The views expressed herein are those of the author(s) and not necessarily those of NYU Wagner. to exceed two paragraphs, may be quoted without explicit permission provided that full credit is given to the source.

https://pdf.wri.org/ref/morduch_02_analysis_effects.pdf

Analysis of the Effects of Microfinance on Poverty Reduction

Many social enterprises and some companies have developed supply chains with the poor as suppliers or distributors to alleviate poverty and to create revenues for themselves. Such supply chains have created new research opportunities because they raise issues fundamentally different from those examined in the existing operations management literature. We report this phenomenon of supply chains with the poor as suppliers or distributors in developing countries and identify operations management (OM) research opportunities. We also provide some stylized models to serve as potential seeds for modeling-based research in this area.

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Supply-Chain Research Opportunities with the Poor as Suppliers or Distributors in Developing Countries

The paper distinguishes between a ‘wider’ definition of wider impacts (which takes into account feedbacks from impacts to institutional performance) and a ‘narrower’ definition, which does not. In respect of both definitions, the paper sets out a typology of the effects which need to be measured (cultural, economic, social and political) and of the levels at which each of these impacts needs to be assessed (local, regional and national). The purpose is not to set out a blueprint for specific studies but rather to offer a framework which may be useful for guiding the methodology of such studies. Copyright © 2004 John Wiley & Sons, Ltd.

Wider impacts of microfinance institutions: issues and concepts

This paper aims to assess the performance of Village Credit Institutions (Lembaga Perkreditan Desa or LPD) in Gianyar district, Bali province, Indonesia and its affecting factors –particularly its institutional environment. The performance indicators assessed include financial indicators (such as portfolio quality, leverage, capital adequacy ratio, productivity, efficiency, profitability, and financial viability) and outreach of the LPDs. Institutions here refer to the rules or procedures that shape how agents (people) interact and the organizations that implement the rules and codes of conduct to achieve desired outcomes. Based on data from financial reports of 174 LPDs of Gianyar district in 1999 and 2001, interviews with some stakeholders (clients, chairmen, and member of commissioner board) of the LPDs, and using descriptive analysis approach, this paper reveals that the LPDs have achieved a good performance indicators and been sustainable, and the good performance and sustainability have been very much influenced by institutional environment which includes both formal and informal institutions.

https://jurnal.ugm.ac.id/gamaijb/article/download/5579/4550

AN ASSESSMENT OF MICROFINANCE INSTITUTION PERFORMANCE: The Importance of Institutional Environment

Together with Singapore, Malaysia is one of the successful cases in Asia achieving rapid economic growth. However the issues of poverty still being discussed today. Amanah Ikthiar Malaysia (AIM) is one of the dominant players contributing to the poverty eradication program in Malaysia engaging in microcredit program with supports from Malaysian government. Since microcredit has been effective as a poverty eradication agent among the poor, it is important to investigate the dimension of effectiveness of poverty eradication program carried out by AIM. The objective of this study is to investigate the dimension of effectiveness in microcredit program and to examine the determinants of total income after joining AIM program. Purposive sampling were applied to take a sample of 100 recipients of AIM microcredit program loan in Kuala Selangor, Hulu Langat, and Gombak in Selangor. Descriptive analysis, factor analysis, and multiple linear regression were used as a methodology to achieve the objective of the study. Factor analysis found four dimension of effectiveness in the microcredit program such as earning ability, payment scheme, member’s cooperation, and well-being. Similarly regression analysis identified 3 variables that are significantly influence the total income after joining the program. These variables are; duration of loans received, amount of loans and number of employee. There are certain issues that need to be addressed to improve the AIM program especially those related to payment scheme and also finding timing for the recipients to graduate from the program as successful entrepreneurs.

/pdf/effectiveness-of-microcredit-program-and-determinants-of-44ogjv9um4.pdf

Effectiveness of microcredit program and determinants of income among small business entrepreneurs in Malaysia

The development of microcredit programs provides an opportunity to strengthen local institutions. Research has focused on the design and management of microcredit programs without enough attention to the institutional environment in which microcredit programs operate. Theory offers a framework for understanding the importance of linkages between microcredit programs and local institutions. These linkages lead to sustainability. Broadly defined, sustainability refers to a net positive flow of benefits to the local community. Microcredit programs embedded in local institutions have the best hope of becoming sustainable. Introduction Microcredit programs provide an opportunity to build sustainable local institutions. While much has been written about the design of microcredit programs and their impact on people's lives, little has been done to place the role of microcredit in an institutional perspective. But there is a body of institutional development theory that can be applied to microcredit (Leonard, 1982; Uphoff, 1986; Esman and Uphoff, 1988; Cernea, 1993; Ostrom, 1993; Howes, 1997). Two theorists, Elinor Ostrom and Norman Uphoff, among others, have contributed substantially to what we know about the role of institutions in effective economic development. Drawing from both economic theory and practical experience, these writers established development policy frameworks useful in designing programs to help the poor. Uphoff examines the advantages of various institutional arrangements in the design of development programs, while Ostrom uses economic concepts to explain the benefits of developing local institutions. While much of the theory has evolved from the study of developing countries, lessons learned apply to microcredit programs in the United States as well. The conventional wisdom holds that programs to help the poor should be sustainable. But achieving sustainability is a particularly difficult problem in crafting economic development strategies. Microcredit programs can only evolve into sustainable institutions if they are linked, or partnered with local institutions: churches, postsecondary schools, local governments, credit unions, banks, established nonprofit organizations, service organizations, and job training programs. Microcredit programs operating without linkages to local institutions are less likely to be sustainable. Just how "sustainability" is to be defined is a knotty problem. Broadly defined, sustainability is in direct opposition to quick fix or ad hoc options addressing a particular problem for a short period of time. All too often, quick fix solutions end up embedded in the lengthy catalog of government programs. Most of us have a pretty good idea of what sustainability is not. Sustainability is not achieved if programs do not meet the needs of the people that they are designed to help. Programs are not sustainable if their costs cannot be met over a long period of time. Without a commitment to maintaining, evaluating, and improving programs, sustainability cannot be achieved. Sustainable programs are well-designed, in terms of operations and institutional relationships, and allowed sufficient time to demonstrate a positive effect. A great deal of research has focused on the design of microcredit programs. The size of the loan, the interest rate, the term, the use of peer group v. individual loans, to name the most prominent issues, occupy a sizeable portion of the literature (Snow and Buss, Forthcoming). The relationship of microcredit programs to existing institutions as an important variable in achieving sustainability has been neglected. Sustainable Microcredit Microcredit programs become sustainable institutions when net benefits to the community exceed total costs. Benefits accrue to the community when new businesses are successful and incomes increase. Microcredit fills a niche that banks do not always fill. …

Douglas Snow

Papers

Microcredit: An Institutional Development Opportunity