Microfinance Practices Research Articles

Microcrediting and Investment Analysis in the Context of Environmental, Social, and Corporate Governance

This article is devoted to the analysis and development of ranking criteria for microcredit organizations to increase their investment attractiveness. The need to solve problematic issues is associated with the need to minimize risks before the start of the lending process through the correct selection of participants in the credit transaction. This study used the methods of content analysis and interpretation, correlation analysis and regression modeling, ranking, and clustering to assess the factors affecting the effectiveness of microcredit organizations. The most attention is paid to identifying key indicators that help improve the quality of financial services provided and their availability for various categories of borrowers. The results show that factors related to lending volumes and borrower characteristics have a significant impact on the quality of microcredit organizations. Of interest is the interpretation of classical financial indicators of microcredit organizations in the context of the principles of environmental, social, and corporate governance (ESG). The proposed approaches and conclusions can be used to improve the practice of microfinance and develop management and regulation strategies in this area.

Mapping the intellectual structure of microfinance and women's empowerment: A bibliometric analysis

The Sustainable Development Goals (SDGs) emphasize promoting and protecting women's rights and privileges. As a result, an increasing body of academic literature describes the various actions taken by different stakeholders to empower women. Amongst the initiatives implemented in many nations, microfinance and financial inclusion programs play a major role. This article aims to present an overview and synthesis of the research on the notion and practices of microfinance and its influence on entrepreneur women's empowerment. In order to do so, this study uses bibliometric techniques over a selection of papers extracted from the Web of Science database, to disentangle the knowledge structure of this academic field. According to our findings, the study of microfinance and women's empowerment is growing, with 470 publications, 963 authors, 67 nations and 36 research areas. Research topics include poverty reduction, gender issues in entrepreneurship, microfinance and women empowerment, and women in microcredit. An additional bibliographic coupling analysis has revealed the hottest research topics, showing the main gaps in the literature that suggest potential directions for future research.

Achieving Sustainable Development Goals Through Microfinance: An Incremental Steps Towards Growth.

In order to access a brighter and more sustainable future for all by the year 2030 the UN Members have adopted the Sustainable Development Goals (SDGs). The three most important global challenges they tackle are ensuring that everyone lives in peace and prosperity, protecting the environment, and ending poverty. The 17 Goals are critical worldwide development initiatives that balance social, economic, and environmental sustainability. They are all interconnected and interdependent. At present Microfinance Institutions (MFINs) are playing very crucial role to make banking and financial services available for remote people which is contributing directly or indirectly for achievement of SDG. Among four of SDGs, notably No Poverty, Quality Education, Gender Equality and promoting Decent work & Economic growth, and reducing inequality, are closely tied to the concepts of microfinance. Their growth is depicted through increasing Gross loan Portfolio (GLP) in recent years. The purpose of this paper is to look into how these 4 goals can be met in India through microfinance practices. For investigating the linkage between SDG and Microfinance tools like CAGR, Pearson Correlation has been used.

Microfinance practices versus sustainable welfare

This study primarily investigates microfinance practices for sustainable community welfare. Microcredit aims to provide credit to poor people to help empower communities and reduce poverty. Community empowerment strategies can be carried out by increasing the productivity of poor communities to increase their income. A basic approach that emphasizes that the poor move from their current situation to a better position by empowering MSMEs through the distribution of microcredit by micro-financial institutions. Changes that will result in sustainable prosperity, decreasing inequality between regions, and reducing community income gaps. This research will use a qualitative approach using the case study method, which does not use statistical generalizations but uses logical and replicative generalizations. This research uses multiple cases with varying characteristics as research informants. Two microfinance institutions and ten cases of MSMEs will be selected in this research. The study was conducted at Sharia Microfinance Institutions as providers of microcredit and MSMEs receiving microcredit in the Southern region of the Special Region of Yogyakarta, Bantul. This district was chosen because Bantul has the highest poverty rate. This condition is the focus of attention for maximum treatment. This research will use three data collection methods: interview, observation, and documentation, to maintain the data's validity and reliability. Data triangulation was used to test the validity of the data. The data analysis process in this research uses two stages: descriptive analysis and within-case analysis. The research results found that microfinance practices carried out through Sharia Microfinance Institutions (SMFI), apart from focusing on providing accessible financing facilities, have also provided direction in developing MSMEs and taking action towards community welfare. SMFI regularly provides business development training to MSMEs

Asymmetric impact of microfinance on economic growth: Evidence from Bosnia and Herzegovina

