Microcredit Institutions Research Articles

Impact of micro finance banks on poverty alleviation in Ondo state, Nigeria

The study investigates the impact of microfinance banks on poverty alleviation in Ondo state, Nigeria. A simple random sampling technique was used to collect primary data from both customers and the staff of some selected micro finance banks in the state. The data collected from respondents through structured questionnaire were analyzed using descriptive statistics. Descriptive statistics such as frequency count and simple percentage were used to analyze the data gathered. The chi square was used to test the hypotheses of the study at 0.05 levels of significance. Findings from the analysis revealed that the services of microfinance banks reduce the level of poverty in the state. The result also showed that the CBN provides a conducive and enabling environment for the growth and sustainability of micro finance banks. Following from the findings of this study the researcher recommended that the microcredit institutions should increase the credit facilities to the customers at a low rate of interest to promote economic activities so as to make greater impact on the poverty reduction of people of Ondo State.

How business model innovation facilitates microcredit in balancing social mission with commercial performance - evidence from local commercial banks

Microcredit institutions are facing commercialization transformation, and how they can balance their social mission with operational performance is a focus of research in both industry and academia. This study, based on grounded theory and the iterative canvas theory framework of business models, conducts a multi-case study of three local commercial banks in Taizhou, exploring the inherent logic of how these banks manage to balance ‘dual objectives’. The research shows that the business model innovation of microcredit institutions includes desirability, feasibility and viability. The analysis of desirability indicates that focusing on small businesses is key to successfully integrating the social mission; feasibility analysis reveals that accurate application of soft information and resource integration is essential for gaining competitive advantage; and analysis of viability shows that enhanced risk management and scaling up operations are crucial for achieving operational performance. Through data analysis of the case banks from 2012 to 2021, this study provides evidence that microcredit institutions can achieve dual objectives and offers insights into how they do so. This provides valuable lessons for enhancing financial inclusiveness and expanding the coverage of commercial banks.

A novel MABAC approach for multi-attribute group decision-making with single-valued neutrosophic sets: An application in assessing microfinance group lending performance

In the 40 years of global microcredit practice, loan technology has played a positive role in microcredit as one of the most important supporting elements. The development and evolution of microcredit institution lending technology is the result of comprehensive consideration of specific regional economic, social, cultural, and geographical factors. In the context of the diversified trend of microcredit technology, choosing loan technology reasonably, exploring flexible guarantee conditions, and innovating diversified loan technology combinations will become practical problems faced by microcredit institutions, and also the direction of theoretical research. The timely innovation of group loan technology in microcredit has practical value and theoretical significance for promoting the innovation of financial agricultural products in the implementation of China’s rural revitalization strategy, as well as bridging the theoretical controversy of microcredit loan technology. The performance evaluation of microfinance groups lending is a MAGDM issues. In this paper, the distances measures of single-valued neutrosophic sets (SVNSs) and maximizing deviation method (MDM) is used to obtain the attribute weight values. Based on the classical Multi-Attributive Border Approximation area Comparison (MABAC) method, the single-valued neutrosophic numbers MABAC (SVNN-MABAC) method is constructed for MAGDM under SVNSs. Finally, an example for performance evaluation of microfinance groups lending and some comparative decision analysis are constructed to verify the SVNN-MABAC model.

When pro‐poor microcredit institutions favour richer borrowers: A moral hazard story

AbstractWe suggest an explanation for the existence of “mission drift,” the tendency for Microfinance Institutions (MFIs) to lend money to wealthier borrowers rather than to the very poor. We focus on the relationship between MFIs and external funding institutions. We assume that both the MFIs and the funding institutions are pro‐poor. However, asymmetric information on the effort chosen by the MFI to identify higher‐quality projects may increase the share of loans attributed to wealthier borrowers. This occurs because funding institutions have to build incentives for MFIs, creating a trade‐off between the quality of the funded projects and the attribution of loans to poorer borrowers.

Lending a hand: help banks in the Netherlands, 1848–1898

Abstract Households and small businesses are often confronted with funding gaps due to small-scale lending problems. Whereas existing research focused primarily on how rural areas addressed such problems, this paper determines what contributed to the success of urban help banks in the Netherlands (1848–1898). It considers how help banks’ lending mechanism, corporate governance mechanism, and historical circumstances lowered operating costs. The latter was crucial and depended on elites with philanthropic and practical considerations, who housed, staffed, and funded help banks at modest costs. This mix provides guidance to small-scale lenders, including microcredit institutions, to address funding gaps and tailor their services.

