequate transportation networks, unreliable power supply, and limited internet connectivity hinder SME productivity and market reach. Governments and international organizations are increasingly investing in infrastructure development to create a more conducive environment for SMEs. The World Bank, for instance, has various programs aimed at enhancing infrastructure in emerging markets, thereby facilitating better business operations for SMEs. In terms of opportunities, the digital revolution offers vast potential for SMEs. Digital tools and platforms enable SMEs to reach broader markets, streamline operations, and improve customer engagement. E-commerce, in particular, allows SMEs to overcome geographical limitations and tap into global markets. Additionally, leveraging social media for marketing can significantly enhance brand visibility and customer acquisition. Furthermore, emerging markets often present a youthful and growing consumer base, eager for new products and services. SMEs can seize this opportunity by tailoring their offerings to meet local preferences and demands. This consumer-centric approach can lead to increased loyalty and market share. In conclusion, while SMEs in emerging markets face considerable challenges, the opportunities for growth and impact are immense. By improving access to finance, investing in infrastructure, and embracing digital tools, SMEs can drive substantial economic development. Policymakers, financial institutions, and international organizations must continue to support these enterprises to unlock their full potential and foster sustainable economic growth.

THE IMPACT OF MICRO FINANCE SERVICES ON WOMEN'S ECONOMIC EMPOWERMENT; EVIDENCE FROM KURUNEGALA DISTRICT IN SRI LANKA

Women's economic empowerment has become one of the most pressing concerns in the world as empowering women economically, can make a significant contribution to the expansion of the economy and their immediate families to maintain a sustainable way of life. The concept of microfinance has developed as a tool to obtain both financial and non-financial support for poor people's self-empowerment. Women who come from low-income families are given the ability to make a valuable contribution to the economy through the use of microfinance. In the Sri Lankan context, female labor force participation is comparatively at a lower level, and thus more women are economically inactive. Therefore, microfinance services are vital to low-income women in both rural and urban areas. Due to the vitality of this aspect, this research aims to examine the impact of microcredit, micro saving, financial training, and advisory services on women's economic empowerment in Sri Lanka. The population used in this research is microfinance women beneficiaries in Kurunegala District, and the researcher selected 380 microfinance women beneficiaries as the sample size of this study using random sampling technique. Data collection was conducted using structured, self-administered, web-based questionnaires and personal interviews, where the data set was analyzed using multiple linear regression analysis. The results of this research show that microcredit, micro savings, financial training, and advisory services significantly and positively impact women's economic empowerment. Accordingly, the researcher recommends microfinance institutions to increase the granting of microcredit facilities to poor women in the Kurunagala district, as these institutions have given less loan amounts than applied. Also, it is recommended to reduce interest rates and increase payback periods, as high interest rates are an additional burden on the customers. Furthermore, the government should pay more attention to these low-income women and conduct some programs to improve their knowledge and careers. Meanwhile, microfinance institutions should improve their management capacity and strive to reach out to women in need to enhance their economic empowerment and improve their contribution to the workforce and economy.

Enhancing Financial Integrity in Ghanaian Microfinance Institutions Through Forensic Auditing: Assessing Its Role in Fraud Reduction

Enhancing Financial Integrity in Ghanaian Microfinance Institutions Through Forensic Auditing: Assessing Its Role in Fraud Reduction

The Effect of Service Quality and Islamic Financial Education on Customer Growth and Risk Profile in Islamic Microfinance Institutions in Central Java

This study examines the impact of Service Quality and Islamic Financial Education on Customer Growth and Risk Profile within Islamic microfinance institutions operating in Central Java. A quantitative approach utilizing Structural Equation Modeling-Partial Least Squares (SEM-PLS) was employed to analyze data collected from 130 respondents using Likert scale surveys. The measurement model and structural model were evaluated to assess the relationships among the variables. The results indicate significant positive associations between both Service Quality and Islamic Financial Education with Customer Growth and Risk Profile. Service Quality emerged as a critical factor influencing Customer Growth, while Islamic Financial Education was found to enhance Risk Profile management. These findings underscore the importance of enhancing service delivery and financial literacy initiatives in promoting sustainable growth and risk management in Islamic microfinance.

