scholarly journals Bundling Health Insurance and Microfinance in India: There Cannot be Adverse Selection if There Is No Demand

2014 ◽  
Vol 104 (5) ◽  
pp. 291-297 ◽  
Author(s):  
Abhijit Banerjee ◽  
Esther Duflo ◽  
Richard Hornbeck
Keyword(s):  
Health Insurance ◽  
Interest Rates ◽  
Adverse Selection ◽  
Financial Services ◽  
Drop Out ◽  
Microfinance Institutions ◽  
Randomized Control ◽  
Demand For Health ◽  
The Impact ◽  
Pyrrhic Victory

Microfinance institutions have started to bundle their basic loans with other financial services, such as health insurance. Using a randomized control trial in Karnataka, India, we evaluate the impact on loan renewal from mandating the purchase of actuarially-fair health insurance covering hospitalization and maternity expenses. Bundling loans with insurance led to a 16 percentage points (23 percent) increase in drop-out from microfinance, as many clients preferred to give up microfinance than pay higher interest rates and receive insurance. In a Pyrrhic victory, the total absence of demand for health insurance led to there being no adverse selection in insurance enrollment.

Microfinance: The Impact of Multiple Borrowings of Microcredit among Clients of Microfinance Institutions in Central Uttar Pradesh Region of India

2016 ◽  
Vol 6 (2) ◽  
Author(s):  
Zain Mehdi
Keyword(s):  
Interest Rates ◽  
Financial Services ◽  
Private Equity ◽  
Uttar Pradesh ◽  
Microfinance Institutions ◽  
Non Profit ◽  
Loan Contracts ◽  
For Profit ◽  
The Poor ◽  
The Impact

Microfinance is the supply of loans, savings, and other basic financial services to the poor. Beginning of the microfinance movement is most closely associated with the economist Muhammed Yunus, who in the early 1970's was a Professor in Bangladesh. In the midst of a country-wide famine, he began making small loans to poor families in neighboring villages in an effort to break their cycle of poverty. The study has focused on the repayment problems of loans to be taken by the clients of ‘For Profit Making Microfinance Institutions (MFIs)’. Micro financing has boomed in recent years. Though founded as non-profit institutions, Indian Microfinance industry has been turbocharged by private – equity firms, nearly doubling in the year ended March 31, 2008 delivering $ 2.5 billion loans. Many microfinance lenders have recently registered as for – profit finance firms with the Reserve Bank of India, giving them wider access to funds but limiting them to ‘reasonable’ interest rates. Those rates are still high – between 20% and 40% annually, according to the Consultative Group to Assist the Poor, or CGAP, hosted at the World Bank location. This creates the need for multiple borrowings. In this research, the researcher has used the regression analysis to study the effect of Age, Gender, Number of Dependent and Education level due to multiple loan contracts. Further, the relationship between variables taken in this research has been analyzed such as income of respondents and amount of loans. The findings show that actually, the multiple borrowings of clients of MFI’s are not benefiting them and in reality they are affecting their livelihood.

scholarly journals Micro-Finance & Micro-Credit for Sustainable Development

2017 ◽  
Vol 6 (3) ◽  
pp. 365
Author(s):  
Shital Prakash Bhusare ◽  
Ruby Chanda
Keyword(s):  
Interest Rates ◽  
Low Income ◽  
Financial Services ◽  
Urban Areas ◽  
Microfinance Institutions ◽  
Self Help ◽  
Deviation Coefficient ◽  
Self Help Groups ◽  
The Impact ◽  
Self Help Group

<div><p><em>Poverty is one of the biggest challenges to the development of a developing country like India where a major population is living in rural and semi-urban areas. Institutional credit is considered as a powerful tool for alleviating poverty. Microfinance is the supply of loans, savings, and other basic financial services to the poor. As the financial services of microfinance usually involve small amounts of money – small loans, small savings etc. the term "Microfinance" helps to differentiate these services from those of commercial banks. Microfinance in India has been through two channels of credit delivery to poor and low-income households–Self Help Group Bank Linkage Programme (SBLP) and the Microfinance institutions lending through groups as well as directly to individuals. This study was with the overall objective of conducting a detailed analysis of interest rates, costs and margins of microfinance institutions. </em></p><p><em>This study highlights the reach and the impact on the customers and the channels used by these firms for the effectiveness of Micro Finance and Microcredit schemes. For the purpose of analysis the statistical tools like Mean, Standard deviation, coefficient of co-relation and regression have been used. </em></p><p><em>Microfinance is playing a very important role in decrease poverty. Microfinance to the rural SHGs is a way to raise the income level and improve the living standards of the rural peoples. Thus, it can be concluded that the self-help groups contribute substantially in pushing the conditions of the rural population up.</em></p></div>

scholarly journals The impact of social media on the performance of microfinance institutions in developing countries: a quantitative approach