Influence of Financial Literacy on Micro-Credit Accessibility Among Rural Households in Tanzania

Purpose: Microcredits will remain crucial to rural households over a long period as they provide small loans to the needy, making it an essential aspect of rural finance. Due to the rural credit market's structure and financial inclusion problem, rural households often have trouble accessing microcredit. This paper analyzes the influence of financial literacy (FL) on microcredit accessibility in rural households in Tanzania. Methodology: Using a large dataset of Finscope households survey in Tanzania, a binary logit estimation technique was utilized to determine the influence of financial literacy on credit accessing decisions of rural households. In addition, a descriptive analysis was done from the selected sample. Findings: Generally, the analysis showed that financial literacy had a negative and significant effect on the micro-credit accessibility decision of rural households in Tanzania. Education level has a significant positive influence on micro-credit attaining decisions. Practical implication: The outcome of this research is helpful to policymakers and micro-credit institutions as they provide an insight into the influence of financial literacy on microcredit accessibility. The study recommends financial literacy programmes be established in rural areas to enlighten the citizens about the benefit and proper uses of borrowed money. Originality/Value: This paper used actual surveyed data from Tanzanians in all regions. The results are robust to different categories of households and control variables that can also affect micro-credit accessibility decisions.

Mind the Gap in Financial Inclusion! Microcredit Institutions fieldwork in Peru

Financial inclusion remains a key political issue. Since microcredit first captured public attention, Microfinance Institutions (MFIs) have expanded rapidly all around the world. Although much economic and financial literature has highlighted the importance of microfinance as a factor of development, there is also an intense debate about its effectiveness as a development tool. This paper is a descriptive analysis of the microcredit state of the art contrasted with the fieldwork done in Peru. A qualitative research methodology was used; 29 in-depth face-to-face interviews with different microfinance agents: MFIs, NPOs, microfinance associations, and microfinance customers in Peru. Peru has been chosen because it has a dynamic and well-regulated microfinance sector with more than 70 entities specialized in microfinance. Though statistical generalization is not possible, interview data provided rich and contextual evidence, which is often missing from a quantitative research approach. This paper highlights the importance of financial and accounting education in microcredit beneficiaries and how can it be enhanced in the digital age. The COVID-19 Pandemic has forced vulnerable population to embrace new digital technologies and has highlighted the digital gap that still exists in Latin America but this situation presents opportunities and challenges. This present study contributes to the debate over how to improve microcredit intervention's impact on the more vulnerable and identifies some unique insights into the interrelationships of financial education and financial inclusion. The results of the present study confirm that financial and accounting education are key elements in financial inclusion. La inclusión financiera sigue siendo una cuestión política clave. Desde que el microcrédito captó por primera vez la atención del público, las instituciones de microfinanciación (IMF) se han expandido rápidamente por todo el mundo. Aunque gran parte de la literatura económica y financiera ha destacado la importancia de la microfinanciación como factor de desarrollo, también existe un intenso debate sobre su eficacia como herramienta de desarrollo. Este trabajo es un análisis descriptivo del estado del arte del microcrédito contrastado con el trabajo de campo realizado en Perú. Se utilizó una metodología de investigación cualitativa; 29 entrevistas en profundidad cara a cara con diferentes agentes de las microfinanzas: IMFs, ONLs, asociaciones de microfinanzas y clientes de microfinanzas en Perú. Se ha elegido Perú porque tiene un sector microfinanciero dinámico y bien regulado con más de 70 entidades especializadas en microfinanzas. Aunque la generalización estadística no es posible, los datos de las entrevistas proporcionaron una evidencia rica y contextual, que a menudo falta en un enfoque de investigación cuantitativa. Este trabajo destaca la importancia de la educación financiera y contable en los beneficiarios de microcréditos y cómo puede mejorarse en la era digital. La pandemia del COVID-19 ha obligado a la población vulnerable a adoptar las nuevas tecnologías digitales y ha puesto de manifiesto la brecha digital que aún existe en América Latina, pero esta situación presenta oportunidades y desafíos. El presente estudio contribuye al debate sobre cómo mejorar el impacto de las intervenciones de microcrédito en los más vulnerables e identifica algunas ideas únicas sobre las interrelaciones de la educación financiera y la inclusión financiera. Los resultados del presente estudio confirman que la educación financiera y contable son elementos clave en la inclusión financiera.