Analisis Pengaruh Pricing, Kepercayaan, Dan Pelayanan Terhadap Keputusan Nasabah Pembiayaan Mikro Produk Murabahah (Study Kasus BSI Simpang Mulieng)

This research aims to determine the analysis of the influence of pricing, trust and service on customers' decisions to finance micro murabahah products (case study of BSI Simpang Mulieng). This researcher took a sample of 38 data from customers responding to micro murabahah financing products at BSI Simpang Mulieng in 2021-2023, which was collected using a total sampling technique and the data was measured using a Likert scale and processed with the help of SPSS 26. From the results of the research on the T test, pricing was obtained. (X1) has a positive effect on customer decisions (Y) regarding financing micro murabahah products at Bsi Simpang Mulieng. seen from the tcount value of 2.704 > ttable 2.032 and the significance value of 0.009 < 0.01. Trust (X2) has a positive effect on customer decisions (Y) on murabahah financing at Bsi Simpang Mulieng, seen from the t-count value of 2.222 > 2.032 and a significant value of 0.033 < 0.1. Service micro murabahah product financing at BSI Simpang Mulieng. Judging from the calculated f value > f table with a value of 38.975 > 2.88 with a significance value of 0.000 < 0.05. And the results of the coefficient of determination test (R2) show that the three independent variables (X1. margin and service quality and the remaining 24.5% are influenced by other variables not included in the research.

Penggunaan Finansial Teknologi Aplikasi Mobile BMT NU Balen Untuk Peningkatan Anggota dan Pendapatan (Studi pada BMT NU Balen di Bojonegoro)

This study evaluates the effectiveness of digital technology implementation on BMT NU Balen's mobile application in increasing the number of customers and revenue located in Balen sub-district, Bojonegoro Regency. Digitalization at BMT NU Balen has improved operational efficiency by reducing administrative costs and manual transactions. This study used a qualitative method with a case study approach, involving observation, interviews, and documentation as data collection techniques. Data before and after the implementation of the mobile application was analyzed to measure its direct impact. The results showed that the financial technology implemented in BMT NU Balen's mobile application successfully increased the number of customers from 570 in 2020 to 4,150 in 2023, which means an increase of 3,580 members or seven times. BMT NU Balen's revenue also increased significantly from 251 million rupiah in 2020 to 1.716 billion rupiah in 2023, which means an increase of 1.465 billion rupiah or five to six times. The results of this study are expected to provide valuable insights for BMT NU Balen and other microfinance institutions in utilizing technology to increase the number of customers and revenue, as well as support the development of a more efficient microfinance ecosystem.

Microfinance Services and Household’s Income among Saving and Internal Lending Community Groups in Evurore Ward, Embu County, Kenya

The research established loans, savings and training services effect on the income of household’s income among saving and internal lending community groups in Evurore Ward of Embu County, Kenya. Greeman Bank model, Saving-Asset Accumulation model and Village Saving Model served as theoretical base of the study. Descriptive design was implemented following a population of 562 SILC practicing group members in Evurore Ward where proportionate sampling technique was applied to arrive at 291 respondents. Primary data was sourced employing the utilization of structured questionnaire. The outcome unveiled a significant positive effect of microfinance loans on household’s income; the effect of microfinance savings on household’s income among SILC groups was not statistically significant but positive; microfinance training had a significant positive effect on household’s income among SILC groups in Evurore Ward, Embu County, Kenya. The survey recommends that to further enhance the income-generating potential of SILC groups, it is necessary to promote increased access to microfinance loans. This can be achieved by collaborating with microfinance institutions, NGOs, and government agencies to expand the availability of microfinance loan programs tailored to the needs of SILC groups in the area. Keywords: Microfinance Services, Microfinance Lending, Microfinance Training, Microfinance Savings, Household Income

Impact of Microfinance on Poverty in Zambia

This research studies the impact microfinance has on poverty in Zambia. The study uses simple linear regression analysis to determine if a relationship exists between the two variables, with poverty being predicted while microfinance being used to predict the outcome of its impact on Zambia. It is a well-known fact that most countries in Africa are facing this type of phenomenon, many countries are striving to alleviate poverty by enforcing different measures and one of them is through the introduction of microfinance institutions. This study defines and gives a clear view of what and how microfinance institutions are fighting poverty by providing different types of services to unemployed individuals, individuals who lack access to conventional banking systems, low-income earners, small businesses, and enterprise owners.

