Analysis of determinants of youth self-employment career choices

PurposeGiven the different manifestations of the unemployment crisis, the main purpose of this study was to identify what characteristics influence the participation of youth in key self-employment business options.Design/methodology/approachThe study has used both probability and nonprobability sampling techniques. Purposive sampling methods were used to identify target study areas (districts and Kebeles) while the systematic random sampling method was used to locate sample respondents. A total of 424 sample respondents were interviewed through interview scheduled questionnaires. Statistical data analysis was carried out using STATA 14 software.FindingsAgriculture, local value-added business activities, food-related services, petty trade and local transportation were common business choices where unemployed youths were engaged in. The findings of the study also showed that sex, loan size, loan repayment period and training gap were predictors of youth engagement in various self-employment career choices.Practical implicationsIncreasing loan size has a positive and significant influence on youth engagement in all self-employment business choices and has reminded us the need to revise or lift up loan size celling to assist youths in engaging in productive sectors. Similarly, the favourable correlation between female youths and value-added activities necessitates a well-designed female-specific intervention.Originality/valueAn understanding of the key determinants of youth preference to engage in specific self-employment career choices enables practitioners to intervene where necessary in supporting youth self-employment engagement. A combination of skill training, relaxed loan size and relaxed repayment is likely to gain sustainable business, which would benefit the local economy by transforming small businesses to a higher level and creating more job opportunities.

Factors affecting farmers’ willingness to adopt crop insurance to manage disaster risk: evidence from Bangladesh

Climate change and climate-related disasters have had a major impact on agriculture and agricultural livelihoods in Bangladesh, threatening the food security of the entire nation. Non-structural measures such as crop insurance have been recommended as risk management tools for farmers but have not been implemented because of a lack of supporting policies, expertise, and lack of information about farmers’ willingness to adopt such strategies. This study aims to fill that research gap by exploring the factors influencing agricultural producers to purchase crop insurance. Primary data were collected from three districts (Mymensingh, Barisal, and Comilla) that are prone to flooding. A multinomial logit model was adopted to investigate the relationships among dependent and explanatory variables. The results indicate that age, loan size, distance from the major river, farming experience, farming type, and risk attitude affect farmers’ willingness to pay for crop insurance. Government subsidies and increased awareness of the benefits of crop insurance could improve the outlook for the agricultural sector and help medium and subsistence farmers maintain their livelihoods. The results also provide valuable guidance for local, national, and international stakeholders.

Regressive Mortgage Credit Redistribution in the Post-Crisis Era

We document four secular trends about U.S. mortgage origination by traditional and FinTech lenders after the 2008-2009 financial crisis. First, since 2011, the overall number, size, and approval rate of small and medium-sized loans have been decreasing over time, relative to large loans. Second, the largest lenders redistribute their lending the most. Third, this loan-size redistribution of credit increases in the size of the lender. Fourth, the effects are stronger for mortgages further away from the conforming loan limit(s) in both directions. We argue that the supply of credit drives these secular trends, and we assess several potential economic mechanisms.

Analysis of Effect of Microfinance on the Performance of MSEs in Amhara National Regional State, Ethiopia

This article examines the effect of microcredit on the performance of the micro and small enterprises (MSEs) in Amhara National Regional State, Ethiopia. A total of 340 MSEs were randomly selected, and a survey method was used. Average Sales volume was used to measure performances of MSEs. The findings suggested that the majority of MSEs in Ethiopia were engaged in manufacturing and urban agriculture sectors with a share of 48.53% and 26.76% of the total, respectively. Paired t-test analysis of the study confirmed that there was a significant difference between the sales, total asset, employment and net profit performance of MSEs after microcredit loan. The study concluded that loan size, savings and entrepreneurship training had a significant positive effect on the performance of MSEs. It is suggested that microfinancial institutions should strengthen their existing policies and strategies to increase credit to MSEs, enhancing the modalities of entrepreneurship training and mobilizing savings to achieve the envisioned targets of reducing unemployment and promoting the growth of MSEs in Ethiopia.

Environmental, Social, and Governance Incidents and Bank Loan Contracts

We investigated how a borrower’s adverse environmental, social, and governance incidents affect bank loan contracts. Using a sample of 2001 publicly traded US firms during the period from 2007 to 2016, we found that loans initiated after the occurrence of a firm’s environmental, social, or governance-related incident have a significantly higher spread and a lower loan size. Our sample contained firms covered by RepRisk, as RepRisk began tracking firms’ environmental, social, and governance-related incidents in January 2007. Further analysis showed that the influence on loan contracts is more pronounced in younger firms, which verifies that environmental, social, and governance-related incidents have significant influence and higher information asymmetry. In addition, a test of the timing of the environmental, social, and governance-related incidents in a year further strengthened our conclusions. Moreover, the impact of environmental, social, and governance-related incidents on loan contracts was also reflected in other non-monetary items, such as the duration of a loan contract, requests for collateral, and the frequency of covenants, as well as the lender structure. This paper adds to the discussion on the economic effects of environmental, social, and governance-related incidents on bank contracts. More broadly, our results contribute to the public policy discussion on the role banks should play in the transition to a low-carbon and sustainable economy.

