Small Loans Research Articles

Empowering Communities through Akhuwat Foundation's Microfinance Initiative in Bhakkar, Punjab

Poverty is a global problem with several facets that affect millions of people worldwide. This study investigates the role of microfinance, mostly through the Akhuwat Foundation, in reducing poverty in the undeveloped district of Bhakkar, South Punjab, Pakistan. Akhuwat Foundation provides small loans to the needy to raise them out of poverty. This qualitative study takes an interpretive social science method, combining a meta-analysis of relevant literature with in-depth interviews of stakeholders using open-ended questions. According to the data, recipients primarily use these loans to start businesses, which leads to increased income and, as a result, poverty alleviation. However, limited resources limit the extent of lending, demanding increased loan-giving capacity to reach more people in need. Moreover, respondents require further training in business management or entrepreneurial capacities, which is not addressed by microfinance institutions such as Akhuwat Foundation before loan acceptance. Pre-loan training is required for optimum use of funds for business purposes, which limits microfinance's potential influence on poverty alleviation.

Exploring Adherence to Operational Guidelines Set by Rural Women’s Savings and Investment Groups in Kashari County, Mbarara District

Most Civil Society Organisations (CSOs) in developing countries all over the world are fighting poverty through various strategies such as employment promotion, agricultural and rural development among others. Microcredit has been proven as one of the most effective strategies in poverty alleviation especially through giving small loans to vulnerable populations particularly women without requiring collateral security. This study delved into exploring the adherence to operational guidelines set by the rural women savings and investment groups in Kashari County, Mbarara district. This is a qualitative study that was conducted among rural women in Kashari county Mbarara district. Key findings revealed that all members including those who can’t read and write are aware of the operational guidelines. However, only members who are involved in the day today running of the groups’ activities are more knowledgeable about the operational guidelines, lending rules and procedures and they go ahead to adhere to them. Findings further revealed that members who are not involved in daily running of the groups have not adequately adhered to the operational guidelines as expected. It was further found out that the guidelines which were easily adhered to by most members were mainly to do with subscription as members for instance paying their annual, monthly and weekly subscription and contributions. The lending guidelines were also reported to be easily and keenly followed during the loan appraisal process. This paper concludes that operational guidelines are crucial ingredients in the smooth running of rural women to the savings and investment groups. We recommend that concerted efforts must be directed towards ensuring that both active and non-active members, educated and less or non-educated members are kept abreast with operational guidelines and reminded of their obligations on regular basis.

Pricing models for small and micro loan portfolio insurance

From the perspective of the insurance deductible, this article constructs pricing models suitable for small and micro loan portfolio insurance under realistic conditions, and summarizes relevant pricing laws through examples. It is found that the option attribute of loan portfolio insurance contracts endowed by absolute or relative deductible clause can be used to price small and micro loan portfolio insurance. Meanwhile, owing to the offset effect of the loan portfolio on the credit risk of different single loans, the premium rate of loan portfolio insurance should be controlled between that of corresponding single loan insurance. Moreover, properly adjusting the deductible ratio, insurance period, and composition of the insured loan portfolio can create more space for reducing the insurance price of the loan portfolio or expanding insurance profits. Our study improves the pricing model system of small and micro loan insurance, which has important theoretical value and practical significance for the scientific pricing of loan portfolio insurance.

Loan application due diligence and financing small firms in Africa

ABSTRACT Banks gauge and verify business potential when processing small business loan applications by conducting due diligence on the firm. Although research has examined the factors that influence small business financing, little attention has been given to understanding the due diligence process that informs credit decision making. We address this gap using signal theory to analyze and develop insights from 24 qualitative interviews. Our study identified 11 key hard and soft signals loan officers use to access small business credit risk during due diligence. The key signals include key person risk, change in leadership risk, articulation of company value, adaptation to change, separating business and personal finances, personal reputation, transparency and willingness to share information, data accuracy and completeness, regular account operation, faulty budget and turnover assumptions, and legitimacy of collateral. The implications for small and medium-sized enterprises finance theory and practice are discussed.

Analisis Prosedur Pemberian Kredit pada KSP Kopdit Pintu Air Cabang Koting

This research aimed to define the process of credit approval at KSP Kopdit Pintu Air of Koting Branch. The research method used was descriptive qualitative, with primary data as the main source. Analysis of the credit approval process was conducted through observations and interviews. The result of results indicated that the credit granting process at KSP Kopdit Pintu Air of Koting Branch consisted of several stages such as credit application, credit analysis, credit disbursement, and credit assistance. Although the credit granting process at KSP Kopdit Pintu Air of Koting Branch had been generally effective, principle of granting credit based on 5C had been well implemented at KSP Kopdit Pintu Air of Koting Branch was not applied to small loans.

