Microfinance Loans Research Articles

Microfinance loans, women’s economic empowerment, and poverty: a case study of Baobab Microfinance Company

ABSTRACT We investigate the impact of Baobab Microfinance Company (BMC) loans on poverty and economic empowerment of female clients using a mixed methods approach. Using a sample of 411 BMC clients, we find in some cases, relative lower poverty and higher economic empowerment for clients with a higher frequency of loans compared to those with a lower frequency of loans. An implication is that the marginal impact of loans across different loan cycles is U-shaped rather than linear and has a short-term impact on clients. Furthermore, our qualitative results suggest that loans help women lower poverty and become economically empowered.

The Effect of Microfinance Bank Services on Women Empowerment: The case for Women Entrepreneurs in Irbid, Jordan (SMEs)

Generally, women, entrepreneurs face problems in accessing funding due to factors that stem from cultural values, ??societal needs, family ties, illiteracy, gender discrimination, strict government policies, economic crisis, and the lack of training in entrepreneurship and skills acquisition that hinders entrepreneurial activities. This study was conducted to examine the impact of microfinance bank services in empowering female entrepreneurship in Irbid Governorate. The study used a cross-sectional survey research design consisting of 20,000 registered businesswomen. A total of 392 working women were selected using stratified sampling technique and the data was analysed using Least Square Structural Equation Modelling (PLS-SEM) with the help of SmartPLS3 software. The results showed that microfinance loans, microfinance savings, and financial interventions or donations had a significant, positive impact on empowering women's businesses in Irbid, Jordan. The study concluded that microfinance deposits could elevate women’s income and act as a guarantee to obtain loans and other microfinance services. Consequently, microfinance institutions (MFIs) should empower more women-owned businesses. In addition, the government through the Central Bank of Jordan should reduce the interest rate of microfinance banks to attract more female entrepreneurs and create more microfinance bank plans and financial intervention packages to enhance financial services to ensure donations and funds reach women entrepreneurs.

Development and implementation of a process evaluation for intervention quality improvement of a community-based behavioral HIV intervention trial in Tanzania.

Process evaluations for social and behavioral interventions are increasingly important as interventions become more complex and multi-faceted. Conducting process evaluations in low-resource international settings can be challenging. Process evaluations in low-resource international settings can help inform and improve quality of ongoing intervention implementation. We conducted a process evaluation of a cluster-randomized controlled trial to assess the efficacy of a microfinance and health leadership program on sexually transmitted infections and intimate partner violence perpetration among young men in Tanzania. Our trial included 1,491 participants and the intervention lasted two years. We collected process data on microfinance loan uptake and repayment, and health leaders' health conversations with peers to monitor intervention reach and dose received. We developed a database system that allowed offline data collection and synced to a central database when internet was accessible. Research staff in the U.S. accessed data from the central database to analyze and create regular implementation reports. Process graphical reports facilitated identification of implementation challenges and enabled us to resolve issues before they worsened. For example, from a group with low microfinance loan repayment we learned area participants perceived the loan to be a grant, and then we clarified the misinformation with participants. The process evaluation helped inform ongoing intervention implementation, including approaches to improve reach and uptake of interventions. Field staff time was protected by systemizing the sharing of data processing and analyses across the global team.

Associations between hurricane exposure, food insecurity, and microfinance; a cross-sectional study in Haiti.

Natural disaster and food insecurity are prevalent in Haiti. Natural disasters may cause long-term food insecurity. Microfinance programs may provide resilience against this outcome. The objectives of this study were 1) to assess the association between the impact of Hurricane Matthew and long-term food insecurity and 2) to understand whether this association varies by participants' membership in a microfinance program. In 2017-2018, we interviewed 304 Haitian female microfinance clients. We used log-binomial regression to evaluate the association between hurricane Matthew impact and long-term food insecurity, with evaluation of effect modification by timing of microfinance exposure. We found that one year after the hurricane, participants who were severely impacted by the hurricane were more likely to report poor dietary diversity and moderate to severe household hunger, compared to the less severely impacted participants. Both associations became insignificant among those who received their first microfinance loan before the hurricane. Natural disasters like hurricanes are associated with long-term food insecurity at individual and household levels. Microfinance programs might improve post-hurricane long-term food security.

