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 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>

A comparative analysis of the practice and performance of microfinance institutions in Nigeria

2017 ◽  
Vol 44 (11) ◽  
pp. 1522-1538 ◽  
Author(s):  
Abiola Ayopo Babajide ◽  
Joseph Niyan Taiwo ◽  
Kehinde Adekunle Adetiloye
Keyword(s):  
Best Practice ◽  
Sampling Procedure ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Content Type ◽  
Non Profit ◽  
For Profit ◽  
Multi Stage ◽  
And Performance ◽  
The Impact

Purpose The successful story of microfinance institutions is often tied to the practice and methods of credit delivery as evidence among international world class microfinance institutions across the globe. The purpose of this paper is to examine the impact of practice and methods of credit delivery employed by “non- profit” and “for-profit” microfinance institutions on financial sustainability and outreach programmes of the microfinance institutions in Nigeria. Design/methodology/approach The study adopts the survey research design and multi-stage stratified random sampling procedure to collect data from 372 senior management staff, managing directors and board members of microfinance institutions of both groups in Nigeria. Data collected were analyzed using descriptive statistics and multiple regressions analysis. Findings The findings suggest that the current practice and methods of credit delivery of microfinance in both “non-profit” and “for-profit” microfinance institutions have an inverse relationship with the financial sustainability and outreach programmes of the institutions. This study provides empirical evidence for the incessant failure of microfinance institutions in Nigeria. Research limitations/implications The study therefore recommends an immediate overhaul of the methodology and practice of microfinance institutions in the country to align with international best practice. Originality/value In spite of the huge literature on microfinance in Nigeria, there is not enough evidence to empirically prove that the practice of microfinance has affected the performance of the industry in Nigeria. This study sets out to fill that gap in the literature. The paper examines the practice of microfinancing in Nigeria vis-à-vis the performance of the microfinance institutions, categorized into NGO and microfinance bank “for-profit” institutions using international best practices from countries where microfinance is highly successful as a benchmark for deployment of microfinance in Nigeria, in order to proffer policy direction to stakeholders on steps to take to ensure viability in the microfinance subsector in Nigeria.

scholarly journals Rural Finance in Contemporary Times: Interface with Microfinance

2005 ◽  
Vol 30 (2) ◽  
pp. 81-112 ◽  
Author(s):  
N S Sisodia ◽  
M B N Rao ◽  
Vijay Mahajan ◽  
V Leeladhar ◽  
M P Vasimalai ◽  
...  
Keyword(s):  
Interest Rates ◽  
Financial Services ◽  
Banking System ◽  
The State ◽  
Microfinance Institutions ◽  
Rural Finance ◽  
The Poor ◽  
Role Of The State ◽  
Financial Exclusion

In India, when we talk about rural finance, the stereotype offered is that of a banking system that fails to reach out to the poorer clients and, when it does, fails to recover the money so disbursed. The counter-point offered is usually the magic wand of microfinance. This Colloquium was an interface between leading bankers and microfinance practitioners in India to examine where these two worlds meet and how they could learn from each other. The discussions were organized around three themes: a) the legacy of the banking system, b) the limitations of microfinance, and c) an assessment of the potential. On the issue of legacy, the message was clear that the intervention of the state in certain aspects has been undesirable. These areas were clearly identified as granting general pardon for loans, tinkering around with interest subsidies, and interfering with the commercial aspects of banking. The limitations of the microfinance institutions were in terms of their sustainability and their inability to draw commercial capital and grow rapidly. However, these limitations were partly seen as a consequence of regulatory apathy and support from the state both in terms of formulating and articulating a regulatory framework and also in terms of the central bank being reluctant to supervise the efforts. These did not help in enhancing the legitimacy of microfinance institutions. The participants saw a great potential in the rural markets which were beyond agriculture. The emerging sectors were identified as construction, non-farm enterprise, handloom, clusters that involve garment making and quarrying, etc. According to them, there was scope for both the banks and the microfinance institutions to intervene. The following points emerged from the discussion: Rural finance has suffered from interventions from the state in the past. While some interventions have been positive, they have harmed the sector when compromises such as write-offs have been made. Microfinance has emerged as an important mechanism to reach out financial services to the poor. There are interesting lessons from this for the banks to adopt. There are problems for the microfinance institutions in the form of regulatory and supervisory apathy. This leads to financial exclusion of large segments of the poor. There is a huge market for financial services — both loans and savings. Innovations across the world indicate important breakthroughs in delivery of financial services. These can be implemented provided the regulatory impediments are removed. The issue of risk management has to be systematically addressed. The role of the state, wherever positive, has been effective and, therefore, this should be sharply defined to see how the state could contribute to this sector. The issue of interest rates continues to be vexatious and needs to be addressed urgently.