This study explores the correlation between microfinance loans (MFL) and economic growth in Bosnia and Herzegovina (Bosnia). It utilizes the non-linear Autoregressive Distributed Lag (NARDL) method to examine cointegration and short-run dynamics by analyzing quarterly data spanning from 2010 to 2022. The findings underscore the link between MFL shocks and long-term economic growth. The study unveils the unique effects of both positive and negative MFL shocks on growth, suggesting a non-linear relationship between microfinance loans and economic growth in Bosnia. However, the study concludes that the impact of MFL on Bosnia's GDP is adverse. Short-term fluctuations in MFL show no substantial influence on Bosnian economic growth. The coefficient of the error correction model is both negative and significant indicating the stability of the long-term relationship. This implies a rapid correction, with 46.4 % of the previous quarter's imbalance rectified within the current quarter. While our results are based on a single country, they align with recent criticisms of microfinance practices. Furthermore, our study offers a novel approach as it represents the first examination of the asymmetric relationship between MFL and GDP in Bosnia, providing valuable policy recommendations.

Effect of Microfinance Practices on Growth of the Bodaboda Industry in Kenya; A Case of Kamukunji Sub-County

This research project aimed to analyze the effect caused by microfinance practices on the growth of the Boda Boda industry in Kenya (a case of the Kamukunji sub-county). A sample size of 150 out of 750 Boda boda riders of the target population in the Kamukunji sub-County, served as the basis for this study. The researcher used a descriptive study design with both qualitative and quantitative research methods being used. Questionnaires were used in data collection. The data was analyzed using statistical techniques such as regression analysis and descriptive statistics. Data was presented using bar graphs, pie charts, and tables to aid in effectively analyzing the results using SPSS software at 95% confidence level. Data was analyzed using tables and simple percentages for easy statistical inference; the hypothesis was tested using multivariate regression analysis. Findings from the study revealed that the interaction between loan accessibility, motorcycle ownership, microfinance training, and savings has surfaced as pivotal elements intricately interwoven into the fabric of industry expansion and empowerment specifically multiple regression results indicated that 91.9 percent of changes in growth are predicted by microfinance practices variables under study giving and the remaining percentage goes by other factors that are not in this study. Some of the recommendations drawn from the study are to enhance training initiatives, champion financial inclusion, foster motorcycle ownership and embrace microfinance education.

Fostering Inclusive Growth: Exploring Gender Dynamics and Loan Sizes in Microfinance Institutions

The financial landscape has witnessed a growing focus on the role of women in driving economic development and achieving sustainable development goals (SDGs). The global pursuit of the SDGs, notably in gender equality and women's empowerment, has highlighted the importance of women's economic involvement. Recognizing the critical role that microfinance institutions (MFIs) play in encouraging inclusive economic growth and poverty alleviation, this study investigated how strategic gender dynamics within MFIs affect loan size. The study addresses a critical gap in understanding the gender dynamics within MFIs concerning women's presence at various echelon positions and their involvement, notably evaluating their impact on loan size. The study examines a meticulously curated dataset consisting of 1295 MFIs from 102 countries by analyzing selected gender dynamics such as women's echelon position, women's focus, gender diversity, target market and outreach. The study's findings, distilled into four configurational solutions, gave fascinating insights into the circumstances under which numerous factors interact to determine loan size in MFIs. Core conditions such as target market, women focus and female outreach were identified as critical drivers of loan size outcomes in various configurations. The implications of women's focus were particularly noteworthy, indicating that a concerted effort to prioritize women's engagement can significantly contribute to increased loan size in MFIs. The findings of this study serve as a foundation for establishing a more equitable and prosperous future through empowered women and effective microfinance practices on a global scale.

Prospects of Islamic Microfinance: Maqasid Shariah Perspective

Islamic microfinance is one of the instruments that has been scientifically demonstrated to help the poor and needy. The instrument aims to help the underprivileged by giving them access to financing based on Shariah principles for lucrative activities, primarily small and micro-businesses. Notwithstanding that the Islamic microfinance providers claim that they comply with the Islamic rulings (hukm), little attention has been paid to the extent to which the practice addresses the maqasid (objectives) shariah. Such claim of Shariah-compliant practice will be rendered meaningless if maqasid shariah are not realised. Hence, the present paper aims to explore the significance and prospects of the Islamic microfinance practice from the standpoint of maqasid shariah. The library research, inductive, deductive and analytical techniques are employed consistently. The findings reveal that Islamic microfinance has a significant roles in realising the major maqasid shariah, namely: safeguarding the religion, human life, intellect wealth and progeny. These prospects convey the perception that much effort needs to be done to encourage the offering of Islamic microfinancial products at the Islamic finance sectors at large. Future studies may propose maqasid shariah guidelines for the better practice of Islamic microfinance. Keywords: Islamic Microfinance, Maqasid Shariah, Poor Population, Prospects