Consumer attributions for corporate social responsibility: causes and consequences

PurposeThis study aims to investigate the complex relationship between corporate social responsibility (CSR) dimensions and customer loyalty. In particular, this study suggested an intervening process through customer perceived value, which makes banking customers more loyal.Design/methodology/approachUsing a randomised sample of 261 respondents from the Northern Province of Sri Lanka, this study empirically investigates the role of CSR in enhancing customer value and loyalty. The collected data, the study model and hypotheses were assessed by partial least squares structural equation modelling.FindingsAccording to the results, CSR practices that are both strategic and stakeholder-driven have a positive effect on customer loyalty in the banking industry. Further, customer perceived-value positively impacts customer loyalty. Besides, customer perceived-value mediates the association between CSR practices and customer loyalty.Research limitations/implicationsThis study is limited to the banking industry. Thus, future studies can replicate the same research in different sectors like retail, tourism and hospitality, insurance and microcredit institutions, garments, textiles, etc.Practical implicationsThis study suggests specific dimensions of CSR that need to be emphasised while the banking industry designs its loyalty programs.Originality/valueThe notion of customer value has been suggested as a mediating mechanism between diversified CSR perspectives and customer loyalty. Thus, this study proposes a comprehensive framework for enhancing customer loyalty to banks via CSR practices and customer value creation.

Caught between outreach and sustainability: The rise and decline of Dutch credit unions

This paper explores the history of Dutch credit unions (credietvereenigingen). Launched to provide SME credit, these credit unions gradually drifted away from their original aims, hereby increasingly targeting a wealthier echelon of clients at the expense of their poorer customers. In the end, they were squeezed out of business by new, government-supported SME banks and the big commercial banks. This study is devoted to understanding why this drift occurred and how this ultimately determined the development of these institutions. Thereby, it deepens our understanding of the similar challenges faced by present day social enterprises (most notably microcredit institutions) which may also succumb to mission drift, and hints to possible solutions in which such drift may be prevented.

"Institution of Microfinance and Improvement of the Socio-Economic Situation of the Population of GOMA. Case of the Promotion and Support of Economic Development Initiatives in Kivu (PAIDEK) from 2017 to 2021"

This study focuses on socio-economic life in the city of Goma. Improving the survival conditions of our populations requires improving working conditions and the availability of financial resources within households. To carry out this research, we used descriptive, analytical and statistical methods, in particular inductive; based on the results of the survey carried out among the beneficiaries of PAIDEK microcredits. Research techniques were used in this work: documentary, interview, survey questionnaire and survey. At the end of our investigations, the socio-economic conditions of the population benefiting from the credit have improved: food, access to health care, education, housing, small business. This confirms our hypotheses. Ultimately, micro-credit institutions are a lever for the local economy to boost the social well-being of our populations.

What's new in the drivers of electricity access in sub-Saharan Africa?

This study examines the drivers of electricity access in sub-Saharan Africa in 48 chosen countries from 1995 to 2019, accounting for endogeneity of variables using a new novel xtdpdgmm command that implements two-step system GMM (Generalized Method of Moment) estimators. The findings show that in sub-Saharan Africa, domestic credit to the private sector and the food production index are the two most important factors influencing access to electricity. Domestic credits to the private sector and food production are statistically significant and have a positive impact on increasing regional electricity access. Thus, having access to credit from financial institutions is crucial for many households in order to have access to electricity. The result reveals that agricultural productivity improves food security by increasing access to electricity. Our study recommends that governments in sub-Saharan Africa should boost agricultural production and provide a favorable environment for the banking sector and other microcredit institutions to finance electrification initiatives. In order to improve the region's access to electricity, financial institutions, governments, and donor funding should be encouraged to finance small-scale renewable energy projects. Thus, to lower the cost of electrification in sub-Saharan Africa, increasing off-grid financing should be prioritized. These findings have significant implications for sub-Saharan Africa and other developing countries.