The Impact of Financial Access on Female Labour Force Participation: Evidence from Panel Estimation

This paper examines the relationship between financial access and economic empowerment among females, i.e., female labour force participation by testing a panel data of 51 countries ranging from 2004 to 2016. The number of bank branches and automated teller machines, both in thousand square feet and a hundred thousand adults, are applied as financial access indicators. The estimation method employed is the dynamic panel system generalized method of moment estimators. The control variables in the equation are the life expectancy, gross domestic product per capita, and female education enrolment. The results showed that bank branches have more noticeable impacts than automated teller machines in affecting the female labour force participation rate, implying that bank branches' services have a more substantial influence on women empowerment than automated teller machines. Furthermore, financial access indicators show a negative association with female labour force participation, probably due to female discrimination in financial access or the income effect caused by better financial access. Another possible reason is that the development policies could have bypassed women, as indicated by previous studies. To overcome this situation, governments could improve their financial service to ensure that financial access benefits women empowerment, including exploring the microfinance and special loans for female borrowers.

Impact of Index Insurance on Moral Hazard in the Agricultural Credit Market: Theory and Evidence from Ghana

AbstractRecent research suggests that coupling microfinance loans with an index insurance policy may be a cost-effective way to expand credit market access to smallholder farmers in developing countries. Index insurance can increase demand for credit and encourage increased supply of credit by protecting borrowers and lenders from covariate production shocks that discourage credit market expansion. In this paper, we propose that index insurance, when bundled with credit, may also reduce a different barrier to credit market access: high transaction costs caused by moral hazard in the credit market. We develop a theoretical model of a competitive credit market with moral hazard. In this market, lenders use either dynamic incentives or collateral to mitigate the moral hazard problem. The model shows that index insurance bundled with loan contracts can reduce moral hazard and increase borrower welfare. We then test the model and find some empirical support using a subset of data from a randomised control trial in northern Ghana.

CONCEPTUAL FOUNDATIONS OF FINANCIAL SUPPORT FOR INCREASING THE INNOVATIVE COMPONENT OF UKRAINE’S INTERNATIONAL COMPETITIVENESS

Abstract. The article describes the dynamics of Ukraine’s position in the Global Innovation Index for 2015—2019. It is revealed that the domestic economy has a high educational and scientific potential, is able to produce various innovations in the form of ideas, scientific developments, patents; the bottlenecks of Ukraine in the state of innovative development are the state of cluster development, the share of foreign direct investment in GDP, the online service of the government, the use of information and communication technologies, the availability of joint agreements on strategic alliances, the state of domestic lending to the private sector, the export of goods of the creative economy, the volume of microfinance loans, the presence of firms offering formal training, the state of cooperation between universities and production, agreements with venture capital. It is proved that the problem of improving the financial mechanism for ensuring innovation processes in the economic system of Ukraine requires a priority solution. Developments on increasing the innovative component of increasing Ukraine’s international competitiveness are impossible without adequate financial support. The article examines the foreign experience of state support for innovation activities. It is revealed that in developed countries — the world’s leading innovation leaders, public policy provides for direct funding of scientific research and through tax measures encourages private sector R&D spending. The concept of financial support for increasing the innovative component of Ukraine’s international competitiveness, which should be implemented at the strategic, tactical and operational levels, is proposed. To ensure a sustainable level of international competitiveness of the country through increasing the innovation component, it is important to implement a system of measures to monitor threats even at the stage of their origin and prevent the spread of their negative impact. Therefore, the methods and tools for implementing the proposed concept contain components of threat prevention: economic (tax incentives; transfers ;direct budget investments; grants; concessional lending; cooperation with foreign institutions, etc.), organizational (development of innovative infrastructure; consulting assistance; personnel support; creation of clusters using the potential of education, business, government, public; creation of regional clusters with innovation and industry production, etc.), institutional (techno parks, business incubators, analytical centres, etc.), regulatory (strategies, concepts, plans, programs) and social levers (conducting business trainings, implementing joint social projects, etc.). Keywords: innovation, Global Innovation Index, financial support for innovative development, international competitiveness, cluster. JEL Classification O11, O19, O16, O33, E62, F20 Formulas: 0; fig.: 2; tabl.: 2; bibl: 16.