Improving positive work behavior of back office employees at sharia microfinance institutions with involvement in religious work life to anticipate fraud

Improving positive work behavior of back office employees at sharia microfinance institutions with involvement in religious work life to anticipate fraud

Pengaruh Disiplin, Kompetensi Dan Kinerja Karyawan Terhadap Kepuasan Pelanggan PT.Bank Perkreditan Rakyat Shinta Daya Yogyakarta

Bank Perkreditan Rakyat (BPR) is one of the formal Microfinance Institutions (LKM). From the function of human resource management (HRM), to realize BPRs can become banks that play an important role in the economic development process, one of which is through institutional strengthening, namely by improving the quality of human resources including discipline, competence, and employee performance to improve the quality of bank services to customers. and to strengthen good corporate governance (GCG). The purpose of this study was to determine the effect of discipline, competence and employee performance on customer satisfaction at PT. People's Credit Bank Shinta Daya Yogyakarta. Based on the results of data analysis, it can be concluded that: partially employee discipline has a positive and significant effect on customer satisfaction; Employee competence has a negative and significant effect on customer satisfaction; Employee performance has a positive and significant effect on customer satisfaction; and simultaneously Discipline, Competence and Employee Performance have a positive and significant effect on customer satisfaction.

Factors Affecting Risk Management Practices of Microfinance Institutions in Ethiopia

Factors Affecting Risk Management Practices of Microfinance Institutions in Ethiopia

How Islamic Rural Bank Overcomes the Trade-off Between Sustainability and Outreach: Does Market Competition Matter?

There was no consensus how to deal the trade-off between maintaining sustainability and outreach of microfinance institutions among researchers. The paper provides time series data which includes monthly industry data from Islamic Rural Bank for a period of more than 14 years starting from January 2009 to March 2023. In the first analysis, an estimate of the level of market competition is compute by the Lerner Index (LI) of each period. Furthermore, the efficiency analysis of Data Envelopment Analysis (DEA) is used to measure efficiency which allows estimation of efficiency performance using multiple inputs and outputs to understand how Islamic Rural Bank deal with sustainability and outreach. In the end, a Vector Autoregression/Vector Error Correction Model (VAR/VECM) analysis is used to analyse the relationship between the level of market competition and the efficiency of Islamic Rural Bank in achieving sustainability and outreach objectives. The results of the study suggest that by using a production approach Islamic Rural Bank is able to operate efficiently while maintaining the sustainability and outreach objectives without trade-offs. In addition, market competition has a moderate influence on achieving sustainability goals and their outreach. This research examines how Islamic Rural Bank as one of the microfinances to overcome the trade-off between the goals among high competition and the increasing of financial needs by customers. The Microfinance model from Islamic Rural Banks can be replicated to other microfinance institutions (MFIs) to reach both outreach and sustainability goals.

Farmer Satisfaction with Financing Services at Sharia Microfinance Institutions Agribusiness (Sharia MFI-A)

The total share of financing for the agricultural sector from financial institutions in Indonesia is still relatively low. It is because the agriculture sector is considered high-risk and not bankable. Even though the demand for financing from the agricultural sector is very high. Sharia MFI-A is a financing institution friendly to farmers because it has Sharia principles and shares risks. The loyalty of its customers determines the sustainability of this business. Service quality and customer expectation are affect customer satisfaction. This study aims to analyze service attributes considered necessary by customers and customer satisfaction to financing services at Sharia MFI-A. This research was conducted in West Sumatra, a province famous for its local principles of “Adat basandi sayarak, syarak basandi kitabullah”. The research was conducted on Sharia MFI-A namely in Agam Regency. The respondents were farmers who received financing in 2022. Five variables were observed: tangible, reliability, responsiveness, assurance, and empathy and measured using the Likert scale. Data analysis used Importance Performance Analysis (IPA) and Customer Satisfaction Index (CSI). The results showed that CSI’s score on Sharia MFI-A services is 88.28%, including the range of very satisfied criteria. Customers expressed very satisfaction with the performance of Sharia MFI-A services because the office is clean and comfortable, fast and friendly service, guaranteed customer confidentiality, and proft sharing transparency. This is by the principles of sharia services, namely fairness, and honesty in transactions ('adl wa tawazun), maslahah, and does not contain gharar and riba. Customer satisfaction with the services will affect farmers' loyalty to utilizing financing services from Sharia MFI-A in the future.

