Pub Date : 2019-03-01DOI: 10.3362/1755-1986.18-00027
Mohammad Zainuddin, Ida Md Yasin
The microfinance industry in recent years has witnessed a paradigm shift from subsidized credit to sustainable for-profit microfinance. The increasingly commercial approach raises concern over whether sustainability comes at the expense of outreach to the poorest. The ability of microlenders to simultaneously achieve the dual missions of profit and welfare is highly debated. Empirical research has examined the relationship between sustainability and outreach, but is there any conclusive evidence of the existence of trade-off? This paper critically examines the outreach-sustainability literature in microfinance. More specifically, it a) summarizes the major crises that affected the microfinance industry; b) explores the theoretical debate between subsidized and commercialized approaches of providing microfinance; c) identifies different measures used by researchers to quantify outreach and sustainability; and d) reviews the empirical findings of the outreach-sustainability relationship. The article concludes with the proposal of a more measured and rigorous empirical investigation, given the mixed outcome to date.
{"title":"The trade-off debate in microfinance: a review of the theoretical and empirical literature","authors":"Mohammad Zainuddin, Ida Md Yasin","doi":"10.3362/1755-1986.18-00027","DOIUrl":"https://doi.org/10.3362/1755-1986.18-00027","url":null,"abstract":"The microfinance industry in recent years has witnessed a paradigm shift from subsidized credit to sustainable for-profit microfinance. The increasingly commercial approach raises concern over whether sustainability comes at the expense of outreach to the poorest. The ability of microlenders to simultaneously achieve the dual missions of profit and welfare is highly debated. Empirical research has examined the relationship between sustainability and outreach, but is there any conclusive evidence of the existence of trade-off? This paper critically examines the outreach-sustainability literature in microfinance. More specifically, it a) summarizes the major crises that affected the microfinance industry; b) explores the theoretical debate between subsidized and commercialized approaches of providing microfinance; c) identifies different measures used by researchers to quantify outreach and sustainability; and d) reviews the empirical findings of the outreach-sustainability relationship. The article concludes with the proposal of a more measured and rigorous empirical investigation, given the mixed outcome to date.","PeriodicalId":39025,"journal":{"name":"Enterprise Development and Microfinance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42273365","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-01DOI: 10.3362/1755-1986.2019.30-1br
A. Miller, A. Butler
{"title":"Book Review","authors":"A. Miller, A. Butler","doi":"10.3362/1755-1986.2019.30-1br","DOIUrl":"https://doi.org/10.3362/1755-1986.2019.30-1br","url":null,"abstract":"","PeriodicalId":39025,"journal":{"name":"Enterprise Development and Microfinance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45649757","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-01DOI: 10.3362/1755-1986.18-00009
Sydney Chikalipah
Prior empirical studies have sought to establish whether financial leverage boosts or stifles a firm’s profitability. By stark contrast, we are unaware of an empirical study that has attempted to investigate the leverage–profitability nexus in the microfinance context. Thus, we study the effect of financial leverage on the profitability of microfinance institutions, domiciled in sub-Saharan Africa, by exploiting a Microfinance Information eXchange (MIX) data set consisting of 465 microfinance institutions, drawn from 37 countries, over the period 1996 to 2012. By employing the generalized method of moments (GMM) estimation technique, we found that financial leverage is negatively associated with the profitability of microfinance institutions in sub-Saharan Africa. The plausible explanation for our findings is the persistently high costs of debt finance among many African countries. More importantly, policy implications are drawn from these findings.
