Showing papers on "Microfinance published in 2021"

Measuring the Equilibrium Impacts of Credit: Evidence from the Indian Microfinance Crisis

Abstract: In October 2010, the state government of Andhra Pradesh, India, issued an emergency ordinance, bringing microfinance activities in the state to a complete halt and causing a nationwide shock to the liquidity of lenders, especially those with loans in the affected state. We use this massive dislocation in the microfinance market to identify the causal impacts of a reduction in credit supply on consumption, earnings, and employment in general equilibrium in rural labor markets. Using a proprietary district-level data set from 25 separate, for-profit microlenders matched with household data from the National Sample Survey, we find that district-level reductions in credit supply are associated with significant decreases in casual daily wages, household wage earnings, and consumption. We find a substantial consumption multiplier from credit that is likely driven by two channels—aggregate demand and business investment. We calibrate a simple two-period, two-sector model of the rural economy that incorporates both channels and show that the magnitude of our wage results is consistent with the model’s predictions.

Changes in Social Network Structure in Response to Exposure to Formal Credit Markets

Abstract: Formal financial institutions can have far-reaching and long-lasting impacts on informal lending and information networks. We first study 75 villages in Karnataka, 43 of which were exposed to microfinance after we first collected detailed network data. Networks shrink more in exposed villages. Links between households that were unlikely to ever borrow from microfinance are at least as likely to disappear as links involving likely borrowers. We replicate these surprising findings in the context of a randomized controlled trial in Hyderabad, where a microfinance institution randomly selected neighborhoods to enter first. Four years after all neighborhoods were treated, households in early-entry neighborhoods had credit access longer and had larger loans. We again find fewer social relationships between households in early-entry neighborhoods, even among those ex-ante unlikely to borrow. Because the results suggest global spillovers, which are inconsistent with standard models of network formation, we develop a new dynamic model of network formation that emphasizes chance meetings, where efforts to socialize generate a global network-level externality. Finally, we analyze informal borrowing and the sensitivity of consumption to income fluctuations. Households unlikely to take up microcredit suffer the greatest loss of informal borrowing and risk sharing, underscoring the global nature of the externality.

How does financial literacy impact on inclusive finance

Abstract: Inclusive finance is a core concept of finance that makes various financial products and services accessible and affordable to all individuals and businesses, especially those excluded from the formal financial system. One of the leading forces affecting people's ability to access financial services in rural areas is financial literacy. This study investigated the impacts of financial knowledge on financial access through banking, microfinance, and fintech access using the Bangladesh rural population data. We employed three econometrics models: logistic regression, probit regression, and complementary log–log regression to examine whether financial literacy significantly affects removing the barriers that prevent people from participating and using financial services to improve their lives. The empirical findings showed that knowledge regarding various financial services factors had significant impacts on getting financial access. Some variables such as profession, income level, knowledge regarding depositing and withdrawing money, and knowledge regarding interest rate highly affected the overall access to finance. The study's results provide valuable recommendations for the policymaker to improve financial inclusion in the developing country context. A comprehensive and long-term education program should be delivered broadly to the rural population to make a big stride in financial inclusion, a key driver of poverty reduction and prosperity boosting.

Can digital technologies reshape rural microfinance? Implications for savings, credit, & insurance

Abstract: Rural microfinance must contend with the triple challenges of isolation, small‐scale transactions, and risk These challenges result in information asymmetries and transaction costs that render markets for financial services costly or missing This paper examines how emerging digital technologies (eg, mobile money, digital credit scoring, and earth observation) can reshape rural markets for savings, credit, and insurance services, especially in developing countries Although our synthesis of the literature suggests reason for hope in all three domains, the imperfections of these digital technologies require evaluation and oversight if the resulting rural financial system is to be more efficient and equitable than its predecessor JEL CLASSIFICATION D14; F63; R51

Marketing bank services to financially vulnerable customers: evidence from an emerging economy

Abstract: This study aims to explore how banks in Nigeria are marketing financial services to financially vulnerable customers.,A multiple case study research strategy was used to analyse three commercial banks and two microfinance banks. Data were collected using semi-structured interviews with the banks' directors as well as from banks' published annual reports and archival images.,The study reveals that Nigerian banks develop different product development portfolios, adopt innovative traditional marketing schemes and apply inclusive technologies to reach and extend services to the unbanked and financially vulnerable customers in the society.,Banks should focus on consumer engagement through the proactive development of technologies and employ innovative marketing methods. Customers' banking experiences can be enhanced if banks communicate with and educate customers about technological modes of engagement. In addition, financial service transaction support and financial literacy education can assist banks in marketing their services to financially vulnerable customers, in mutually beneficial ways.,This study shows how financial service operators' market and extend their services to financially vulnerable customers in emerging markets. It empirically establishes the importance of financial services to financially excluded customers.