The Role of Islamic Microfinance in Poverty Alleviation: Evidence from Pakistan

This study aims to develop and propose an Islamic microfinance model that can be used for poverty alleviation in Pakistan. Other than investigating poverty, other interrelated aspects were also considered in which entrepreneurship, conventional microfinance, and Islamic finance were included. Moreover, by moving beyond and further exploring, this research presents various uses of Islamic microfinance to reduce poverty. A set of primary data was collected through interviews to carry out this research. Initial findings of the study unveil that poverty exists concerning common perceptions such as lack of necessities, unemployment, poor health, and insufficient financial resources. However, child selling, unethical ways of earning such as begging, robbery, and incompetency of the skilled person were the findings representing poverty from totally different perspectives. Moreover, the studied results also reveal that few respondents were aware of the concept and use of conventional microfinance. Still, at the same time, all the respondents represented the forbiddance of interest. Findings also represent the unawareness about Islamic microfinance's concepts, practice, and importance. This research is helpful as it presents the idea and the use of Islamic microfinance for the impoverished people of Pakistan and how it can be a beneficial alternative for reducing poverty. Moreover, it also seeks the attention from the financial institutions in the Country that how the beliefs and expectations of poor people are important in reducing their poverty. The significance of this study broadens the scope of the neglected concept of Islamic finance generally and Islamic microfinance particularly.

Why Does Microfinance Target Women? Empirical Evidence from Nigeria

Over the last three decades, microfinance has featured in the Global South development policies as a potential contributor to inclusive financial services, poverty reduction and women empowerment. However, why women are the primary customers of microfinance banks and institutions remains an ongoing research subject. This article presents a study of women in Rivers State, Nigeria, using qualitative research approach. It was found that microfinance financial inclusion objectives in Nigeria are targeted at the active poor—those who own small business and rely on group lending methodology and collateral substitutes to minimize lending risks. Of the active poor, microfinance prioritizes women because of gender stereotypes that women have more “integrity,” show more commitment to loan contracts and are more susceptible to social pressure and sanctions. Targeting women is, therefore, a deliberate and strategic policy to advance the interest of microfinance backers. Therefore, this author contends that microfinance is not a scheme that provides whole-scale financial inclusion and poverty reduction. Instead, it seeks to leverage income-generating activities of the active poor to extract profits. Consequently, the article contributes towards illuminating the role of gender and local context in microfinance practices.

Liquidity defaults and progressive lending in microfinance: A lab‐in‐the field experiment in Bolivia

AbstractMany microfinance institutions (MFIs) use dynamic incentives in combination with progressive lending schemes to reduce defaults. However, the specific role of progressive lending has never been tested empirically, while observational evidence in other contexts points to potentially adverse effects. Using an experimental approach, we study the impact of progressive lending on overborrowing, attending to the possibility that progressive lending may actually increase liquidity defaults. We organize a framed field experiment in the municipality of Coroico, Bolivia, inviting 271 members of an MFI to participate in an experimental game. In Bolivia, the penetration rates of microfinance are among the highest in the world, progressive lending systems are a common practice, and the concept and practices of microfinance are well known among most people. We find that participants who borrowed over multiple rounds with progressively increasing borrowing caps showed increased liquidity defaults once the caps became unconstraining compared to those without progressive lending. We speculate that this result stems from anchoring borrowing loan requests on the credit limit set by the lender and formalize this rationale in a model for credit demand and naive borrowers. MFIs should consider the potential perverse anchoring effects of progressive lending when designing policies aimed at reducing overborrowing.

The Role of Micro Finance Institutions on the Development of Micro Enterprises (MEs) in Sri Lanka