Exploring job satisfaction’s impact on turnover tendency among employees in Kosova’s microfinance institutions

Purpose The purpose of this paper is to delve into the intricate link between job satisfaction and employees’ turnover intentions. To accomplish this, a detailed structural model was constructed, incorporating five essential constructs: job satisfaction, turnover intention, satisfaction with financial factors, satisfaction with non-financial factors and external factors. Design/methodology/approach The research used a questionnaire with 28 items based on established tools, focusing on five different constructs. The model’s validation involved applying structural equation modelling to 147 non-managerial employees in microfinance institutions. Findings The findings reveal a significant negative correlation between job satisfaction and turnover intention. Satisfaction with financial factors significantly outweighs satisfaction with non-financial factors in shaping job satisfaction. In addition, the impact of external factors on turnover intention was observed to be minimal and inconsequential. Research limitations/implications This review highlights the importance of investigating the moderating factors in the job satisfaction–turnover relationship, distinguishing between types of satisfaction and conducting longitudinal studies across diverse contexts. It notably presents a diverse range of recent findings in this field, emphasising the breadth of the results that have emerged in this area of research. Practical implications Understanding job satisfaction and turnover intention is crucial for microfinance institutions. By prioritising efforts to enhance job satisfaction through improved financial offerings and non-financial factors like a supportive work environment and opportunities for growth, organisations can effectively mitigate turnover rates and foster success. Social implications The study underscores the societal value of supportive work environments beyond just benefits and career opportunities. By understanding the external influences on employee satisfaction, organisations can contribute to building more decent workplaces and promote social well-being, while advocating for social considerations in organisational practices. Originality/value This paper uses a novel integrated model comprising five distinct constructs not previously used together. It stands among the pioneering works that not only elucidate the correlation between job satisfaction and turnover intention but also delineate the constituents of job satisfaction itself.

Is there a trade-off between MFls' financial efficiency and outreach in macroeconomic and institutional context?

This paper analyses whether there is a trade-off between microfinance institutions (MFIs)' financial efficiency and outreach in macroeconomic and institutional context. We first theoretically discuss the potential impacts of macroeconomic and institutional factors on financial efficiency of MFIs, then present empirical evidence in support of theoretical analysis. The main results show that there is a potential trade-off between MFIs' financial efficiency and outreach when we consider the influences of macroeconomic and institutional variables on financial efficiency of MFIs.

Philanthropy for Widows at Islamic University-Based Islamic Microfinance Institutions in Madura Indonesia After the Covid-19 Pandemic

Philanthropy for Widows at Islamic University-Based Islamic Microfinance Institutions in Madura Indonesia After the Covid-19 Pandemic

Enhancing financial inclusion in China amidst COVID-19: Opportunities, challenges, and strategies

This paper examines the impact of the COVID-19 pandemic on financial inclusion in China, a country with a significant agricultural sector and an evolving digital landscape. The pandemic has accelerated the shift towards digital financial services, underscoring disparities in access. This study explores the pre- and post-pandemic scenarios of financial inclusion in China, evaluates the economic and social impacts of the pandemic, and assesses the role of digital transformation in the financial sector. It also investigates the changing roles of commercial banks and microfinance institutions, the integration of technology in finance, and the development of rural-urban economic linkages. The paper aims to propose strategies to enhance financial inclusion, ensuring it reaches the most vulnerable, and concludes with recommendations for creating a more equitable and robust economic system.

Digitization strategy and innovation performance of microfinance institutions: mediating role of innovation capability

Digitization strategy and innovation performance of microfinance institutions: mediating role of innovation capability