Measuring Social Performance in Social Enterprises: A Global Study of Microfinance Institutions

Abstract: Social enterprises in the microfinance industry need to adhere to both financial and social demands. Critics argue that there is a mission drift away from the social mission, and this has motivated the introduction of social rating agencies to strengthen the business ethics of microfinance institutions (MFIs). Using a global dataset of 204 socially rated MFIs from 58 countries, we assess the factors that drive the social performance ratings of MFIs. Overall our results show that social ratings of MFIs are significantly related to financial performance, greater outreach especially in rural areas, well-defined social objectives, staff commitment, service quality and an enhanced customer service. We observe that various rating agencies attach different importance to each of the social indicators. The public policy implication is that social rating agencies need to become more transparent, to reduce the information asymmetries between heterogenous socially motivated investors and the focal MFI.

Research Advances on Financial Inclusion: A Bibliometric Analysis

Abstract: With intensifying competition in the financial system, new strategic applications are constantly being devised in the search for greater efficiency. In consequence, decisions are commonly based on locating and retaining market segments with high added value, and those which fail to supply the profitability required by the market are “excluded”. The aim of this study is to analyse the research advances made in the field of financial inclusion and the main lines of investigation currently being addressed by means of a bibliometric analysis. Among the scientific community, there is growing interest in this study area. The most assiduous in this respect are SA Asongu (the most productive author), Enterprise Development and Microfinance (the journal that has published the most articles in this field), Makerere University, Uganda (the most productive institution) and India (the country where most recent studies have taken place). Foreseeably inspiring future research, there is currently great interest in developing a more accessible financial system, especially through the use of digital money (Fintech) as an instrument to promote financial inclusion. For all this, a line of research is proposed that also includes the proposals from the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals.

Subprime empire: On the in-betweenness of finance

Abstract: In the decade since the 2008 global financial crisis, much of the debate has been over whom to blame: reckless speculative finance or irresponsible (often low-income) borrowers. This essay takes up this set of moral arguments about what the poor can and should be able to afford by examining subprime logics at a global scale: subprime empire. Predatory lending in heartland America and development-oriented microcredit in places such as India and Paraguay appear not just to be geographically disparate but also to have different moral valences. After closer inspection, however, we argue that subprime lending and microfinance are two sides of the same coin. Our analysis of microfinance allows us to understand what is happening in the “in-between” as capital flows between financial investors and poor borrowers. By comparing financialization in India and Paraguay, we document and theorize the making of subprime empires that rely on actors within marginal financial sites to stabilize the evaluative frameworks and social interdependencies that make profits flow. We argue that the forms of financial capture and conversion in the “financial inbetween” reproduce imperial dynamics by naturalizing the limited expectations of economic subjects of the global south and erasing the violence inherent in these forms of economic redistribution that maintain those expectations as such.

Microfinance and poverty reduction: New evidence from Pakistan

Abstract: Microfinance is key to reducing poverty in Pakistan. While comprehensive finance is frequently considered as, it creates inclusive growth and poverty reduction in poor communities, and can be boosted by ease of finance. However, when the poor people are involved in the broader scale (different types of poverty level), can this microfinance work? We used an econometric model to test the symmetry approaches of the comprehensive financial organizations and the poor in poverty reduction activities to find the answers. Keeping this in view, we studied different determinants related borrowers for the poverty reduction with respect to access to Micro finance institutes (MFI) and productive loan. Despite some limitations, such as those arising from potential unobservable important determinants of access to MFIs, significant positive effect of MFI productive loans has been confirmed. The significance of “treatment effect” of coefficients has been verified by probit model. In addition, we found that loans for productive purposes were more important for poverty reduction by MFB (Microfinance banks) than MFI. However, in urban areas, simple access to MFIs has larger average poverty‐reducing effects than the access to loans from MFIs for productive purposes. This leads to exploring service delivery opportunities that provide an additional avenue to monitor the usage of loans to enhance the outreach. Therefore, the results showed by probit model that access to MFI was better in urban areas and male borrowers thus achieved more loan. Therefore, it is suggested that for the poverty reduction, there is a dire need to improve and localize the Microfinance institutions in rural areas as well as to promote group lending methodology to avoid risk of getting loans and increase the number of both male and female savers. Thus, the saving value will be increased and side by side interest rate will be significantly achieved. Hence, it is concluded that the goal of providing sustainable financial services implicitly implies that MFIs provide financial services to the poor, whenever they find it profitable to do so. The removal of subsidy and the absence of interest rate restrictions could make the market for the poor become even worse as the market occupiers may act in their own interest. The powerful push will be needed from national economic and social impacts for the increasing support for microfinance.