Microfinance and Social Performance

2010 ◽  
Author(s):  
Robin Gravesteijn ◽  
James Copestake
Keyword(s):  
Interest Rates ◽  
Financial Services ◽  
Small Businesses ◽  
Social Performance ◽  
Environmental Conservation ◽  
Bank Loan ◽  
Poor People ◽  
Microfinance Institutions ◽  
The Poor ◽  
Wide Range

Microfinance refers to an array of financial services—including loans, savings, and insurance—available to poor entrepreneurs and small business owners who have no collateral and, otherwise, would not qualify for a standard bank loan. Those who promote microfinance generally believe that such access will help poor people out of poverty. For many, microfinance is a way to promote economic development, employment, and growth through the support of micro-entrepreneurs and small businesses; for others, it is a way for the poor to manage their finances more effectively and take advantage of economic opportunities while managing the risks. One of the newer fields that is getting more attention within microfinance is the measure of microfinance institutions’ (MFIs) social performance, which broadly is an indication of how well an MFI meets the social goals outlined in its mission and vision. Social performance is reflected in a wide range of indicators, including an MFI’s policies towards employees, like providing health care or maternity leave; to what degree an MFI targets the poorest of the poor for financial services; an MFI’s policies on environmental conservation; how low an MFI keeps its interest rates; how transparent an MFI is about these interest rates and other loan terms; and how an MFI’s services translate into improved lives for their clients.

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.

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 Interest Rate Ceilings on Microfinance Industry

2015 ◽  
Vol 2 (2) ◽  
pp. 10
Author(s):  
Ali Saleh Alshebami ◽  
D. M. Khandare
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Low Income ◽  
Secondary Data ◽  
Research Subject ◽  
Access To Credit ◽  
The Poor ◽  
Good Intention ◽  
The Interest Rate ◽  
The Impact

<p>Imposing ceilings on the interest rate has recently become one of the new hottest topics in microfinance industry; various debates have been discussing this issue to know the effect of interest rate ceilings on the supply of credit in particular and on microfinance industry in general. However in spite of the good intention behind these ceilings, there was no absolute result stating that ceilings have really contributed to the improvement or protection of the poor clients, indeed, these ceilings have hurt those low income people instead of helping them, due to these ceilings most of MFIs left the market or reduced their scale due to the inability to continue operating with low interest rate leaving the very poor clients without access to credit. Thus, the purpose of this paper is to review the impact of imposing such ceilings on the interest rates and to find out what alterative solutions can be employed as substitutes for them. This paper is entirely based on the secondary data collected from various records related to microfinance such as microfinance books, official websites and reports, published papers, and other sources related to the research subject.</p>

Adopting Islamic microfinance as a mechanism of financing small and medium enterprises in Uganda

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ssemambo Hussein Kakembo ◽  
Muhamad Abduh ◽  
Pg Md Hasnol Alwee Pg Hj Md Salleh
Keyword(s):  
Financial Services ◽  
Small And Medium Enterprises ◽  
Skills Training ◽  
Microfinance Institutions ◽  
Alternative Scheme ◽  
Content Type ◽  
The Poor ◽  
Islamic Microfinance ◽  
Financial Challenges ◽  
Medium Enterprises

