Microfinance Market Research Articles

Causal Strategic Inference in a Game—Theoretic Model of Multiplayer Networked Microfinance Markets

Performing interventions is a major challenge in economic policy-making. We present causal strategic inference as a framework for conducting interventions and apply it to large, networked microfinance economies. The basic solution platform consists of modeling a microfinance market as a networked economy, learning the model using single-sample real-world microfinance data, and designing algorithms for various causal questions. For a special case of our model, we show that an equilibrium point always exists and that the equilibrium interest rates are unique. For the general case, we give a constructive proof of the existence of an equilibrium point. Our empirical study is based on microfinance data from Bangladesh and Bolivia, which we use to first learn our models. We show that causal strategic inference can assist policy-makers by evaluating the outcomes of various types of interventions, such as removing a loss-making bank from the market, imposing an interest-rate cap, and subsidizing banks.

Competition, Performance and Portfolio Quality in Microfinance Markets

Growing competition in microfinance has been blamed for multiple borrowing, over-indebtedness and loan repayment crisis in recent times. Using the Boone indicator as a proxy for competition, in this paper we investigate how competition impacts the outreach, financial performance and loan portfolio quality of microfinance institutions (MFIs). The analysis is based on data from 568 MFIs in ten vibrant microfinance markets (Bangladesh, Bolivia, Ecuador, India, Indonesia, Mexico, Nepal, Nicaragua, Peru and Philippines) for the period 2003–2014. We control for potential endogeneity of MFI performance, competition and other covariates by employing the generalized method of moments (GMM) estimation technique. We find that increased competition leads to higher profitability and better loan portfolio quality of the sampled MFIs, but worsens depth of outreach to the poor, which is an indication of mission drift.

Construction of the system of internal control in microfinance organizations for AML / CFT purposes

The article deals with the main characteristics of a microfinance market in the Russian Federation, reflects the main regulatory and legal framework for regulating the core activities of microfinance organizations and activities to counter money laundering and terrorist financing. The work shows the importance of internal control for AML / CFT. The purpose of the article is the development of a few activities that should be carried out by the internal control service in microfinance organizations for AML / CFT purposes. Keywords: Microfinance organizations, regulation, control, terrorism, money laundering, legalization.

Exclusion of Transgender from Microfinance Market: Field Study from Odisha, India

Exclusion of Transgender from Microfinance Market: Field Study from Odisha, India

Анализ основных проблем российского рынка микрофинансирования

Анализ основных проблем российского рынка микрофинансирования

Loan demand in Jordanian microfinance market: interest rate elasticity and loan-acceptance prediction via logistic regression

Currently, more and more competitors enter the Jordanian microfinance market, offering a greater range of differentiated loan products, aggressive interest rates and loan terms. Our goal is to formulate loan-acceptance prediction methods and, ultimately, pricing strategies for Jordanian microfinance products by studying the customer behaviour of one of the three largest microfinance institutions in Jordan with a particular focus on interest elasticity of demand. We examine the hypothesis of a low interest rate elasticity of demand, and the possibility of increasing the interest rate without cannibalizing loan demand. We plan a methodology to pin down average interest rate elasticity by determining the driving factors affecting the demand. The methodologies we use are based on empirical demand studies and a logistic regression dependence model for loan demand. As a by-product of these studies, we provide a data set including 63 different demographic, educational, household, loan, and other characteristics ...

The relationship between the performance and legal form of microfinance institutions

ABSTRACT This paper investigates the relationship between the legal forms adopted by microfinance institutions (MFIs) and their performance within three scopes: financial performance, social performance, and efficiency in resource allocation. The MFIs studied are classified into four groups: banks, non-governmental organizations, cooperatives, and a fourth group formed of for-profit institutions not characterized as banks, made up of non-bank financial institutions (NBFIs) and rural banks. The data used are annual and cover the six years from 2007 to 2012. The quantitative regression model with panel data was used together with dummy variables to compare between the four groups of legal forms, except for the group made up of NBFIs and rural banks, which was not represented by any dummy variable. 304 MFIs from 59 countries made up the sample. In the study it was observed that larger MFIs have higher profits, higher returns, and higher operational self-sufficiency rates than smaller MFIs, indicating that MFI growth could enable consolidation in the microfinance market. The results also indicate that for smaller MFIs the way to consolidate and improve the indicators could be through assimilating or merging with other MFIs. It was also noted that non-bank financial institutions and rural banks are able to serve more customers and that cooperatives provide smaller loans, causing a bigger social impact, and that they obtain higher returns and profits. The results indicate that these legal forms may be the most appropriate for the microfinance market.