Microfinance and entrepreneurship at the base of the pyramid

AbstractResearch SummaryThere continues to be substantial debate on whether and how providing inclusive access to finance through microcredit promotes entrepreneurship‐led development at the base of the pyramid. We contribute to this literature by examining differences in household‐level outcomes associated with microfinance loans given for different purposes, and identifying conditions under which the most impact is achieved. Defying common expectations, loans funding microenterprises do not exhibit greater impact than those funding traditional livelihood activities, and loans funding new microenterprises fare particularly poorly. However, loan impact improves when multiple members of a borrower group seek livelihood loans together, and when the provided loans better match the individual financial needs of the borrowers. Our findings underscore the need to refine how microfinance is applied as a tool for development.Managerial SummaryComparing across microfinance loans given for different purposes, we find that the average impact associated with loans supporting traditional livelihoods is at least as high as that for loans supporting microenterprises, and that the impact of loans specifically funding new microenterprises is lower than those for growing existing microenterprises. We also find that the impact of livelihood loans is greater when multiple members of a borrower group are engaged in livelihood‐focused activities, and that loans that better match borrowers' specific needs have a superior impact. We conclude that we need to move beyond the black‐or‐white debate regarding whether microfinance works to a nuanced understanding of when it is effective, that is, examining conditions under which microcredit customers—whether aspiring entrepreneurs or not—can thrive.

Women’s economic status, male authority patterns and intimate partner violence: a qualitative study in rural North West Province, South Africa

There are conflicting views on the impact of microfinance-only interventions on women’s economic empowerment and intimate partner violence in low and middle-income countries. Evidence suggests however that when microfinance is combined with complementary programmes (microfinance plus) it may be effective for empowering women and addressing intimate partner violence. We conducted in-depth interviews with adult women in rural South Africa who had received microfinance loans for more than a year and had recently completed gender training. We explored women’s perceptions on income generation; the effects on their relationships, including intimate partner violence; their notions of power; and perspectives on men’s reactions to their empowerment. Findings reveal that the notion of ‘power within the self’ is supported by women’s income generation, alongside a sense of financial independence and improved social support. Women reported increased happiness and reduced financial stress, although social norms and gender expectations about women subservience and male headship remain salient, particularly among older women. Furthermore, younger women appeared to tolerate abuse due to financial and caring responsibilities. These findings underpin the importance of complementary gender training programmes and of including men as participants for enhancing the effectiveness of economic strengthening interventions.

INSTITUTION OF CREDIT CONSUMER COOPERATION: RESTRICTIONS AND COMPETITIVE ADVANTAGES

The article provides a general description of the essence and specific characteristics of consumer credit cooperatives (CCC) as well as the assessment of degree of relevance of the issue of CCC development in the context of increasing financial accessibility in different territories of the Russian Federation. The author defines the scale of activity of credit consumer cooperation in relation to the microfinance sector, the savings and loan market of the Russian Federation as a whole and in relation to the sector of credit cooperation in other countries, including the percentage of involvement of the population of different countries in the processes of mutual financial assistance of the CCC. The historical context of the development of credit consumer cooperation in Russia is also briefly reviewed, and its quantitative parameters in the past and current periods are compared. The author determines the place of the modern institution of the CCC in the financial market of the Russian Federation in the context of the concepts of mass and niche, taking into account the specifics of the target audience and the predominant area of activity of credit cooperatives. In this regard, the following limitations and potential advantages are highlighted. The research has resulted in proposals to increase the competitiveness of the CCC in the savings and loan market. These suggestions are made in order to transform the sector towards a growth trend through the preservation of the key mechanics of the traditional service of credit cooperatives, which determine a high degree of loyalty of shareholders. The author’s ideas are combined with the addition of the practice of CCC activities with a set of modern functions, the provision of which is conditioned by both the cooperatives technological platforms and the form of organizing key internal processes. The final conclusion of the present work is that it is the implementation of such a dual strategy that will increase the competitiveness of the institution of credit cooperation and will ensure a return to the trend of its quantitative growth and qualitative development.