FINANCIAL OUTREACH AND FINANCIAL SUSTAINABILITY OF LICENSED DEPOSIT TAKING MICROFINANCE INSTITUTIONS IN NAIROBI CITY COUNTY, KENYA

Purpose: The purpose of this study was to investigate the relationship between financial outreach and financial sustainability of deposit taking microfinance institutions in Nairobi County, Kenya. Methodology: The study employed a positivism research philosophy to determine the relationship between financial outreach and financial sustainability. A population of 13 licensed Deposit Taking Microfinance Institution was considered for this study. Census method was preferred due to small number of target population. A static Panel linear regression model with fixed effect was developed for both operating self-sufficiency and financial self-sufficiency. Secondary data was obtained from Central Bank of Kenya from audited financial statements. Inferential analysis method was employed using Stata statistics software then descriptive statistics tool such as mean and standard deviations were used. several diagnostic tests were conducted namely: normality, multicollinearity, heteroscedasticity, serial correlation, stationarity and Hausman. Results: The study found that number of active clients (breath of outreach) had statistically significant relationship; Average loan size (depth of outreach) had insignificant; age of firm (experience of institution) had insignificant relationship on financial sustainability of DTMFIs in Nairobi County, Kenya. The moderating effect between credit risk management (portfolio at risk) and breadth of outreach (number of active clients) was positive while portfolio at risk and experience of institution (age) and depth of outreach (average loan size) was negative on the relationship between financial outreach and (OSS and FSS) financial sustainability. Further, loan loss provision coverage had positive interaction with number of active clients, age, and average loan size on the relationship between financial outreach and financial sustainability of DTMFIs in Nairobi County, Kenya. Unique contribution to theory, practice and policy: The study recommended that the government through Central Bank of Kenya should formulate policies that enhance savings with DTMFIs and therefore encourage financial inclusion. Further, DTMFIs should engage in vigorous financial education to boost financial facilities’ awareness to boost the breadth of outreach and get involved in information collection and sharing to mitigate credit risk.

Segmentation of retail bank customers for the purposes of modeling the loan claim default

Subject. In the banking practice, approaches to separate modeling of loan claim default (for new and repeat customers, for customers having and not having a history in the Credit Bureau, etc.) are widespread. Such a segmentation of retail bank customers may increase the efficiency of applied scoring system. The practical problem of choosing the optimal heuristic method of segmentation for the scoring remains unresolved. Objectives. The purpose of this work is to determine the optimal heuristic method of segmentation from those that are known in the literature and the industry. Methods. The study employs statistical analysis and content analysis of information sources. Results. We compared over thirty heuristic methods for segmentation of retail bank customers. The comparison showed that according to the classifier of the efficiency metric (AUROC), our proposed segmentation by the disbursed loan size turned out to be optimal. The method consists in the ‘disbursed loan’ variable discretization under the TreeR method. Conclusions and Relevance. The findings may be helpful in loan scoring and in any statistical modeling, using the logit regression.

Social and financial performance of MFIs: complementary or compromise?

Purpose With the ongoing transformation of the microfinance sector, questions have been raised on the ability of microfinance institutions (MFIs) to perform financially well without compromising with their social objectives. The current study attempts to analyse the social and financial performance of Indian MFIs with an objective to find the kind of relationship between these two objectives. Design/methodology/approach The dynamic framework of simultaneous equations model is used to find the nature of the relationship which exists between social and financial performance of Indian MFIs. Findings The study finds that depth of outreach enables MFIs to achieve financial sustainability. On the other hand, financially strong MFI lend more as reflected by an increase in their average loan size. Research limitations/implications Many MFIs still receive subsidies to support their operations. Ideally, adjustments should be made to remove the effect of such subsidies on their cost. However, due to non-availability of data, the study fails to make any adjustment for the subsidies. Practical implications The presence of a complementary relationship between social and financial performance in the Indian microfinance sector is quite encouraging for the policymakers during the current time when the sector is becoming less dependent on subsidies. However, the recent upsurge in the average loan size requires attention. Social implications The findings suggest that MFIs can achieve financial sustainability while targeting poor clients. This indicates that MFIs can perform socially good along with their financial performance. Originality/value Such study is vital when the Indian microfinance sector is moving away from subsidies to become self-reliant and commercialised. Few studies have focused on this aspect of Indian microfinance sector.

Understanding the Scope of the Institutional Transformation within the Microfinance Sector: Evidence from Sidian Bank in Kenya

This article investigates the impact of the change in the legal status of a microfinance institution on its social and financial performance. It uses a case study with a strong emphasis on both quantitative and qualitative approaches to understand the stakeholders’ perceived value of transformation. The results from the study reveal that transformation significantly improves the profitability and the efficiency of Sidian Bank, and in addition, improves the quality of its portfolio. However, we found that transformation has altered significantly the social objectives of Sidian Bank by decreasing its breadth and depth of social outreach. Insights from the qualitative approach reveal that the average loan size widely used to proxy mission drift is a biased indicator since clients grow over time and always favor bigger loans. The stakeholders’ perceived value of transformation differs in terms of risks, breadth, and financial results.