Aim: The study investigates the impact of microfinance practices on the growth of micro-enterprises (MEs) concerning the Central Province, Sri Lanka. It has been discovered that the growth of microbusinesses is dependent on gender, age, education level and nature of the industry.
 Design/Methodology/Approach: Multinomial Logistic Regression models was applied in this study. Multinomial logistic regression is frequently used for the analysis of categorical response data with continuous or categorical explanatory variables. Parameter estimates are usually obtained through direct maximum likelihood estimation. Two models were used to test the hypothesis concerning the three practices, micro-credit, training and advisory services. Primary data were obtained from 200 registered microenterprises (ME) owners in the Central Province through convenience sampling methods. Data collection was conducted using a self-structured questionnaire.
 Results and Conclusion: According to the results, microfinance practices have a significant relationship with the development of MEs, while Microcredit and advisory services have a significant impact on the development of MEs. Training programmes have not significantly impacted on the development of MEs. The research concludes that microfinance as a whole educates and helps to develop micro financed micro-scale enterprise businesses and positively impact those families in the Central Province, Sri Lanka.
 Research limitations/implications: Data were limited to select only one province in Sri Lanka out of nine using a self-structured questionnaire. Also considering the response rate and sample size, there are limitations to generalize the findings. This research was restricted to three variables micro-credit; Training and Advisory services impact of other factors that can influence the growth of MEs did not fall under the scope of this study.
 Originality and Value: The impact of microfinance practices on MEs growth in Central Province in Sri Lanka is an under-researched area of study. The findings of this study can act as a guideline in the future for decision-makers to identify factors that influence more on MEs development.

Does Islamic microfinance serve maqāsid al-shari'a?

The purpose of this paper is to analyze whether the practice of Islamic microfinance serves maqāsid al-shari'a (underlying intents of Islamic law) or not. The paper uses a qualitative methodology. Using the literature, five key factors of maqāsid al-shari'a pertaining to an Islamic economy and mal (wealth) are developed, which are then used as a base of analysis for analyzing whether the practice of Islamic microfinance serves maqāsid al-shari'a. The research further uses an Islamic microfinance window based in Kyrgyzstan as a case study. The empirical data and analysis indicates that Islamic microfinance contributes to serving many key aspects of maqāsid al-shari'a, including: (1) Poverty reduction (2) economy enhancement (3) enhancing social condition of society (4) wealth distribution and circulation, and (5) enhancing intellectual levels of society. This research may have contributed to knowledge by possibly being one of the first researches analyzing the impact of Islamic microfinance on maqāsid al-shari'a, by using contemporary empirical data from Kyrgyzstan (2017 onwards) as a case study.

Methodological Dilemma in Microfinance Research: Applicability of a Qualitative Case Study Design

This paper sheds light on the methodological dilemma in microfinance research and examines the feasibility of conducting a qualitative case study. Microfinance research is dominated by quantitative impact studies. However, the issues of process and implementation are critical to make an impact. The paper argues that a qualitative case study method can be used as a supplement or an alternative to quantitative methodology, because it is context-specific and naturally enquires research problem. The in-depth and in-detail inquiry make the findings more robust, and readers can understand the meaning holistically by reading stories and quotes. The case study can be used to prove microfinance impacts and to improve microfinance practices.

Exploring novel Islamic monetary system

PurposeThe purpose of this paper is to explore an alternative Islamic monetary system in which money is created from supply chain grassroots based on work effort and is accessible to people as long as they offer goods and services demanded by others.Design/methodology/approachThis study adopts the critical realism approach and highlights the challenges with the present monetary system. It also proposes to address these challenges through an alternative monetary system in which money creation starts from the grassroots of the supply chain. The proposed system extends the real-world complementary currency concept of barter to a holistic electronic trading platform, which includes chain barter alternatives, licensed warehouses and electronic warehouse receipts within the Islamic microfinance practice, thereby facilitating cross-border trade and international trade payments. An electronic currency, valued at the worth of goods produced in the supply chain, is introduced as the medium of exchange.FindingsThe problem with past monetary systems can be addressed through current information technology and supply chain management to enable a monetary system and money creation based on real economic transactions.Originality/valueThis study proposes an alternative monetary system, which is only possible by harnessing supply chain management with money creation. The proposed monetary system may be considered, should the present system fail or need to be improved.

Effectiveness of Microfinance Policy in Nigeria, 2010-2017

This study evaluates the effectiveness of microfinance policy in Nigeria from 2010 to 2017. The Study used AMJU Microfinance Bank as its sample and the objectives of the study are to examine appropriate client targeting mechanisms that enhance good microfinance practice aimed at poverty reduction and how client impact evaluation improves operational efficiency and effectiveness. Propensity Score Matching (PSM) technique of micro econometric framework was used to establish the counterfactual for participants. The fundamental evaluation problem of selection bias was treated in the study and primary data obtained through interviews were analysed. The findings show that microfinance client exist rate was on the increase for established clients being significant; and client loan size dissatisfaction for older clients was on the rise and customers that have benefited from micro-credits were better-off than non-beneficiaries. The study concludes that Microfinance is effective in poverty reduction and recommends amongst others that the delivery methodology should be tailored after their operational strategy and target clients; and also, appropriate feedback mechanism be built into their product and services delivery to encourage impact evaluation of participants’ responses, thereby, providing relevant inputs for the formulation of effective National Microfinance Policy in Nigeria. Keywords: Microfinance, National Microfinance Policy, Financial Services, Financial Development Classification: Finance, Micro-credit DOI : 10.7176/JESD/11-2-03 Publication date: January 31 st 2020