Integration of biogas technology into livestock farming: Study on farmers’ willingness to pay for biodigesters in Madagascar

Substituting fuelwood by biogas contributes to fighting climate change and improving household sanitation in developing countries. However, in Africa, biogas technology is not well integrated into rural households yet and is still in embryonic stage due, among others, to the low purchasing power of farmers. A study was therefore conducted to investigate the farmers' willingness to pay (WTP) for biodigesters in Madagascar using the dichotomous choice question approach of contingent valuation. The results showed that farmers’ WTP were affected significantly and positively by the cost of energy for cooking (probability to accept the bid increased by 0.020), number of dairy cows (0.060), income from agriculture (0.156), off-farm income (0.229), and having experience on borrowing money from bank or microcredit institutions (0.253). However, negative responses were observed related to the increase of biodigester installation cost (probability to accept the bid decreased by 0.023), land area (0.002) and the utilization of manure (0.029). With a constant installment payment plan for a period of 3 years, the average WTP was 18% less than the estimated price of a biodigester upfront cost. Considering the importance of socio-economic characteristics of farmers on biogas integration, the results reported in this study are valuable decision-support tools for government, NGOs, associations, and companies interested in promoting biogas technology in developing countries.

Debt Relations in Georgian Bazaars

This article is about practices of borrowing and lending money in the context of Georgian bazaar trade. While many anthropological studies focus on debtors or individual moneylenders, this article starts from the perspective of microcredit experts, who grant loans to traders on behalf of their companies and thereby engage in complex relationships. Borrowing money from a microcredit institution consists of an administrative act, which is sealed by formal procedures such as signing a contract, but the bazaar is a sphere that is, at least partially, structured by informal practices and personal relationships. To make a profit, microcredit experts must play a risky and sometimes existential game. They must decide whether to trust or not to trust a client. In order to assess and minimize risk, they immerse themselves into the world of their clients and rely on social values and moralities. This article describes their strategies and thus gives insights into the nature of debts, obligations, relationships, institutional frameworks, and informal practices in the context of microfinance in the Georgian bazaar trade sector.

Financing entrepreneurial activity in Uruguay: time to default in a public microcredit institution

ABSTRACT This paper develops a tool to predict the percentage of compliance in the repayment of microloans granted by non-profit microfinance institutions (MFI) of the Uruguayan government. The database consists of 1,357 microloans granted by the Program for the Strengthening of Productive Entrepreneurs (PFEP) of the Uruguayan Ministry of Social Development (MIDES) during the period 2012–2016. The paper uses Cox (1972) proportional risk model, employing four penalty modes: ENET, LASSO, AENET and ALASSO. The analysis shows that with a reduced set of variables that are easy for the MFI to obtain, it is possible to obtain high predictive power.

Fostering Agriculture under the Industrializing State: The Caja de Crédito Agrario and Agricultural Credit in Post-Depression Chile, 1926-53

This paper analyzes the role of the Caja de Crédito Agrario (CCA) in the development of the agricultural credit market in post-depression Chile. Employing its official annual reports, reports from the Superintendency of Banks, and Chile’s Statistical Yearbooks, we constructed the first series of CCA’s credit operations, and established trends in the number, the average amount, and the social, geographic, and specific economic activity distribution of all loans. From 1927 to 1952, CCA loans represented 11.5% of all commercial bank loans, and in the latter year the CCA lent more money to agriculture than any other bank. The CCA became Chile’s largest agricultural bank, right before being merged with other institutions to create the State Bank of Chile. The CCA’s credit was decentralized: its operations evolved towards a fairly balanced distribution of loans among Chile’s main agricultural provinces. This was a micro-credit institution that allocated the vast majority of its loans to small farmers, who otherwise would not have access to formal credit. The CCA was a public policy tool for helping small farmers produce food for domestic consumption. Contrary to conventional views, in Chile the industrialization-promoting state did also foster agricultural growth through CCA public credit.

A Study on the Performance Evaluation System of Microfinance Companies Under Dual Objectives

Microfinance companies are the result of China’s rural financial reform. Since their creation, they have been undertaking the responsibility of effectively allocating financial resources and guiding the flow of funds to rural areas and underdeveloped areas through the introduction of private capital. The emergence of microfinance companies has intensified the competition in rural financial market and built a new pattern of rural financial service systems. As a result driven by multiple objectives, these microfinance companies must face the issue of how to integrate microfinance services for the “three rurals” (rural economy, rural community, and rural residents) as well as small, medium, and micro enterprises with their own finances in a sustainable and effective manner. On the basis of dual objectives and with full consideration of the characteristics of China’s microfinance companies, this study has constructed a performance evaluation system exclusively for commercial microfinance companies in China by drawing on the performance evaluation system of foreign micro-credit institutions through analytic hierarchy process and Delphi method.