ПРИСУТСТВИЕ БАНКОВ НА РОССИЙСКОМ РЫНКЕ МИКРОФИНАНСИРОВАНИЯ: ПРИЧИНЫ, ТЕНДЕНЦИИ, ПОСЛЕДСТВИЯ

The article deals with the problem of banks’ active entering on the microfinance market through bank-affiliated microfinance institutions (MFI). The subject of this article is Russian MFI’s market; aims of this article are to reveal consequences of bank’s expansion on microfinance market and to develop recommendations for further functioning considering current trends. During the research there has been shown a specificity of MFI’s functioning; also there have been considered MFI’s functions and there has been given a description of MFI’s main forms, i.e. microfinance company and microcredit company. Reasons of banks’ entering on MFI’s market have been analyzed. Actual consequences of “bank” MFI’s entering the microfinance market have been reflected. As a result of the research, a conclusion has been drawn about the fact that banks’ presence on microfinance market is at variance with its origins – microcrediting of population and subjects of small and medium business on reductive conditions. For the protection of MFI’s market’s origins it has been advised to divide this market into two segments (“bank” and “non-bank” segments) with their own approaches in regulation. Such market’s segmentation would allow one to ensure competitive advantages for different kinds of MFI which should provide profitable condition of crediting for multiple groups of borrowers.

РОЛЬ ФИНАНСОВОЙ ЛОГИСТИКИ В РАЗВИТИИ РОССИЙСКОГО РЫНКА МИКРОФИНАНСИРОВАНИЯ

Based on the study results, it’s been proved and justified that financial logistics plays an important role in the qualitative development of the Russian microfinance market. The principles of financial logistics enable one to solve such problems as limited sources of funding, deterioration of the portfolio of microfinance organizations, increase in the cost of financial logistics flows. The introduction of the principles of financial logistics in case of optimization of activities in management, planning and control of financial flows makes it possible to achieve such goals of running microfinance organizations as maintaining a stable, competitive position on the market - maintaining current positions; improving the quality of the microfinance organization’s portfolio; further development of the microfinance organization: selection of more promising areas of activity, an increase in the quantitative and qualitative component on the market (regional development of the structure, improvement of the quality of financial, material and other logistic flows, expansion of a product range, management system innovation, improvement of operating activities, etc.) The article describes main stages through which the logistics process should pass to solve the abovementioned problems (planning of resource flows, organization of logistics processes and monitoring).

Do microfinance investment managers add value, and how?

The purpose of this paper is to analyse and describe whether or not microfinance investment managers add value for their clients and investors, and how, which is important to enhance the understanding of the microfinance investment market. This is achieved by analysing whether microfinance investment managers deliver on their promise of a double bottom line with social and financial performance. This analysis is based on a database of a pioneering microfinance investment manager, including data on 1,465 loans to microfinance institutions (MFI) from 2003 to 2014. The results are based on descriptive analyses and a logistic regression analysis. The results of this paper’s analysis provide the following indications: First, microfinance investment managers add value by acting as stewards for socially responsible investors. Second, microfinance investment managers as intermediaries have provided a predictable and stable source of funding to MFIs as regards interest rate costs and loan duration to maturity over the past 10 years, despite the financial crisis in 2008. Third, the microfinance market is associated with high credit risk and microfinance investment managers provide risk management and diversification.

Bridging the 'Missing Middle' between Microfinance and Small and Medium-Sized Enterprise Finance in South Asia

With maturity in the microfinance market in South Asia, it is observed that some microfinance members’ needs grow beyond the boundaries of traditional microfinance group loans. In addition, there are other small enterprises whose needs are not met by microfinance institutions or commercial banks. It is important to address the financing needs of these firms given their employment potential, and hence this issue is on the policy agenda of the three countries studied in this paper: India, Bangladesh, and Pakistan. Drawing on interviews with chief executives of lending organizations and desk research, this paper reviews the options currently available to such firms in each country, the lending models being used, and recent policy initiatives to promote them. Based on the country experiences, the features of successful lending models for this segment and the specific challenges that need to be addressed are summarized and conclusions drawn.

