Although the word finance is in the term microfinance, and the core elements of microfinance are those of the finance discipline, microfinance has yet to break into the mainstream or entrepreneurial finance literature. The purpose of this article is to introduce the finance academic community to the discipline of microfinance and microfinance institutions (MFIs). We provide a comprehensive review of over 350 articles and address the issues of MFI sustainability, products and services, management practices, clientele targeting, regulation and policy, and impact assessment.

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Microfinance: A Comprehensive Review of the Existing Literature

What is the impact of microfinance on poor people?: a systematic review of evidence from sub-Saharan Africa

Traditionally the position of women in Tanzania has been low compared to men. Women are poorer, have low education and suffer from traditions and customary laws. Thus, empowerment of women is one of the main issues in Tanzania and beyond. Microfinance services are considered as an entry point or a vehicle toward empowering women. However, it is also considered that Microfinance Institutions are extorting money from poor women through high interest rates, causing higher social pressure and in some cases lead to domestic violence. Using the quantitative and qualitative data from three regions of Tanzania, this study shows that women members of microfinance institutions (MFIs) are more empowered compared to non-members in non-program areas. In total 454 women (305 members of MFIs and 149 non-members) participated in the survey and 10 women in the in-depth interviews. The data obtained are analysed using Mann-Whitney U test. The results show a significant difference between the women members of MFIs and non-members in the dependant variables related to women empowerment. Women members of MFIs have more control over savings and income generated from the business, greater role in decision-making, greater self-efficacy and self-esteem, and greater freedom of mobility and increased activities outside home.

Empowering Women through Microfinance: Evidence from Tanzania

Purpose




The purpose of this paper is to analyze determinants of farmers’ participation and credit rationing in microcredit programs using survey data from Ghana.




Design/methodology/approach




The authors use the Garrett Ranking Technique to analyze farmers’ reasons for participation or non-participation in credit programs, a probit regression model to estimate factors influencing farm households’ participation, and the Heckman’s sample selection model to identify factors influencing farm households’ probability of being credit rationed by microcredit programs.




Findings




The results reveal that farm households participate in credit programs because of improved access to savings services and agricultural loans. Fear of loan default and lack of savings are reasons for non-participation in credit programs. Furthermore, membership in farmer-based organizations (FBOs) and the household head’s formal education are positively associated with farmers’ participation in credit programs. The likelihood of farmers being credit rationed (i.e. their loan applications were either rejected or the amount of credit they applied for was reduced) is less likely among higher income farmers and members of FBOs such as farmer cooperatives and savings clubs.




Practical implications




The findings suggest that policy strategies aiming to improve access to savings and credit services should educate farmers and strengthen FBOs that could serve as entry points for financial service providers. Such market smart strategies have the potential to improve farmers’ access to financial services and reduce rural poverty.




Originality/value




Although existing studies have examined farmers’ participation in credit markets and credit rationing separately, the unique contribution of this paper is the analysis of participation in microcredit programs as well as the likelihood of farmers being credit rationed in Ghana.

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Agricultural credit provision: what really determines farmers’ participation and credit rationing?

Indonesian microfinance is primarily operated by for-profit commercial banks, characterized by large-scale loans that require collateral. In 2003, the largest nongovernmental organization in the country introduced much smaller-scale loans without a collateral requirement. This scheme is commercialized but potentially more suited to the credit demands of the poor. Applying propensity score matching with the difference-in-difference method, this paper examines whether the emerging microcredit scheme has been successful in targeting and improving the welfare of the poor in the one year following loan disbursement. The results show that although collateral ownership is not an important determinant of participation, relatively wealthier families gain access to microcredit. The impact of microcredit on various household outcomes is generally statistically insignificant, except for sales of nonfarm enterprises for the nonpoor and schooling expenditures for the poor. This implies that the microcredit scheme under study might not have an immediate impact on poverty alleviation.

https://www.onlinelibrary.wiley.com/doi/pdf/10.1111/j.1746-1049.2010.00101.x

The short-term poverty impact of small-scale, collateral-free microcredit in Indonesia: a matching estimator approach.

This paper looks at three microfinance programs in Uganda, representing best practices, to determine how they impacted households and entrepreneurs, particularly in reducing poverty and empowering borrowers. Evaluation results showed the programs positively and significantly improved the quality of life of participants, both economically and socially. Introduction Microenterprises are a vibrant part of the Ugandan economy, providing a wide range of goods and services. In 1995 an estimated 22% of all households were engaged in some kind of business activity (Impact Associates, 1995). These households were usually micro in scale and home-based. Twenty-nine percent of the working age population in 1995 were estimated to be employed in micro and small enterprises. These statistics underscore the prevalence of microenterprises, but mask the importance of microenterprises as a vital source of income for the urban and rural poor. Microenterprise business activities are often the major source of household revenue. These poor microentrepreneurs, especially women, have had limited access to financial services offered by the commercial banks (Duval, 1991; Morris et al., 1995; Mugyenyi, 1992). Widespread recognition of this lower accessibility to formal credit has led to recent endeavors to target the poor, especially women entrepreneurs, through development programs that provide financial services. In addition to the provision of credit, these programs also facilitate the establishment of savings accounts. Thus, these semi-formal financial institutions provide low-income clients (particularly women) with financial services not previously provided by commercial banks. Since the mid-1990s, as part of its strategy to alleviate bottlenecks to private sector development, USAID/Uganda has provided financial and technical support to a number of organizations providing microfinance services for poor microentrepreneurs. These organizations vary in terms of target clientele, maximum size of loans, program strategies, geographic coverage, size of the loan portfolio, and financial security. The objective of the Uganda assessment is to provide data on the impact of USAID-supported microfinance programs on clients, their households and enterprises. The assessment will also provide information on the linkages between microentrepreneurs and the agricultural sector. It should be noted that no attempt is being made to distinguish between use of USAID funds and other funds, as these microfinance programs are normally financed through a mix of sources and funds tend to be fungible. Do programs providing microfinance services make a positive difference in the lives of microentrepreneurs, their households, and enterprises? This problem statement can be framed as a series of questions. What is the nature, extent, and distribution of these impacts? Have microfinance programs helped to reduce proverty in the households of microentrepreneurs? Has support to microentrepreneurs in urban areas increased the flow of transfers and remittances to rural areas? Have programs helped microentrepreneurs, particularly women, to gain more control over the income they generate? The baseline assessment answers the above questions also and an ancillary, but important, question: What are the linkages between microfinance program clients and the agricultural sector? Three microfinance organizations which follow what are considered to be "best practices" were selected for inclusion in this study: FOCCAS (Foundation for Credit and Community Assistance), FINCA (Foundation for International Community Assistance) and PRIDE (Promotion of Rural Initiatives and Development Enterprises) Uganda. The three districts covered by the assessment were purposively selected to provide a range of socioeconomic contexts, since geographic location can influence the impact of a program. The locations selected were: Kampala, a vibrant metropolitan capital center; Masaka, a small urban center in southern Uganda, and rural Mbale, a highly populated, good farming area in the east near the Keyan border. …

Agrippinah Namara

Papers

An Assessment of Clients of Microfinance Programs in Uganda