Impact of Microcredit on Employment Generation and Empowerment of Rural Women in India

Abstract: This study examines the responsibility of microfinance institutions towards changes in the livelihood practices of the borrowers. Considering a total of 350 borrowers of West Bengal, the impact of ...

Exploring the impact of COVID-19 pandemic on women entrepreneurs in Pakistan

Abstract: Purpose: The purpose of this paper is to explore the impact of COVID-19 lockdown on micro-businesses owned by women borrowers of microfinance institutions and to provide policy suggestions to assist women entrepreneurs in managing such an unexpected crisis from a qualitative perspective within developing countries such as Pakistan. Design/methodology/approach: The study adopts a qualitative research design to explore the impact of COVID-19 on women’s entrepreneurial activities. Seven women entrepreneurs were selected and semi-structured interviews with focused group discussion under case study research design are used. Thereby providing a contemporary view of the issues faced by women entrepreneurs in the period of huge social and economic upheaval. Findings: The results provide valuable insights about how the COVID-19 crisis affected women entrepreneurs by particularly considering household income, business sales, lifestyle and mental health. The liquidation of women-led businesses indicated the necessity to reconsider creativity and digitalization for business survival. Moreover, the results also revealed that the impact of the COVID-19 pandemic on the physical, mental and economic well-being of women highlights the need for considering gender gap issues in forming response policies for COVID-19 in developing countries. Originality/value: As the COVID-19 crisis is a recent and existing phenomenon, this study is among the first to explore particularly the impact of the COVID-19 outbreak on micro-enterprises mainly owned and managed by women. Thereby claiming that COVID-19 not only physically but also psychologically affected women entrepreneurs. Moreover, the study highlights a need of skill focused training programs for women entrepreneurs to make sure that they can protect their businesses during such difficult times. © 2021, Emerald Publishing Limited.

Microfinance and social capital formation- a social network analysis approach

Abstract: The microcredit program has emerged as an important poverty alleviation strategy over the last three decades, and several studies have examined its economic impacts on the community well-being. However, far too little attention has been paid to the effects of micro credits on community social connection and solidarity. This paper aims to examine the application of Social Network Analysis (SNA) to explore the impact of the rural microcredit fund on community social capitals. In doing so, the data on interactions of four rural development groups' members before and after the microcredit project implementation were collected using participatory workshops in Neyzar village of Qom province in Iran. The data were analyzed by Ucinet software, and the socio-graphs were produced by the NetDraw application. The results show that, more people have been involved in the social interactions after the project implementation and there was statistically significant increase in density and decrease in centralization of cooperation network. Furthermore, there were no important distinctions in centrality of people with various educational levels before and after the project implementation. Overall, it can be concluded that, the microfinance initiative considerably promotes the community social capital and participation in the rural development activities. Moreover, the SNA techniques are applicable as an impact assessment tool to investigate changes in community social capital.

The potential of Islamic social finance to alleviate poverty in the era of COVID-19: the moderating effect of ethical orientation