Construction of Rural Financial Organization Spatial Structure and Service Management Model Based on Deep Convolutional Neural Network.

Local credit cooperatives have long played an important role in local financial services. It has made a significant contribution to agricultural production, farmers' incomes, and the economic development of rural areas. In particular, as a financial instrument serving farmers, microfinance management by local credit cooperatives plays a key role in pursuing profits and fulfilling social responsibility. It was therefore important to obtain effective instruments for combating poverty in rural areas from all walks of society. This paper first outlines the development of microfinance loans in Germany and other countries and describes the current situation and some of the challenges facing local credit cooperatives in financial management. Next, we present the basic concepts of data mining, describe the common methods and key techniques of data mining, analyze and compare the properties of the individual data, and show how the associated mining can actually be performed. Next, we will explain the basic model of microfinance for farmers and some risks in detail and analyze and evaluate the characteristics of these risks in the context of local credit cooperatives. As a result, this paper proposes an improved deep convolutional neural network. The optimized algorithm selects the optimal weight threshold value and different iteration times. The results are fewer errors, the results are closer to the correct data, and the efficiency is better than before. The algorithm is more efficient because errors have been greatly reduced and the time spent on them has been slightly reduced.

Community-funded integrated care outreach clinics as a capacity building strategy to expand access to health care in remote areas of Uganda

ABSTRACT Most Ugandans live in rural, medically underserved communities where geography and poverty lead to reduced access to healthcare. We present a novel low-cost approach for supplemental primary care financing through 1) pooling community wealth to cover overhead costs for outreach clinic activities and 2) issuing microfinance loans to motorcycle taxi entrepreneurs to overcome gaps in access to transportation. The intervention described here, which leverages community participation as a means to extend the reach of government health service delivery, was developed and implemented by Health Access Connect (HAC), a non-governmental organization based in Uganda. HAC began its work in August 2015 in the Lake Victoria region and now serves over 40 sites in Uganda across 5 districts, helping government health-care workers to provide over 1,300 patient services per month (and over 35,000 since the program’s inception) with an average administrative cost of $6.24 per patient service in 2020. In this article, we demonstrate how integrated and appropriately resourced monthly outreach clinics, based on a microfinance-linked model of wealth pooling and government cooperation, can expand the capacity of government-provided healthcare to reach more patients living in remote communities. This scalable, sustainable, and flexible model is responsive to shifting needs of patients and health systems and presents an alternative approach to healthcare financing in low-resource settings. More rigorous evaluation of health outcomes stemming from such community-based models of service delivery is warranted.

Loan Appraisal Protocol for Effective Microfinance Portfolio in Tanzania

The aim of this article is to provide a comprehensive analysis on loan application appraisal protocol for effective microfinance portfolio in Tanzania. This study utilizes random sampling method and ordinary least square regression model on 219 microfinance institutions collected from Dar es Salaam, Morogoro and Dodoma regions. The results show that borrower business income, capital of borrower, membership duration of borrower and social collateral of borrowers have negative and significant impact on portfolio at risk of microfinance institutions. The findings therefore indicate that portfolio at risk of microfinance institutions can be reduced by (i) microfinance institutions to consider sound cash flow of the main business of microfinance client to enhance repayments; (ii) microfinance institutions must provide credit facilities to borrowers with relatively high capital in their business; (iii) microfinance institutions should extend credits to borrowers who are frequently willing to access credit facilities to enhance regular repayments; (iv) microfinance institutions should encourage borrowers to use group lending when accessing credits for effective repayments and diminish the risk of microfinance loan portfolio.