Digital Transformation in Financial Services and FinTech: Trends, Innovations and Emerging Technologies

Purpose: This research investigates the transformative impact of digital innovations within the financial services sector, particularly focusing on the evolution of digital banking and FinTech. The study aims to explore how digital banking products are being developed to enhance financial literacy and promote financial inclusion across diverse populations. Methodology: The research employs a comprehensive analysis of current trends and technologies, utilizing case studies and data-driven insights to assess the role of blockchain, artificial intelligence (AI), and machine learning in reshaping banking and financial services. The study examines the implications of these technologies on small business loans and wealth distribution. Findings: The findings reveal significant advancements in digital banking products, highlighting the increased accessibility and efficiency provided by these innovations. Emerging technologies have facilitated improved financial literacy and inclusion, particularly by enabling more accurate credit assessments and democratizing access to financial resources. The study underscores the pivotal role of AI in enhancing customer service through personalized experiences and predictive analytics. Unique Contribution to Theory, Policy, and Practice: This research makes a substantial contribution to academic theory by expanding the understanding of digital transformation in financial services. It provides critical insights for policymakers, emphasizing the importance of integrating technological advancements to foster financial inclusion and economic growth. Practically, the study offers strategic guidance for financial institutions seeking to implement innovative solutions, thereby improving service delivery and competitiveness in the evolving financial landscape. The research underscores the necessity for ongoing adaptation and investment in emerging technologies to meet the dynamic needs of consumers and businesses.

О ростовщичестве и преюдициальности в свете постановления Конституционного Суда по делу Филатова

On December 25, 2023, the Constitutional Court of Russia adopted Decree No. 60-P in Filatov case concerning usurious interest. The article substantiates that in interpreting the institution of prejudice, the new approach contradicts the numerous practices of the Constitutional Court itself, in particular, it introduces prejudice on issues of law, and not just fact. In addition, the Decree does not consider the key question of what are the usually charged interest rates in the sense of paragraph 5 of Article 809 of the Civil Code and, accordingly, what are the usurious interest rates? The author’s position on this issue is proposed, taking into account the European and American experience of limiting usury. In particular, it is suggested to unify the interest rate ceilings (caps) and also establish a maximum debt-to-loan ratio for B2C consumer loans and small B2B loans to individual entrepreneurs, regardless of who the creditor is.

The effect of collateral on small business rationing of term loans and lines of credit

Theories of loan contracting in the presence of asymmetric information highlight the key role of collateral in mitigating against credit rationing. However, theory also allows for the use of collateral by ‘bad’ borrowers in order to receive better loan contract offers. In this study, we explore the extent to which collateral can affect the incidence of absolute loan denial and partial rationing associated with smaller loans than requested being offered. Using data from a large survey of UK small- and-medium enterprises, we find significant evidence on the negative effect of collateral. Our results also reveal important distinction between lines of credit and term loans, where the presence of collateral is associated with 3 % less term loan approved compared to overdraft. We argue that even the request (or offer) of collateral for a term loan indicates that either the bank or the firm believes it is a risky bet.

Innovations and Future Development Pathways of Internet Finance Asset Securitization in China: A Case Study of Ant Group

With the evolution of the Internet age, e-commerce giants have established small loan entities to accommodate the booming B2C business model. While these online small loan providers retain the traditional attributes of their counterparts, they are adept at addressing the financing needs of micro-enterprises and individuals. Furthermore, these digital lenders have a broader reach in terms of geography and demographic distribution and possess enhanced capabilities to assess borrowers' creditworthiness. Such strengths make them well-suited for asset securitization, an emerging financing approach. This paper will analyze China International Capital Corporation -Ant Financial special asset management program which is one of the important asset securitizations of Internet small loan in China. The analysis will focus on the basic features and innovations of the structure of the securities. In addition, various economic indicators of Ant Financial will be considered to analyze the effectiveness and risks of Ant asset securitization. This study provides both theoretical and practical insights into Ant Financial Services asset securitization. Moreover, the research has analyzed the reasons behind the suspension of Ant Group's IPO, its subsequent rectifications, as well as the future trends of internet finance in China, providing beneficial reference for other companies.