{"title":"Financial leverage and profitability of microfinance institutions in sub-Saharan Africa","authors":"Sydney Chikalipah","doi":"10.3362/1755-1986.18-00009","DOIUrl":"https://doi.org/10.3362/1755-1986.18-00009","url":null,"abstract":"Prior empirical studies have sought to establish whether financial leverage boosts or stifles a firm’s profitability. By stark contrast, we are unaware of an empirical study that has attempted to investigate the leverage–profitability nexus in the microfinance context. Thus, we study the effect of financial leverage on the profitability of microfinance institutions, domiciled in sub-Saharan Africa, by exploiting a Microfinance Information eXchange (MIX) data set consisting of 465 microfinance institutions, drawn from 37 countries, over the period 1996 to 2012. By employing the generalized method of moments (GMM) estimation technique, we found that financial leverage is negatively associated with the profitability of microfinance institutions in sub-Saharan Africa. The plausible explanation for our findings is the persistently high costs of debt finance among many African countries. More importantly, policy implications are drawn from these findings.","PeriodicalId":39025,"journal":{"name":"Enterprise Development and Microfinance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44550250","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Microfinance programmes have emerged to serve the poor who are excluded by conventional banks and financial institutions. However, in the context of Nepal, accessible and sustainable financial services are still limited. Only 40 per cent of Nepalese are served by formal financial institutions. Experience has shown that people living in extreme poverty need several forms of support, such as grants for livelihoods and for purchasing productive assets, business development training, and financial literacy. This paper discusses barriers surrounding supply and demand side of financial systems for promoting financial inclusion. It argues that reaching the ultra-poor is only possible if appropriate strategies are devised to address the existing barriers that prevent inclusion of the unserved and under-served. The paper presents lessons learned from several initiatives to enhance financial inclusion in Nepal, and suggests approaches for serving the ultra-poor in the future.
{"title":"Approaches and design of microfinance programmes for the ultra-poor in Nepal","authors":"Nav Raj Simkhada","doi":"10.3362/1755-1986.00008","DOIUrl":"https://doi.org/10.3362/1755-1986.00008","url":null,"abstract":"Microfinance programmes have emerged to serve the poor who are excluded by conventional banks and financial institutions. However, in the context of Nepal, accessible and sustainable financial services are still limited. Only 40 per cent of Nepalese are served by formal financial institutions. Experience has shown that people living in extreme poverty need several forms of support, such as grants for livelihoods and for purchasing productive assets, business development training, and financial literacy. This paper discusses barriers surrounding supply and demand side of financial systems for promoting financial inclusion. It argues that reaching the ultra-poor is only possible if appropriate strategies are devised to address the existing barriers that prevent inclusion of the unserved and under-served. The paper presents lessons learned from several initiatives to enhance financial inclusion in Nepal, and suggests approaches for serving the ultra-poor in the future.","PeriodicalId":39025,"journal":{"name":"Enterprise Development and Microfinance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41918330","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Sierra, Victoria Muriel-Patino, F. Rodríguez-López
Microfinance institutions (MFIs) are usually driven by a twofold orientation defined by a set of financial and social aims. To date there is no consensus on how these two orientations are connected, nor on what is the best method to evaluate performance. The introduction of social elements to measure the degree of success in recent years led to several evaluation approaches with different combinations of social and financial standards. MFIs are constrained by limited budgets to carry out performance evaluations, and they might have to choose among different assessment methodologies. This study aims to identify the preferred standard-based methods to undertake microfinance performance evaluations in Bolivia. Our findings show that microfinance institutions focus mainly on assessment and rating; the SPI4 is the most widely used method to undertake performance evaluations, followed by credit rating. Most microfinance institutions conduct social performance evaluations in collaboration with external consultants.
{"title":"The evaluation of microfinance performance in Bolivia","authors":"J. Sierra, Victoria Muriel-Patino, F. Rodríguez-López","doi":"10.3362/1755-1986.00013","DOIUrl":"https://doi.org/10.3362/1755-1986.00013","url":null,"abstract":"Microfinance institutions (MFIs) are usually driven by a twofold orientation defined by a set of financial and social aims. To date there is no consensus on how these two orientations are connected, nor on what is the best method to evaluate performance. The introduction of social elements to measure the degree of success in recent years led to several evaluation approaches with different combinations of social and financial standards. MFIs are constrained by limited budgets to carry out performance evaluations, and they might have to choose among different assessment methodologies. This study aims to identify the preferred standard-based methods to undertake microfinance performance evaluations in Bolivia. Our findings show that microfinance institutions focus mainly on assessment and rating; the SPI4 is the most widely used method to undertake performance evaluations, followed by credit rating. Most microfinance institutions conduct social performance evaluations in collaboration with external consultants.","PeriodicalId":39025,"journal":{"name":"Enterprise Development and Microfinance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43404961","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
What assumptions do savings group advocates and practitioners hold about how groups work, and are they justified? As NGOs promote ever more savings groups, they cite a list of benefits: access to funds for emergencies and investments, profits on savings, and strengthened social ties. At the same time, they generally follow a set of ‘golden rules’: pay out annually, charge interest, and target women. Yet the benefits are only realized when a number of factors fall into place, and the rules don’t always make sense in different contexts. Savvy promoters and groups are already questioning these assumptions and adapting policies to better meet their needs; more could do so. In this paper we question some pervasive assumptions about savings groups. We provide counter-examples and lessons learned from our own experiences, those of others in the field, and published literature, in hopes of encouraging practitioners to examine these assumptions in their own contexts.