Caste-Based Discrimination, Microfinance Credit Scores, and Microfinance Loan Approvals Among Females in India

We draw on the phenomenon of caste-based discrimination in India and signaling theory to assess whether microfinance credit scores improve the odds of female micropreneurs from a lower caste receiving loans and whether visible business characteristics further improve the odds of receiving microfinance loans. In a sample of 3,144 female microfinance loan applicants at a female-focused microloan enterprise in India, females from a lower caste, relative to those from a higher caste, have lower odds of receiving loans when their credit scores are below the mean. However, when females from a lower caste have credit scores higher than the mean, the odds of receiving a loan increase. The practical effect of size is small but meaningful. Loan applicants from a lower caste with a visible signal of business ability do not improve their chances of receiving a loan relative to those from a higher caste.

Impact of Microfinance Village Savings and Loan Associations on Women’s Empowerment and Resilience Against Vulnerability in Malawi

The purpose of this study was to explore and discuss the impact of village savings and loan associations (VSLAs) on socio-economic changes among women and resilience against vulnerability. The study employed a descriptive research design, and household-survey methods were used to obtain data from two districts: Chiradzulu Tradition Authority Maoni and Blantyre Rural Traditional Authority Kapeni. The multi-stage sampling method was used to select the samples. The sample size was 70 ( n = 70) women from VSLA groups, and the data obtained were analysed using ‘Statistical Package for the Social Sciences’ (SPSS). The findings of the study show the positive contributions of VSLAs towards women, such as an increase in the economic and social level of members. Despite these positive results, it was found that VSLA members have no access to loans from external organisations or banks, and there is also a lack of training among the VSLA members.

Banking on cooperation: an evolutionary analysis of microfinance loan repayment behaviour.

Microfinance is an economic development tool that provides loans to low-income borrowers to stimulate economic growth and reduce financial hardship. Lenders typically require joint liability, where multiple borrowers share the responsibility of repaying a group loan. We propose that this lending practice creates a cooperation dilemma similar to that faced by humans and other organisms in nature across many domains. This could offer a real-world test case for evolutionary theories of cooperation from the biological sciences. In turn, such theories could provide new insights into loan repayment behaviour. We first hypothesise how group loan repayment efficacy should be affected by mechanisms of assortment from the evolutionary literature on cooperation, i.e. common ancestry (kin selection), prior interaction (reciprocity), partner choice, similarity of tags, social learning, and ecology and demography. We then assess selected hypotheses by reviewing 41 studies from 32 countries on micro-borrowers' loan repayment, evaluating which characteristics of borrowers are associated with credit repayment behaviour. Surprisingly, we find that kinship is mostly negatively associated with repayment efficacy, but prior interaction and partner choice are both more positively associated. Our work highlights the scope of evolutionary theory to provide systematic insight into how humans respond to novel economic institutions and interventions.

Empowering Rural Women’s Involvement in Income Generating Activities Through BRAC Microfinance Institution in Sylhet District, Bangladesh

This article presented the findings on the role of microcredit financial assistance, specifically from Bangladesh Rural Advancement Committee (BRAC) Micro-finance institution to assist rural women in Sylhet District, Bangladesh involved in income generating activities. The impact on their socio-economic empowerment, the constraints of rural women in having access to loan service from micro-finance institutions and loan repayment process will be discussed. The target population of the study was those women who had availed microcredit facilities from some microcredit providing institutions or organizations in the study area. Survey method was used as a technique for data collection. The results of the analysis indicate that participation of rural women in micro-finance assisted income generating activities contributes towards socioeconomic empowerment. It also showed that most of the rural women who availed the facility of microcredit finally became empowered through acquiring the confidence level, business skills, decision making power, and self-esteem. The findings also showed that microcredit has significant impact on the up lift of socio-economic empowerment of the women’s in Sylhet district. However, constraints of rural women in accessing loan and loan repayment process should be properly addressed by the stakeholders to improve the contribution of micro- finance institutions for achieving sustainable development goal. Hence, accessing microcredit has been able to empower women financially and it is suggested that microcredit loan be made accessible to poor women who are keen to uplift the family’s economic wellbeing.