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ahmad Daowd ◽  
Muhammad Mustafa Kamal ◽  
Tillal Eldabi ◽  
Ruaa Hasan ◽  
Farouk Missi ◽  
...  
Keyword(s):  
Social Media ◽  
Developing Countries ◽  
Performance Indicators ◽  
Financial Services ◽  
Microfinance Institutions ◽  
Poverty Level ◽  
Content Type ◽  
Media Platform ◽  
Media Applications ◽  
The Impact

PurposeOver the last few decades, microfinance industry is argued to have played a constructive role in alleviating poverty level and providing the underprivileged with access to financial services. Statistics from the World Bank reveal that, currently, only 4% of the underprivileged have been served out of the 3 billion+ potential clients. Such results are due to several claims, particularly the operational and financial challenges faced by microfinance institutions (MFIs) in the constant flux inviting more attentions towards its performance. While explicit attention is given by many researchers towards mobile banking and information and communication technology (ICT) in improving the MFIs’ performance, the study on how social media, as a rapidly growing online phenomenon, can impact on the MFIs’ performance remains scarce. As such, this study aims to investigate this impact based on four dimensional performance indicators: efficiency, financial sustainability, portfolio quality and outreach.Design/methodology/approachA model is proposed and tested to ascertain the relationship between social media applications and organisational performance. In so doing, web-based questionnaires have been used to collect data from MFI employees in developing countries. Results reveal a significant influence of the social media over the MFIs’ performance, offering valuable insights into both researchers and practitioners in the domain of microfinance, as well as social media—conforming that the adoption of social media as marketing, advertising and communication tools may significantly improve the MFIs’ performance.FindingsThe results demonstrate that there is a positive and significant impact of social media use within microfinance on the key indicators of MFIs. They also show that the highest impact of social media usage within the microfinance is on the portfolio quality. In addition, it was found that marketing and advertising; communication and sales and distribution are the main areas where social media is able to support while social networking websites are the most popular platforms employed in MFIs.Originality/valueThis study adds to the existing literature few theoretical and practical aspects. First, this study developed a model for assessing the value of social media as a new phenomenon within this type of organisation. Second, it offers microfinance sponsors, managers and policy makers with a frame of reference to understand what social media platform can be deployed for each purpose. Third, with the identification of the main MFIs’ performance indicators, this research provided a reference of performance measurement guide for microfinance industry when assessing different technological employment.

Farmers' preferences and willingness to pay for microcredit in Benin: results from in-the-field choice experiments in Benin

2020 ◽  
Vol 80 (5) ◽  
pp. 665-692 ◽  
Author(s):  
Tchekpo Fortune Ogouvide ◽  
Ygue Patrice Adegbola ◽  
Roch Cedrique Zossou ◽  
Afio Zannou ◽  
Gauthier Biaou
Keyword(s):  
Willingness To Pay ◽  
Interest Rates ◽  
Rural Areas ◽  
Financial Services ◽  
Poverty Reduction ◽  
Latent Class ◽  
Microfinance Institutions ◽  
Choice Modelling ◽  
Attribute Importance ◽  
Content Type

PurposeThis document analyses farmers' preferences and willingness to pay (CAP) for microcredit, in order to facilitate their access in rural areas.Design/methodology/approachData are based on a discrete choice experiment with 400 randomly selected farmers from 20 villages of the 7 Benin agricultural development hubs (ADHs). The preference choice modelling was performed using mixed logit (MXL) and latent class logit (LCL) models. Farmers' willingness to pay for each preferred attribute was estimated. The endogenous attribute attendance (EAA) model was also used to capture attribute non-attendance (ANA) phenomenon.FindingsThe results indicate that, on average, farmers prefer individual loans, low interest rates, in kind + cash loans, cash loans, disbursement before planting and loans with at least 10-month duration. These preferences vary according to farmers' classes. Farmers are willing to pay higher or lower interest rates depending on attribute importance. The estimate of the EAA model indicates that, when taking the ANA phenomenon into consideration, people will show stronger attitudes regarding WTP for important factors.Research limitations/implicationsBased on these results from Benin, microfinance institutions (MFIs) in developing countries can, based on the interest rates currently charged, attract more farmers as customers, reviewing the combination of the levels of the attributes associated with the nature of the loan, the type of loan (individual or collective), the disbursement period of funds, the waiting period of the loan and the loan duration. However, the study only considered production credit, ignoring equipment or investment credit.Practical implicationsThe document provides information on the key factors that can facilitate producers' access to MFI products and services.Social implicationsFacilitating small farmers' access to financial service will contribute to poverty reduction.Originality/valueThis research contributes to the knowledge of the attributes and attribute levels favoured by farmers when choosing financial products and the amounts they agree to pay for these attributes. The implementation of the results would facilitate small producers' access to financial services; thus contributing to poverty reduction.