TRIMMING DOWN POVERTY THROUGH MICROFINANCE IN PAKISTAN

Microfinance refers to the provision of financial services, such as loans, savings, insurance, and other basic banking services, to individuals and small businesses in low-income or developing communities who have limited access to traditional banking services. Microfinance aims to alleviate poverty, empower marginalized communities, and promote economic development by providing financial resources to those who would otherwise be excluded from the formal financial sector. Credit does not play a direct role in poverty reduction; instead, it increases the borrowers' income so that they can be socially uplifted. This study was conducted to find out the role of microfinance in eradicating poverty in Pakistan. Punjab Rural Support Program (PRSP) provides small loans in the rural areas of Pakistan. In this study, three variables, credit, education, and family size, are taken as independent variables, while the borrowers' income is taken as the dependent variable. Data was collected from the rural areas of Tehsil Gujrat to project the impact of small credit. The study also presents some policy measures like expanding the outreach, increasing the amount of credit, etc, given, so that maximum benefits can be dropped to the last end.

Do Multifinance Institutions Matter for Poverty Reduction? Evidence from Indonesia

Microfinance Institutions (MFIs) can help reduce poverty by offering small loans to people who cannot get bank loans due to lack of collateral. However, in Indonesia, access to microfinance institutions is unequally distributed, as shown by the establishment of MFIs in Indonesia, which covers only 22 out of 34 provinces. This condition limits their impact on poverty reduction. This study examines how access to MFIs and the loans they provide affect poverty rates in Indonesia, using cross-sectional data from 22 provinces between 2016 and 2022. The results show that access to MFIs and the loans they provide do not significantly reduce poverty. This is due to poor infrastructure, low-quality MFI services, and insufficient loan amounts. The study also found that education lowers poverty, unemployment increases it, and agriculture helps reduce it. To improve poverty reduction, the government should improve infrastructure and extend MFI coverage to more provinces. Additionally, MFIs should increase their loan amounts to make a bigger impact.

Власть и сельскохозяйственная кооперация России в начале XX века

The article examinestherelationship between government and agriculturalcooperation in Russia.First of all,the oppressive activities of the central office, which was represented by various ministries and departments, as well as the activities of the local administration, represented by the Institute of governors, provincial committees on small loans, inspections of small loans at local branches of the State Bank, zemstvo chiefs, and the police are being investigated.

THE ROLE OF ARTIFICIAL INTELLIGENCE IN IMPROVING MICROFINANCE PRODUCTIVITY

More than two billion people do not have access to banking institutions, this is where the important role of microfinance distributes small loans to the poor so that they can access the financial industry. This study aimsto determine the role of artificial intelligence in improving the productivity of microfinance institutions. The qualitative research was employed with a library study approach by reviewing 25 selected journals indexed by Scopus and supported by Rank 1 and Rank 2 Science and Technology Index journals, with research published in 2000 – 2022. A sample of papers based on keywords in the publication was analyzed using bibliometric with VOSviewer application. The research results stated that microfinance institutions were established to provide benefits to poor and lowincome communities. The role of artificial intelligence can increase the productivity of the financial industry. Artificial intelligence can be used to analyze the feasibility and risk of default for customers and potential customers. The advantages of artificial intelligence include speed of decision-making, higher levels of automation for credit decisions, and the ability to be used remotely. In addition, artificial intelligence can also be used to generate investment signals that grow exponentially and generate data for future analysis.

Impact of Microcredit on Poverty Reduction in Bangladesh: a cross-sectional study

Purpose: Usually, microcredit is known as the providing of “small loans” to the poorer group of the population although it differs from country to country. Many poor and hardcore poor people have been taken the microcredit to reduce their poverty. This study aimed to detect the impact of microcredit on poverty reduction among different levels of poor people. Methodology: Primary data were collected using cluster sampling from the 14 different slum areas from Sylhet city in Bangladesh (n= 408) based on a semi-structured questionnaire during October 2023 to December 2023. Descriptive statistical analysis and Generalized Estimating Equations (GEE) were used to analyze the data. Findings: It was observed that among the participants 76% are male and 24% are female. Around 84.1% individuals were taking microcredit from the different NGOs and among them 91.6% got benefit from their loan and their income was increasing 14.6% as well. It was also observed that 54.4% people are anxious about their food and 15.9% people are sleeping with hunger. Results also revealed that after taking microcredit the average percentage of hardcore poor people are significantly decreased compared with non-poor. It may indicate that after taking microcredit hardcore poor people invest their loan more appropriately compare to poor and non-poor groups of people. Conclusions: Taken together, we conclude that microcredit might play better role for hardcore poor people. To get more success of microcredit and hence for sustainable development- government and non-government organizations should pay more attention to reduce the interest rate of loans.