The Miracle of Microfinance? A 2016 Ethical Assessment

This entry focuses upon the current state of microlending activity, and particularly for-profit activity, with ethical analysis of such lending, particularly as it pertains to prospects for poverty alleviation and development for the global poor. Several specific events have lately altered the characteristics of microlending and the general assessments of its prospects: most notably the collapse of the for-profit microfinance market in Andhra Pradesh late in 2010 and research previously pursued within the same state of India that would greatly reduce our estimation of the promise of microcredit for poverty alleviation. This brief piece of writing indicates, but can hardly serve to argue fully, two conclusions. First, that current views of microlending, for better or worse, will tend to promote economic exclusion of the poorest. Second, because the advantages and disadvantages of microlending for poverty alleviation and for women's empowerment have a great deal to do with the specific circumstances of lending, unpromising results found in some circumstances may be taken with a grain of salt.

Doing Bad by Doing Good? Theft and Abuse by Lenders in the Microfinance Markets of Uganda

Microcredit transactions in developing countries create risks for borrowers that are routinely overlooked in the literature. This paper argues that common microfinance-lending methodologies that allow lenders to collateralize loans and unilaterally collect this security create opportunities for malicious lenders to steal from clients in good standing. In places where any lender can simply call itself a “microfinance institution” (MFI), opportunistic lenders can use the halo effect associated with microfinance to encourage borrowers to make themselves unusually vulnerable to theft. Evidence of these abuses can be seen in a case study of Uganda, where theft and fraud by a small number of microfinance institutions created a large-scale crisis and contributed to a precipitous decline in trust in the financial sector as a whole. Even when it occurs only on the margins of the sector, I conclude, this type of opportunism may have problematic implications for all MFIs and undermine efforts to increase financial inclusion. This possibility provides a new impetus to consider innovative regulatory approaches for microfinance.

Microfinance market and social media marketing

Electronic marketing and especially the rise of social media marketing, has made Microfinance Institutions (MFIs)to have the opportunity to talk to thousands of customers, send out messages, get fast feedback, and experiment with offers at relatively low costs. Social media is perceived by consumers as a more trustworthy source of information regarding products and services than business-sponsored communications transmitted via the traditional elements of the promotion mix. Social media channels help MFIs to communicate and organize themselves together, and allow them to reach out and relay their messages to a larger group of people in order to create awareness and promote brand. The aim of this paper is to investigate at what extent social media platforms are being used by microfinance institution as a communication tool with their clients and to identify how organization engaged in social media efforts are expanding their opportunity in reaching their target market. This study also tries to measure the effectiveness of social media marketing in the development of microfinance sector in Albania. The methodology used includes a structured questionnaire developed to collect the required primary data from MFIs operating in Albania, which were distributed and filled out. The data were analyzed and presented in the respective results and findings.

Do Microfinance Lenders Easily Reach an Optimal Welfare? Evidence from a Maximization Lenders' Utility Function

Market segmentation characterized by price heterogeneity appears as a failure of classical view of market equilibrium. We suppose that an existence of specific asset pricing determines the wealth level of lenders. In microfinance, we look at the linkages between the welfare of lenders and market segmentation degree. For that, we used a maximization program where a lender utility function is defined. One of the results is that high number of lenders determines their portfolio diversification capacity. In a context of price inelasticity and price discrimination of financial demand for microfinance products, the microfinance market appears as highly segmented but not highly efficient if we consider lenders’ returns. Moreover, an increase of average yield and average amount of initial loans positively improve the utility level of lenders. So, the improvement of microfinance lenders welfare is probable, but highly constrained by the behavior of some important financial factors.

The Impact of Micro Finance Institutions on Economic Growth of Morocco

The Moroccan banking system is characterized by great diversity and is largely modeled on the French banking system. It includes banks and other institutions working in specialized areas such as, agriculture. At the end of 2011, the banking sector comprised eighty five institutions, with the Bank Al Maghrib (BAM) as its central state institution. This system includes nineteen banks, thirty five finance companies, six offshore banks, thirteen Micro Finance Institutions and twelve other institutions. The total number of banks has not changed since 2009, whereas the number of finance companies has declined. In contrast, the area of microcredit was reinforced. After several years of growth, the microfinance sector in Morocco began to experience some problems in 2008. The crisis in Morocco started with the crash of one of the largest MFIs and jeopardized the whole system. Reasons given for the crisis were mainly the unsustainable growth of the sector, but also the high market concentration of MFIs, multiple indebtedness, the lack of controls and monitoring systems, nonperforming loans and delinquency problems. The microfinance market is very concentrated, and clients are mainly allocated among the four biggest MFIs accounting for over 90% of client outreach. From 2003 the amount of active clients rose from almost 308,000 clients to 1,353,000 clients in 2007.