{"title":"Let’s look before we leap: challenging our ideas on how savings groups work","authors":"Elke Jahns-Harms, K. Wilson","doi":"10.3362/1755-1986.00004","DOIUrl":"https://doi.org/10.3362/1755-1986.00004","url":null,"abstract":"What assumptions do savings group advocates and practitioners hold about how groups work, and are they justified? As NGOs promote ever more savings groups, they cite a list of benefits: access to funds for emergencies and investments, profits on savings, and strengthened social ties. At the same time, they generally follow a set of ‘golden rules’: pay out annually, charge interest, and target women. Yet the benefits are only realized when a number of factors fall into place, and the rules don’t always make sense in different contexts. Savvy promoters and groups are already questioning these assumptions and adapting policies to better meet their needs; more could do so. In this paper we question some pervasive assumptions about savings groups. We provide counter-examples and lessons learned from our own experiences, those of others in the field, and published literature, in hopes of encouraging practitioners to examine these assumptions in their own contexts.","PeriodicalId":39025,"journal":{"name":"Enterprise Development and Microfinance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44299452","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A well-functioning and inclusive financial sector in developing countries is important for economic development. A mobile payment revolution has been taking place in Africa and allows frugal financial innovations for inclusive finance. This paper looks at the experience of M-Pesa in Kenya and in particular how they deal with customer care. Not enough use is made of the field agents and of customer segmentation (the low-income customers in particular deserve more attention), while customer care and operations can also be improved. Suggestions are made for how to do so and conclusions drawn about the strong points of this potentially frugal financial innovation. M-Pesa is helping people to become ‘financially included’ and tries to learn from customer satisfaction research.
{"title":"Frugal financial innovations for inclusive finance: the experience with customer care at M-Pesa in Kenya","authors":"Lukas Wellen, M. P. Dijk","doi":"10.3362/1755-1986.00016","DOIUrl":"https://doi.org/10.3362/1755-1986.00016","url":null,"abstract":"A well-functioning and inclusive financial sector in developing countries is important for economic development. A mobile payment revolution has been taking place in Africa and allows frugal financial innovations for inclusive finance. This paper looks at the experience of M-Pesa in Kenya and in particular how they deal with customer care. Not enough use is made of the field agents and of customer segmentation (the low-income customers in particular deserve more attention), while customer care and operations can also be improved. Suggestions are made for how to do so and conclusions drawn about the strong points of this potentially frugal financial innovation. M-Pesa is helping people to become ‘financially included’ and tries to learn from customer satisfaction research.","PeriodicalId":39025,"journal":{"name":"Enterprise Development and Microfinance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.3362/1755-1986.00016","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41677752","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-06-01DOI: 10.3362/1755-1986.16-00031
Mahfuzur Rahman, Aslam Mia, Izlin Ismail, C. Isa
Microfinance institutions (MFIs) aim to minimize their operating costs as a way to provide affordable services to the poor and attain financial sustainability for long-term economic viability. To contribute to existing literature, this paper examines the factors affecting the financing cost of MFIs. The study features a balanced panel data of 169 MFIs from Bangladesh’s microfinance industry, covering the period from 2009 to 2014. Based on the empirical results, internal sources of funds, such as clients’ savings and cumulative surplus, have a significant negative effect on the financing cost of MFIs. On the other hand, certain external sources of funds, notably donations and funds from government apex bodies, serve to reduce financing cost, which reinforces the efficiency and effectiveness of external support to the microfinance industry. This study suggests that MFIs should rely on internally generated funds and reduce dependency on commercial debt.