PurposeDespite the fact that small and medium enterprises (SMEs) play a crucial role in strengthening the financial sector within developing and emerging economies through providing employment opportunities to the rural and urban population, capacity building in the form of skills training and economic empowerment, they still face a plethora of challenges that continue to threaten their existence, performance and growth. Access to operational and administrative funds needed to execute their activities effectively is a significant challenge and detrimental to the growth of SMEs in Uganda. Conversely, Islamic microfinance has been noted as a panacea to the challenges of financial inaccessibility among SMEs, especially in developing countries. The purpose of this paper is therefore to investigate how the adoption of Islamic microfinance can play a fundamental role in enhancing the sustainability of microfinance institutions (MFIs) while meeting the financing challenges of SMEs in Uganda.Design/methodology/approachIn this study, a review of existing literature was carried out to critically examine relevant information (literature sources) and empirical studies on SMEs, their performance and challenges. The study being conceptual tries to understand how Islamic microfinance could be adopted as an alternative scheme of financing to bridge the gap and mitigate the financial challenges facing SMEs.FindingsThe study finds that the existing MFIs have failed to achieve their objectives of providing financial services to the poor and SMEs while remaining sustainable. This has left the majority of SMEs within Uganda's informal sector financially handicapped, thus leading to their failure in meeting their expectations and eventually collapsing even before celebrating their third or fourth birthdays. However, the enactment into law of the Financial Institutions Amendment Act 2016 that paved the way for the introduction of Islamic finance in Uganda, and the Tier 4 Microfinance Institutions and Money Lenders' Act, 2016 that incorporated the aspects of Islamic microfinance within the existing microfinance framework as seen and is perceived as a key factor in addressing the financial challenges faced by MFIs and the SMEs if fully adopted.Research limitations/implicationsThis study is conceptual with no empirical investigation and discussion of key theories. On the contrary, it will be imperative and useful when carrying out more extensive hypothetical studies by future researchers, specifically in the area of Islamic microfinance that is relatively new in Uganda.Practical implicationsPractically, this paper will serve as a guide to policymakers and practitioners in the field of microfinance by adding a flair that could enable in bridging the challenges associated with inadequate financing of SMEs in Uganda.Social implicationsSocially, the social aspects of charity (Zakah and Sadaqah) will help to improve the livelihood of the poorest of the poor who cannot engage in active business through meeting their basic needs of life without begging thereby preventing them from being social outcasts.Originality/valueThe study establishes Islamic microfinance (IMF) as a promising and unexplored viable option potentially needed in intensifying the financing needs of SMEs in Uganda. The paper provides an entirely new dimension in nature and way microfinance products should be structured with a view of ensuring that there is sustainable provision of financial services to SMEs. The paper adds real value to the existing conventional microfinance products and services in Uganda, given the ethical and moral attributes of Islamic microfinancing practices that are assumed to efficiently and effectively motivate SME owners and other small entrepreneurs to thrive.

Pros and Cons of Integrating Non-Financial Services in Microfinance

2018 ◽  
pp. 171-199
Author(s):  
Nhung Thi Hong Vu
Keyword(s):  
Social Services ◽  
Financial Services ◽  
Poverty Reduction ◽  
Microfinance Institutions ◽  
Negative Effects ◽  
The Poor ◽  
Need Support ◽  
Microfinance Institution ◽  
Pros And Cons

Microfinance as argued in recent literature is not a panacea for poverty reduction as it was expected. The poor may need support from various ranges of non-financial services including business development services and social services alongside microfinance services. The main aim of this chapter is to provide policymakers and practitioners some discussions on the pros and cons of integrating non-financial services together with microfinance services. This chapter proposes a framework of both positive and negative effects of providing non-financial services on microfinance institutions and clients. A case study of offering non-financial services in a microfinance institution in Vietnam provides both quantitative and qualitative evidence of effects on the microfinance institution and its clients.

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