scholarly journals Macroeconomic factors influencing interest rates of microfinance institutions in the Latin America and the Caribbean

2014 ◽  
Vol 60 (No. 4) ◽  
pp. 159-173 ◽  
Author(s):  
K. Janda ◽  
P. Zetek
Keyword(s):  
Latin America ◽  
Rural Communities ◽  
Interest Rates ◽  
Best Practice ◽  
Cost Savings ◽  
Substantial Part ◽  
Microfinance Institutions ◽  
Macroeconomic Factors ◽  
The Caribbean ◽  
The Impact

Agricultural output in developing countries still represents a substantial part of the GDP. This ratio has actually increased in some areas such as the Latin America. As such, there is an increasing importance of microfinance institutions (MFIs) focusing on the activities associated with agriculture and encouraging entrepreneurship in agriculture and in the rural communities in general. The contribution of microfinance institutions consists mainly in providing special-purpose loans, usually without collateral. However, questions exist as to the magnitude and the adequate level of risk of providing micro-credit loans in relation to the interest rates being charged. We review two main approaches to setting interest rates in the MFIs. One approach takes the view that interest rates should be set at a high level due to the excessive risk that these institutions undertake. The second approach is to convince the public of the possibility of reducing these rates through cost savings, increased efficiency, and sharing best practice, etc. Subsequently we econometrically analyse the impact of macroeconomic factors on the microfinance interest rates in Latin America and the Caribbean. We show that these results depend on the chosen indicator of interest rate. &nbsp; &nbsp;

scholarly journals Effect of Efficiency on Interest Rate in Microfinance Systems of Some Transition Economies

2016 ◽  
Author(s):  
Metin Bayrak ◽  
Kadyrbek Sultakeev ◽  
Dastan Aseinov
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Transition Economies ◽  
Fixed Effects ◽  
Stochastic Frontier ◽  
Panel Data Models ◽  
Microfinance Institutions ◽  
Stochastic Frontier Approach ◽  
The Impact ◽  
Very High

Although the share of microfinance institutions in financial sector of Transition Economies are increasing, the level of interest rates charged by microfinance institutions are very high than normal bank interest rates. Because in these countries the main reasons of high interest rates are operational cost, funding costs, credit risk, inflation and target profit of MFIs. The main purpose of this paper is to analyze the effect of efficiency on interest rate in microfinance system of sampled transition economies. This study uses MIX data that runs from 2000 to 2014 for transition economies countries. The efficiency of microfinance institutions in sampled transition economies measured by applying Stochastic Frontier Approach. The impact of efficiency on interest rate will be analyzed using fixed effects and random effects panel data models.

scholarly journals The impact of microfinance on microenterprises

2017 ◽  
Vol 14 (3) ◽  
pp. 82-92 ◽  
Author(s):  
Sanya Olugbenga ◽  
Polly Mashigo
Keyword(s):  
South Africa ◽  
Financial Services ◽  
Mixed Method Research ◽  
Microfinance Institutions ◽  
Gauteng Province ◽  
Development Activity ◽  
Study Approach ◽  
Wide Range ◽  
Conventional Banks ◽  
The Impact

The provision of and access to financial services, particularly credit, can contribute greatly to the development of microenterprises in South Africa. Such provision has been an issue ignored by conventional banks or formal financial institutions. The problem associated with this ignorance includes high transaction and operation costs, lack of collateral, and the inability to obtain information about microenterprises resulting in difficulties to extend such credit. Microfinance therefore becomes an alternative to conventional banking and a mainstream and sustainable development activity for extending credit to microenterprises. However, the benefits of microfinance, which include, among others, the ability to provide the much-needed financial support for microenterprises, have not been fully harnessed in South Africa. The objective of this article is to evaluate the impact of microfinance on microenterprises in a typical South African township and to propose specialized financial mechanisms to support and improve the provision of credit to microenterprises. The article draws on the findings of a study undertaken in the Ga-Rankuwa township located in the Tshwane Metropolitan area in the Gauteng province of South Africa. It further draws on a wide range of extensive review of literature that documents the impact of microfinance on microenterprises. A case study approach is adopted and mixed method research paradigm (qualitative and quantitative) is used to gather information. Structured questionnaires and interviews were used to solicit information from the randomly selected microfinance institutions and microenterprises in the Ga-Rankuwa township.