{"title":"Factors affecting the financing cost of microfinance institutions: panel evidence","authors":"Mahfuzur Rahman, Aslam Mia, Izlin Ismail, C. Isa","doi":"10.3362/1755-1986.16-00031","DOIUrl":"https://doi.org/10.3362/1755-1986.16-00031","url":null,"abstract":"Microfinance institutions (MFIs) aim to minimize their operating costs as a way to provide affordable services to the poor and attain financial sustainability for long-term economic viability. To contribute to existing literature, this paper examines the factors affecting the financing cost of MFIs. The study features a balanced panel data of 169 MFIs from Bangladesh’s microfinance industry, covering the period from 2009 to 2014. Based on the empirical results, internal sources of funds, such as clients’ savings and cumulative surplus, have a significant negative effect on the financing cost of MFIs. On the other hand, certain external sources of funds, notably donations and funds from government apex bodies, serve to reduce financing cost, which reinforces the efficiency and effectiveness of external support to the microfinance industry. This study suggests that MFIs should rely on internally generated funds and reduce dependency on commercial debt.","PeriodicalId":39025,"journal":{"name":"Enterprise Development and Microfinance","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.3362/1755-1986.16-00031","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41394556","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-06-01DOI: 10.3362/1755-1986.17-00020
S. Annim
This study is premised on two sequential objectives: examination of the outreach dimensions of microfinance institutions (MFIs), and an investigation of the poverty-reducing effect of access to MFIs and the amount loaned to MFI clients. Using a nationally representative sample of 2,884 respondents comprising MFI client and non-client households from Ghana, descriptive statistics and two variants of microeconometric estimation technique are employed. Outreach dimensions varied across MFIs, with targeting of MFIs remaining about the same in 2004 and 2015. Microfinance intervention was observed to have had poverty-reducing effects at the household level. The findings establish that clients of MFIs in the rural areas are more sensitive to larger loan amounts compared to their counterparts in the urban areas. These findings seem to uphold the promise of poverty reduction, but with consideration of the differential effects in terms of outreach, location of the MFI, and loan amount.
{"title":"Outreach and the poverty-reducing effect of microfinance in Ghana","authors":"S. Annim","doi":"10.3362/1755-1986.17-00020","DOIUrl":"https://doi.org/10.3362/1755-1986.17-00020","url":null,"abstract":"This study is premised on two sequential objectives: examination of the outreach dimensions of microfinance institutions (MFIs), and an investigation of the poverty-reducing effect of access to MFIs and the amount loaned to MFI clients. Using a nationally representative sample of 2,884 respondents comprising MFI client and non-client households from Ghana, descriptive statistics and two variants of microeconometric estimation technique are employed. Outreach dimensions varied across MFIs, with targeting of MFIs remaining about the same in 2004 and 2015. Microfinance intervention was observed to have had poverty-reducing effects at the household level. The findings establish that clients of MFIs in the rural areas are more sensitive to larger loan amounts compared to their counterparts in the urban areas. These findings seem to uphold the promise of poverty reduction, but with consideration of the differential effects in terms of outreach, location of the MFI, and loan amount.","PeriodicalId":39025,"journal":{"name":"Enterprise Development and Microfinance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.3362/1755-1986.17-00020","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46956070","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-06-01DOI: 10.3362/1755-1986.16-00033
Hala Helmy Elhadidi
Microfinance has become a critical tool in credit markets for poverty reduction and socioeconomic development. Yet its impact is still questioned and varies from one country to another and from urban to rural areas. This article examines the role of Egyptian microfinance on household income. A cross-sectional survey interviewed 780 established and new clients in Greater Cairo and rural areas in Egypt. The stratified random method was used to collect the data from urban and rural districts. The findings, using multinomial logistics, reveal that microfinance had a positive impact on the household income of women borrowers who spent three years in the scheme as compared to new borrowers.
{"title":"The Impact of Microfinance on Poverty Reduction in Egypt: An Empirical Study","authors":"Hala Helmy Elhadidi","doi":"10.3362/1755-1986.16-00033","DOIUrl":"https://doi.org/10.3362/1755-1986.16-00033","url":null,"abstract":"Microfinance has become a critical tool in credit markets for poverty reduction and socioeconomic development. Yet its impact is still questioned and varies from one country to another and from urban to rural areas. This article examines the role of Egyptian microfinance on household income. A cross-sectional survey interviewed 780 established and new clients in Greater Cairo and rural areas in Egypt. The stratified random method was used to collect the data from urban and rural districts. The findings, using multinomial logistics, reveal that microfinance had a positive impact on the household income of women borrowers who spent three years in the scheme as compared to new borrowers.","PeriodicalId":39025,"journal":{"name":"Enterprise Development and Microfinance","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.3362/1755-1986.16-00033","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"69467151","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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