Competencia y calidad de cartera en el mercado microfinanciero peruano, 2003-2015

The aim of this study is to analyze the relationship between competition and loan portfolio quality in the Peruvian microfinance sector. To make this analysis the market is segmented into three groups of microfinance microfinance institutions IMFs), considering the average volume of its loans. So that, in the first group (large IMFs) entities of higher average volume of loans are located, in the second group (medium IMFs) entities with an average volume of loans are located and finally, in the third group (small IMFs) are entities with lower average loan volumes.This segmentation reflects the heterogeneity of size for loans between IMFs. The results show the Lerner index decreasing over time, for both the group of large IMFs and the group of small IMFs, showing a decrease of market power and increased competition in these two groups of entities. In the group of medium IMFs behavior Lerner index shows a growing trend in the last months of the period studied thus indicating a greater market power and less competition in this group of microfinance operators. On the other hand, an inverse relationship between the Lerner index over delinquency rate in the three groups of IMFs is found, implying that increased competition in the Peruvian microfinance market has deteriorated the quality of loan portfolio the period analyzed. This result is obtained by controlling the behavior of other important variables to explain the delinquency rate such as the business cycle, credit expansion, efficiency and profitability of institutions, and the effect of the international financial crisis of 2008.

Microfinance for sanitation: what is needed to move to scale?

The sanitation sector is gradually realizing that the effectiveness of approaches such as Community-Led Total Sanitation (CLTS) is limited by inadequate access to finance. Households are not able to construct durable facilities and sanitation services are unable to develop so as to respond to demand. At the same time, there is fierce competition among microfinance services providers that is pushing institutions towards more remote customers and to offer innovative products. In addition, the rise of mobile banking and digital finance has lifted many poor people out of financial exclusion. These factors have created a nexus between microfinance and sanitation with high growth potential. However, the sanitation microfinance market remains small to date. Since 2010, the SHARE research consortium has investigated global experiences and lessons for using microfinance to develop sanitation services. A SHARE action-research in Tanzania triggered selected financial institutions to offer financial products for sanitation and generated lessons for scaling up sanitation microfinance. This article presents the findings from the SHARE research, in the context of broader developments in the microfinance markets and key findings from other donor-led initiatives.

Lack of Access or Crowded Markets? Towards a Better Understanding of Microfinance Market Penetration

“Market penetration” is often used as a criterion for microfinance funders, particularly investors, in microfinance asset allocation and portfolio construction. For years, low global market penetration has served as an argument of why investing in microfinance was advisable, often without sufficient differentiation between countries. Precise measures are, however, needed in order to better differentiate between those markets that are deeply penetrated and those with significant potential for expansion. This paper proposes a new set of indicators to measure market penetration in microfinance markets. It presents a unique dataset of microfinance market penetration rates for loans and deposits for a large set of countries, and implements refined measurements for a smaller selection of countries.

A Qualitative Analysis of People Views of Microfinance in Lebanon

Introduction: In the Middle East and North Africa MENA microfinance struggles to find momentum. The Lebanese economy has been struggling through the years due to domestic and external, political and social instability. Although As of 2014 there are around 23 MFIs that are mainly subsidized by the USAID, operating in the country, the Lebanese microfinance market is mostly dominated by three microfinance institutions: Al Majmoua, Vitas and Al Quard Al Hassan Association. Methodology: A quantitative approach using a standardized questionnaire would analyse the perception of the average Lebanese towards microfinance. A questionnaire was designed and validated. Results: Almost half of the respondents earn a monthly income ranged between $100 and $600. Almost 52% of the respondents were university graduates, around 25% finished secondary and high school, and 12% hold a masters or MBA degree. Topic understanding towards microfinance differs across Lebanese areas. The highest percentage of respondents who claim that microfinance offers financial services to low income people are the residents of Beirut 35.1%, Bekaa 30.8%, and South of Lebanon 24.7%. Higher levels of topic understanding were associated with lower levels of age range. Al Quard el Hassan foundation was regarded as the most known micro financial institution operating in Lebanon. In general, Lebanese people tend to believe that microfinance can play an important role in reducing unemployment rates and poverty levels in Lebanon. When people were asked what would motivate you to get a loan from MFIs, most of the respondent 57.4% across all the Lebanese region claimed that it was the need for money to satisfy a need such as paying back a loan, to fix something at home, or for selfconsideration like buying a car. Conclusion: Our findings showed that in general Lebanese tend to have a positive perception towards microfinance. However, most Lebanese perceive microfinance as the process of just providing loans without specifying for whom it is intended. We advise that government introduces laws to regulate the microfinance market.