scholarly journals Evaluating the Impact of Microfinance for Women in Albania

2016 ◽  
Vol 4 (2) ◽  
pp. 233
Author(s):  
Oltiana Muharremi ◽  
Filloreta Madani ◽  
Erald Pelari
Keyword(s):  
Social Influence ◽  
Low Income ◽  
Financial Services ◽  
Poverty Alleviation ◽  
Empirical Investigation ◽  
Social Value ◽  
Microfinance Institutions ◽  
The Poor ◽  
The Impact ◽  
Micro Enterprises

<p class="Default"><em>Microfinance is defined as any activity involving the offering of financial services such as loans, savings and insurance to individuals with low income.</em><em> </em><em>Creating social value includes reducing poverty and having a better impact to improve living conditions through capital for micro-enterprises; insurance and savings deposits for reducing risk and boosting consumption. Worldwide microfinance actors promote access to basic financial services by developing new tools, a variety of products and the adoption of an integrated banking access.</em></p><p class="Default"><em>Initially, microfinance was largely gender neutral: it sought to provide credit to the poor who had no assets to pledge as collateral. It quickly emerged, however, that women invested their business profits in ways that would have a longer-lasting impact on their families and communities. Consequently women became fundamental to the success of the microfinance model as a poverty alleviation tool. The purpose of this article is to examine the impact of microfinance loans in improving the lives of women borrowers, as well as in strengthening their social influence and the microcredit impact in promoting savings. This study is based on an empirical investigation of 384 structured questionnaires and surveys directed at microfinance institutions and their clients in the regions of Vlore and Fier, Albania.</em></p>

scholarly journals The Islamic Microfinance System And Its Ultimate Impact On The Poor In Bauchi Metropolis In The Context Of Socio-Economic Challenges

2021 ◽  
Vol 5 (1) ◽  
pp. 95-101
Author(s):  
Hashim Sabo Bello ◽  
Shamsuddeen Abubakar ◽  
Sunusi Abdulkadir Fateh
Keyword(s):  
Social Services ◽  
Low Income ◽  
Financial Services ◽  
Poor People ◽  
Microfinance Institutions ◽  
Islamic Microfinance ◽  
And Gender ◽  
High Level ◽  
Financial Transactions ◽  
The Impact

One of the conditions for providing social services to the population, reducing the differentiation of their incomes, as well as reducing poverty is to provide equal access to financial services for all segments of the population. Despite high unemployment and a significant number of poor people, only about a few thousand Nigerians today use Islamic microfinance services. The main purpose of this study is to study the impact of the Islamic microfinance system on the financial situation of the population. The study is based on the principles of the theory of positivism. Methods of deduction, statistical analysis, and survey served as methodological tools. The authors of the article developed a structured questionnaire, the analysis of which allowed to analyze the attitude of citizens to Islamic microfinance services. A representative sample of citizens of the metropolis Bauchi with different levels of wealth, age and gender was selected for the study. According to the results of the survey, the development of special microcredit programs for low-income people allowed to finance the start of their own business, thus providing their own and household members’ employment. The main factors hindering the development of microfinance in Muslim countries are the high level of non-repayment of borrowed funds, imperfect infrastructure, the presence of Sharia bans on certain types of financial transactions. The results of the study showed the need for an active information campaign aimed at explaining the benefits of using macro-financial services and their accessibility for low-income citizens, as well as expanding the network of microfinance institutions throughout the metropolis. These measures will create conditions for the development of small business in the country, and as a consequence reduce poverty and reduce the number of unemployed in the country.

scholarly journals Assessing the Impact of Operational Flaws on the Performance of Microfinance Institutions in Ghana

2020 ◽  
Vol 7 (1) ◽  
pp. 37
Author(s):  
Adjei Gyamfi Gyimah ◽  
Annette Serwaa Agyeman ◽  
Solomon Adu-Asare
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Interest Rates ◽  
Negative Impact ◽  
Microfinance Institutions ◽  
Credit Risk Management ◽  
Overall Performance ◽  
The Impact ◽  
And Training ◽  
Regulatory Challenges

Microfinance institutions contribute significantly to the development of a country, and many of these institutions are found in most developing countries including Ghana. However, many challenges have been alleged to stifle the efforts of microfinance companies in their attempt to make their all-important contribution to the development of nations. This study explored the effect of operational flaws on the performance of microfinance institutions in Ghana. The results discovered flaws and challenges associated with the operations of the MFIs in many areas including corporate governance, credit risk management, credit administration, regulatory challenges, and training programs. The study also revealed that such flaws and challenges do harm the overall performance of the MFIs. Based on the findings, it is recommended that MFIs put in place a well-composed and resourceful credit committee to perform the duty of credit risk management in the institutions. The institutions could also reduce their interest rates to encourage their clients to apply for more loans. Lastly, it is recommended that the MFIs take all necessary steps to ensure that they reduce the flaws and challenges they face to mitigate the negative impact of such deficiencies on their performance.

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