Globalization and affordability of microfinance

We study how globalization can differentially affect financial inclusion through the lens of microfinance. Based on an institutional logics perspective, we argue that MFIs embody both social logic and market logic with regard to provision of affordable microfinance loans. Speicially, social logic is amplified by greater social globalization and the stronger presence of nonprofit organizations (NPOs) in the microfinance industry. In contrast, economic globalization catalyzes MFIs' market logic, leading to weaker or greater affordability of microfinance, depending on the relative strength of the profit-maximizing motive and real competition. We test these predictions by focusing on MFI interest-rate setting and using longitudinal data from 2030 MFI observations across 50 countries from 2002 to 2012. We find that country-level social globalization measure is negatively associated with the average MFI loan interest rates and that country-level economic globalization measure has an inverse U-shaped relationship with the average MFI loan interest rates. These results support our hypotheses and suggest a more nuanced view on how globalization affects affordability of microfinance.

In the interest of saving: Refugee‐led microfinance in Kampala, Uganda

ABSTRACTMotivationWhile livelihoods are increasingly promoted for refugees in long‐term situations of displacement, refugees can rarely access microfinance loans—the very start‐up capital generally considered necessary for creating businesses. Yet across Kampala, Uganda, refugees meet to place small amounts of money into group savings and take out and repay microloans.PurposeThis article sheds light on this underexplored phenomenon through an empirical study of refugee‐led microfinance groups in Kampala and an overview of the existing local landscape of refugee‐serving organizations and microfinance institutions providing loans. We analytically reflect on the role of trust in executing microfinance programmes both for and by refugees.Approach and MethodsWe conducted snowball and purposive sampling, semi‐structured qualitative interviews, focus group discussions, and non‐participant observation.FindingsOur study found that refugee‐led microfinance groups have created a loan structure that is successful for refugees—because it was developed by refugees—with low default rates. This success is underpinned by strong community trust between members. These groups access vulnerable populations important to humanitarian organizations, including women, single mothers, unregistered refugees and the very poor. However, despite filling an important gap in livelihoods assistance—the provision of business capital—refugee‐led microfinance groups lack large amounts of capital to loan members, and do not feel they provide adequate business, livelihoods and financial literacy trainings.Policy ImplicationsOur findings suggest that non‐governmental organizations (NGOs) should support existing groups through offering safe spaces to hold meetings, and with financial and business trainings. Debunking stereotypes of refugees held by financial providers, and advocating for refugees’ financial rights remains crucial. Providing loan capital to groups to enable members to take out larger loans may offer another means of support, but collaboration between formal microfinance institutions or NGOs and refugee‐led groups must reinforce rather than devalue the networks of trust that contribute to grassroots savings and loan groups’ success.

Trick or Treat: Does a Microfinance Loan Induce or Reduce the Chances of Spousal Violence against Women? Answers from India.

It is a common belief that microfinance plays a dual role of poverty alleviation and socioeconomic upliftment of its women participants. However, there are enough researches that negates the positive impact of microfinance loans on spousal violence. Recognized as one of the most predominant social evils, violence against women is not only a violation of their human rights but also an act of exploitation and denial of freedom. In the present study, we have tried to investigate if microfinance loan takers experience more spousal violence as compared to their counterparts by analyzing the National Family Health Survey IV, 2015-16. Our results indicate that 40.8% of women microfinance participants experience spousal violence. Additionally, the likelihood of microfinance participants to experience spousal violence is much higher than the non-microfinance participants (odds ratio = 1.35, p value = .000). Microfinance programs are designed to increase the individual agencies of women participants, which, in turn, reduce the chances of them becoming victims of spousal violence. However, if the credit program participation induces the woman to be a victim of spousal violence together with becoming financially autonomous, then such hidden costs need to be taken into account while evaluating the effectiveness of the gendered policy design.