Does microcredit use helps farmers win battle against food insecurity: evidence from Jimma zone of Southwest Ethiopia

BackgroundLack of access to credit precludes smallholder farmers from making investment that generates greater level of income, consumption and wealth. To reverse this limit, Oromia Credit and Saving Share Company has been providing microcredit for rural households for the last two decades in the study area. Yet, there is limited knowledge on the impact of this microcredit service on rural household food security in Jimma zone. Therefore, this research aims at generating location-specific data on the impact of microcredit utilization on household food security in the study area. A multistage sampling procedure was employed to select 360 sample households. Data were generated through household survey, focus group discussion and key informant interview. Both descriptive and econometric data analysis techniques (binary logit model and Propensity score matching) were used.ResultsThe results reveal that educational level, family size; land size and non/off-farm income of the households influenced microcredit utilization positively, whereas livestock ownership and farm income negatively influenced it. The analysis of food security status indicate that large proportion of households are food secure. The Propensity score matching result expose that microcredit utilization has generated a positive and significant impact on household food security.ConclusionsEfforts towards scaling out services of microcredit institutions should target improving financial literacy of the rural poor and their current financial need on the basis of other resources such as land and livestock they owned with the ultimate goal of ensuring household food security. It is also imperative to realize the labour force capacity of the households in the process of expanding credit service.

Microfinancing and Entrepreneurship Growth among Women in Ogun State, Nigeria

Entrepreneurship has continually been a tenacious tool in responding to global poverty. The last few decades recorded tremedous activities of women entrepreneurs. Funding is a critical challenge to present and prospective women entrepreneurs. Microfinancing contitutes a principal source of easy access to funds. Microfinancing comprises financial and non-financial services which could possibly be a driving force to women entreprenuship and empowerment. However, the presence of microfinancing is though visible but there is lack of necessary investigation revealing the impact of microfinancing on entrepreneurial activities among women. Also, repayment problems pose threats of continuity to both microcredit institutions and entrepreneurs. A number of repayment strategies are in existence but there is lack of necessary investigation showing the influence of these repayment strategies on entrepreneurship growth among women. The focus of this study was to evaluate how Microfinancing has influenced entrepreneurship growth among women. This study adopted survey research design and convenience sampling technique. The study concluded that microfinancing has a significant impact on entreprenuship growth among women in Ogun State, Nigeria. Moreover, the developed model would serve as a useful inspiring construct for researchers.

Herd Behavior and Its Effects on Default in Chinese Microcredit

Herd behavior means a mode of behavior will be infected among the individuals in a group, and its existence and influence in specific financial market are uncertain. The paper utilizes the logistic model to test the existence and influence of herd behavior of borrowers in Chinese microcredit market. We find that (1) herd behavior exists in Chinese microcredit market, (2) the two most important factors affecting the default of microcredit resulted from herd behavior are the nature of microcredit institutions and the education level of borrowers, and (3) herd behavior will increase the possibility of default, but it is relatively small.

Drivers of Crop Diversification: Evidence from Smallholder Farmers in Delta State Nigeria

Smallholder farmers in southern Nigeria have relied on the cultivation of cassava, yam, maize and plantain for their livelihood for generations. However, with rising climate variability and soil degradation, many farmers are adopting crop diversification as a viable alternative to improve the productivity of their farmland by growing multiple crops. Therefore, this study was conducted to examine factors that influence crop diversification, and the intensity of crop diversification among small-scale farmers in Delta State. Data for the study were obtained from a random sample of 236 farmers. Crop diversification index (CDI) was used to measure crop diversity, while descriptive statistics, Heckman two-step model and t-test were used to analyse the data. The results showed that 62.3% of the farmers were female; farmers' average age was 51 years, while farm size ranged between 0.08 and 2.2 ha, with a mean of 0.84 ha. Significant differences existed in farming experience (p < 0.05), farm income and farm size (p < 0.01) between crop diversifiers and non-diversifiers. The Heckman model results indicated that age, farm size, credit access, extension contact and farm income had significant positive (p < 0.01) effects on farmers' diversification decision; while farm size, credit access, extension contact and attitude to risk exerted positive and significant influence on intensity of crop diversification by smallholder farmers. Arising from the findings, there is an urgent need for government to chart a new policy direction to revamp the ailing agricultural extension delivery system, a farmer-targeted micro-credit institutions and reforms in land rights to smallholder farmers to enhance timely access to agricultural land to promote crop enterprise diversification among farming households.