Abstract: Purpose: This paper aims to explore the potential of the awareness and knowledge of Islamic social finance (zakat, waqf and Islamic microfinance) to alleviate poverty during the COVID-19 pandemic with the moderating effect of ethical orientation. Design/methodology/approach: The data were collected through the administration of paper-based and electronic questionnaires to 400 respondents out of which only 277 were found valid for analysis. Findings: The study showed that by direct relationship, the awareness and knowledge of Islamic social finance instruments have a potentially significant positive contribution to poverty alleviation during the COVID-19 pandemic except for zakat that has an insignificant positive contribution. Ethical oriental has also a significant positive contribution. Contrary to expectation, the moderating effect of ethical orientation has changed zakat and waqf to have significant negative and insignificant positive contributions, respectively. Only Islamic microfinance has endured the moderating effect to continue contributing significantly and positively to the reduction of poverty. Research limitations/implications: The study explored only the potential impact of the awareness and knowledge of Islamic social finance to mitigate the extreme poverty caused by the COVID-19 pandemic in Nigeria. Practical implications: This study clearly showed the need to create enabling laws and policies to support the operations of zakat and waqf institutions to achieve their objectives effectively and efficiently. These two institutions should be integrated with Islamic microfinance for the possibility of getting better outcomes. Social implications: There should be massive campaigns to restore religious, social and political ethics to enhance the socio-economic development of Nigerians based on the principles of brotherhood. Originality/value: This study provides unexpected and unusual results showing the inability of zakat and waqf institutions to alleviate poverty due to poor ethical orientation. © 2021, Emerald Publishing Limited.

Financing women’s entrepreneurship in Sub-Saharan Africa: bank, microfinance and mobile money

Abstract: Faced with an increasingly high unemployment rate in Sub-Saharan Africa, setting up new businesses is more than ever a necessity. Women who try to work in this direction, however, face several diff...

Credit risk in the microfinance industry: The role of gender affinity

Abstract: This study explores the role played by gender in lending transactions and specifically its effects on the loan portfolio credit risk of microfinance institutions (MFIs). Using a multicountry data s...

Financializing the soul: Christian microfinance and economic missionization in Colombia:

Abstract: Microfinance is the vanguard of financialization today. This is especially true in Colombia, where microfinance rivals any other type of formal credit. Entangled with Colombia’s micro-financializat...

Knowledge mapping of microfinance performance research: a bibliometric analysis

Abstract: Performance assessment of microfinance institutions (MFIs) has long been a question of considerable research interest. The dual goals – financial performance and social performance of MFIs widely studied yet remain unsolved in the existing literature. To assess the knowledge structure of research in this area and to aid future research, we review the literature with bibliometric analysis.,Our study has used bibliographic data of 1,252 scientific documents indexed in the Scopus database from 1995 to 2020 (June 05). We have used the “bibliometrix” package in R language to analyze the data and illustrate the findings.,We find that there has been an increasing trend in publications, especially from 2006 onwards. Various bibliometric indicators allow us to follow the progression of knowledge along with identifying the most contributing and impactful authors, publication sources, institutions and countries. We illustrate the major research themes and identify that “poverty alleviations”, “group lending” and “credit scoring” are the major emerging and specialized themes besides the basic research evolved around “microfinance” or “microcredit”. Our further analysis of thematic evolution over different time frames reveals that “financial performance” aspect is getting more attention in recent times in evaluating the performance of MFIs.,The insights of knowledge accumulated from our bibliometric review and thematic analysis provide researchers with an efficient comprehension of the advancement of the research on microfinance performance and offer avenues for future scientific endeavors.

Revenue diversification and financial sustainability of microfinance institutions

Abstract: This paper aims to investigate whether revenue diversification affects the financial sustainability of microfinance institutions (MFIs).,The study uses a worldwide panel data set of 443 MFIs in 108 countries for the period 2013–2018 and two-step system Generalized Method of Moments estimation model.,The study finds that revenue diversification has a significant and positive effect on the financial sustainability of MFIs.,The findings of this study actually offer important managerial and policy lessons on MFIs’ financial sustainability. Microfinance managers and policymakers should consider revenue diversification as a strategy through which MFIs can attain financial sustainability instead of overreliance on donations and government subsidies,Unlike previous studies that examined revenue diversification in the context of banking firms, this study contributes to literature by examining the impact of revenue diversification of the financial sustainability of MFIs.

Impact of Rule of Law and Government Size to the Microfinance Efficiency

Abstract: This study examines the impact of rule of law and government size under the dimensions of economic freedom to the social and financial efficiency of microfinance institutions (MFIs) from Thailand, ...

Finance and Firm Volatility: Evidence from Small Business Lending in China

Abstract: The online trading platform Alibaba provides financial technology (FinTech) credit for millions of micro, small, and medium-sized enterprises (MSMEs). Using a novel data set of daily sales and an i...