Political Uncertainty and the Geographic Allocation of Credit: Evidence from Small Businesses

AbstractWe investigate how banks change the geographic distribution of their small business loan portfolio when they face political uncertainty in some of the states where they operate. Using exogenous variation in gubernatorial elections with binding term limits, we show that political uncertainty causes local banks to increase out‐of‐state lending to small firms, particularly those located in higher‐income areas. This effect follows a decrease in local lending and is stronger for banks that are more capital‐constrained. The increase in out‐of‐state credit leads to an increase in employment growth and net firm creation in sectors with larger capital needs.

Role of Micro Finance in uplifting Indian Economy: An Analysis

Microfinance institutions (MFIs) act as indispensable financial intermediaries, providing small loans and services to individuals excluded from mainstream banking due to socio-economic constraints. Their significance lies in empowering marginalized communities, promoting financial inclusion, and fostering opportunities for income generation and entrepreneurship. Notably, microfinance contributes significantly to poverty alleviation and gender equality, particularly in empowering women, who often constitute a substantial portion of its beneficiaries. However, the effectiveness of microfinance in India faces multifaceted challenges. This paper addresses hurdles such as exorbitant interest rates, insufficient infrastructure, and the urgent need for effective regulation to prevent the exploitation of vulnerable borrowers Overall, this paper will find out the indispensable role of microfinance in India's economic development while acknowledging the challenges hindering its full potential. Unravelling these dynamics provides policymakers, practitioners, and stakeholders with a comprehensive understanding of microfinance in the Indian context, crucial for formulating informed strategies that foster sustained growth and ensure its continued positive impact on economic development. The insights gleaned from this study are vital for shaping the trajectory of microfinance in India.

Nexus between small and medium-sized enterprise budgeting skills and loan repayment in South Africa

This study’s purpose is to assess the influence of small and medium-sized enterprises’ (SMEs) budgeting skills on loan repayment in South Africa. The quantitative research approach was selected as the appropriate methodology for this study, while the purposive sampling approach was selected as the appropriate way to select participants for this study. The primary data for this study came from respondents who were business owners of SMEs in the retail, hardware, construction, and manufacturing industries. SPSS was used to analyze the acquired data. A total of 380 research questionnaires were distributed, and there were 375 that were returned for analysis (which gives a response rate of 99%). Both a regression analysis and a correlation analysis using Pearson’s method were carried out. Pearson’s correlation coefficient revealed a positive and significant relationship between SMEs’ budgeting skills and loan repayment at the level of r =.250, p < 0.0005. These results were supported by the finding that there is a positive and significant association between these two factors. According to the findings of the study, it is recommended that financial providers educate their SMEs on how to prepare various types of budgets, how to follow up and compare their financial objectives to their performance, and that financial institutions and government organizations should assist SMEs with budgeting skills to decrease SME loan defaults.

Assessing the Landscape: A Survey of Microfinance Self-Help Groups and Their Impact on Financial Inclusion

Assessing the Landscape: A Survey of Microfinance Self-Help Groups and Their Impact on Financial Inclusion

The impact of a macroprudential borrower-based measure on households’ leverage and housing choices

This paper investigates the impact of changes in lending limits on household leverage and housing choices. Using credit registry data and a difference-in-differences estimation strategy we determine how a change in the loan-to-value (LTV) ratio - a macroprudential policy tool - affected constrained households. Our results show that the policy change was effective in reducing households' leverage as constrained households took out smaller loans and had lower loan-to-income ratios. Such households also paid higher interest rate spreads and had higher loan-service-to-income ratios than the control group. Finally, we also show that the policy change affected households' housing choices, as constrained households bought less expensive houses. Our results highlight the improvement of the risk profile of households following the introduction of the LTV limits.

The Financial Consequences of Online Review Aggregators: Evidence from Yelp Ratings and SBA Loans

This paper demonstrates the financial and real consequences of online review aggregators. Exploiting a regression discontinuity design that overcomes the endogenous relationship between Yelp reviews and Small Business Administration loan outcomes, I show that higher coarse Yelp ratings lead to improved loan terms and performance. Specifically, a one-half-star increase in Yelp ratings corresponds to a 25-basis-point decrease in loan spread and 6% lower collateral requirements. The effects are more pronounced when banks have less borrower information. Higher Yelp ratings also contribute to increased consumer demand and the likelihood of future business openings. These findings indicate that online review aggregators influence both consumer choices and banks’ financing decisions. This paper was accepted by Gustavo Manso, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2020.03003 .