Interest-free microfinance in India: a case study of Bait-un-Nasr Urban Cooperative Credit Society

Purpose The purpose of this paper is to understand interest-free microfinance practices in India, identify issues and recommend possible solutions. Design/methodology/approach To achieve the proposed objectives, Bait-un-Nasr (BuN) Urban Cooperative Credit Society, located in Mumbai, India, is considered for the case study. The study is based on both primary and secondary data. The primary data are collected through questionnaires and secondary data from various sources. Performance of the institution is assessed in terms of growth and sustainability indicators. Findings It is found that BuN has been successful in providing interest-free microfinance services in India. A few operational issues have been highlighted and possible solutions are recommended. Moreover, it is found that in comparison to the microfinance industry standards, the performance of BuN has been lower. Research limitations/implications BuN is evaluated from only growth and sustainability aspects and not from the aspect of the socio-economic impacts of its services on the lives of customers. Practical implications This study would become a documented source of interest-free microfinance practices in India. Moreover, the recommendations provided, if implemented, would help BuN in further growth and development. Social implications This study would help create awareness in the society about the practices of interest-free microfinance. Originality/value This paper highlights the interest-free microfinance practices in India that have not received the needed attention. The paper also attempts to identify key issues pertaining to interest-free microfinance with possible solutions.

New trade formations: precarity, pragmatic cosmopolitanism and long‐distance trade in the Caucasus

AbstractFor many ordinary people responding to ongoing post‐Soviet precarity, domestic and transnational trade has become a common choice of livelihood. This article is about the small and medium sized traders who deal in cheap Chinese commodities in the Caucasus –particularly in Georgia and Armenia. It introduces the notion of ‘trade formations’ to account for the multiple ways in which cross‐cultural trade and microfinance practices, as well as stereotypes about national and regional groups and trading minorities, highlight the role of trust, reputation and everyday diplomacy in long‐distance commercial networks. While current trade networks are rooted in the cultures of trade practised under the Soviets, dispositions of pragmatic cosmopolitanism and defensive nationalism often determine who may or may not respond to post‐Soviet precarity by turning to transnational trade, embracing political and religious diversity, and overlooking hostilities, past and present.

The Role of Islamic Microfinance for Poverty Alleviation in Mogadishu, Somalia: An Exploratory Study

This research aims to investigate the current practice of Islamic microfinance in Mogadishu, Somalia and to examine the effectiveness of Islamic microfinance institutions in Somalia on poverty reduction. In total, 65 microfinance recipients participated in the survey. This research adopts a quantitative methodology, using a survey and descriptive analysis. Findings show that the current practice of Islamic microfinance in Mogadishu is serving the poor and that these microfinance activities are effective in terms of obtaining loans, enhancement of standards of living and usefulness of the system. Nonetheless, there is a low level of awareness among the locals regarding the availability of Islamic microfinance.

Microfinance as poverty-shame debt

In an excellent anthropological study of microfinance in Bangladesh, Karim (2008: xviii) argues that it operates as ‘an economy of shame’. That is to say, microfinance is not the benign tool for financial inclusion and empowerment that mainstream development organisations proclaim. Rather, it unintentionally (perhaps) but nevertheless actively deploys shaming techniques in order to maximise loan repayment rates. Karim, however, does not employ an explicit analysis of shame; instead she emphasises its disciplining power for rural women in Bangladesh. Our article builds on this insight but applies a specific psychosocial approach to shame that critically examines a number of the emotion’s harmful practices and outcomes, especially when deployed within microfinance practice. It highlights that microfinance personalises and socialises people’s debt relations, making them a matter for group concern, but that at the same time money-debt’s impersonalising nature results in coercive and disciplinary actions that would otherwise be seen as intolerable. We demonstrate how the active shaming of microfinance participants all too often degenerates into human rights abuses, including violence. The shame of debt and the active shaming that facilitates microfinance’s high repayment rates harms the psychosocial wellbeing of those being shamed as well as their families, and can be linked to a range of concerning outcomes including self-harm and suicide. To conclude, we explore whether the coercion by shame and shaming of microfinance may be linked to its growing use in other areas of development programming.