scholarly journals Modeling the Propensity to Default on Microloans in Mali, Africa

2016 ◽  
Vol 3 (2) ◽  
pp. 97
Author(s):  
Julia R. Norgaard
Keyword(s):  
Poverty Alleviation ◽  
Historical Data ◽  
Educational Background ◽  
Ordinary Least Squares ◽  
Microfinance Institutions ◽  
Loan Repayment ◽  
Qualitative And Quantitative ◽  
The Poor ◽  
Default Rates ◽  
Loan Size

Microfinance is a global phenomenon that is focused on sustainable poverty alleviation.  By providing people in developing countries with the capital to sustain themselves and an educational background on which to build their futures, microfinance institutions (MFIs) have given the poor an opportunity to get out of poverty.  For the purposes of this study, a specific MFI in Mali Africa was utilized to model the propensity for micro-borrowers to default on their loans.  Using the MFI’s historical data on each of their loans, this study models the repayment percentage of individual loans, contingent upon qualitative and quantitative factors.  Employing an Ordinary Least Squares Model I am able to analyze how each independent factor influences default rates.  I also harness fuzzy analysis to group together factors that contribute to high default rates.  I hypothesize that high default rates were encouraged by a longer time between payments, a large initial loan size, business development in investment heavy industries, and starting a business in a hostile market environment.  By utilizing these results, the MFI can optimize its loan repayment success by targeting specific borrowers and modifying their loan structure. The purpose of this study is to provide the Mali MFI with tangible results that they can utilize to increase their loaning effectiveness.  This model is important because microfinance is a relatively new field and 3it seeks to improve the Mali MFI’s poverty alleviating capacity.  

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 Alleviating Poverty Through Islamic Microfinance: Factors and Measures of Financial Performance, and Roles of Islamic Values and Financial Policies

2019 ◽  
pp. 1266-1273
Author(s):  
Adhitya Ginanjar ◽  
Salina Kassim
Keyword(s):  
Financial Services ◽  
Poverty Alleviation ◽  
Financial Education ◽  
Financial Inclusion ◽  
Microfinance Institutions ◽  
Financial Policies ◽  
The Poor ◽  
Depth Interview ◽  
Rich Information ◽  
Islamic Microfinance

Indonesia has a strong presence of microfinance sector with the number of Islamic Microfinance Institutions (IMFIs) estimated to be around 5,000 currently. Microfinance is an effective tool in alleviating poverty in Indonesia due to the limited access to financial services by the poor who accounted for approximately 96 million Indonesians (or 37% of the total population), living on less than USD 1.90 a day. In the absence of collateral and steady income, the poor are considered too risky to be given credit facilities by the formal financial services providers and living in remote areas has also limited their access to formal financial services. This study aims to examine the poverty alleviation efforts from the perspective of the IMFIs in view of their direct involvement in the process and having rich information about financial issues facing the borrowers. The managers also understand about financial inclusion agenda as well as financial guidelines and regulations issued by the relevant authorities. A total of 34 managers of Baitulmaal Wa Tamwil (BMTs), which registered under the Sharia Cooperative Centre (INKOPSYAH) are taken as respondents from the Jakarta, Bogor, Depok, Tangerang and Bekasi (JABODETABEK) areas. The first instrument was a survey questionnaire, and the second one was an in-depth interview to outline data related to the model design. The findings of this research are expected to contribute to better decision-making for the BMTs to further enhance its role in alleviating poverty. The findings also elaborate several dimensions to improving financial inclusion among the poor including providing financial services, implementing Islamic principles, significant policies, community-based framework concept and training financial education. This research highlights the need for a variety of strategies to warrant success of poverty alleviation efforts by BMT.

scholarly journals The Equity and Efficiency of Microfinance

2010 ◽  
Vol 3 (1) ◽  
pp. 11-17
Author(s):  
Mahazarin Kanga ◽  
Juhi Bansal ◽  
Siddharth Verma ◽  
Ishani Bandaranayake
Keyword(s):  
Financial Services ◽  
Poverty Alleviation ◽  
Social Benefits ◽  
Poor People ◽  
Microfinance Institutions ◽  
The Poor ◽  
Equity And Efficiency ◽  
Social Opportunities ◽  
The Common ◽  
Global Population

Banks are for people with money rather than for people without money. However, microfinance is banking for the unbankables. It brings credit, loan, savings and other essential financial services within the reach of millions of people who are too poor to be served by regular banks, i.e. almost 60-90% of the global population. It is one of the most intriguing features of financial economics today. In the aftermath of the 2006 Nobel Peace Prize being awarded to the Bangladeshi, Mohammed Yunus, who is a champion of the cause for microcredit, the common presumption has been that microfinance create s undeniable social benefits such as poverty alleviation and more equal social opportunities. Indeed, this is true to a large extent; however, less acknowledged are the problems that lurk behind this facade of ‘social service’. Donning the caps of economists, this pa per discusses the economic rationality of microfinance as an effective tool for achieving poverty alleviation. We ask the question on whether the theoretical objective of microfinance for ‘helping the poor’ is sullied in practice by rent seeking, profit seeking and corruption. We assess the fundamental economic model for the basis on which Microfinance Institutions (MFIs) provide loans to the poor and as whether the poor people eventually benefited from this financial innovation.

scholarly journals The Role of Islamic Microfinance for Poverty Alleviation in Mogadishu, Somalia: An Exploratory Study

2019 ◽  
Vol 6 (4) ◽  
pp. 355-365
Author(s):  
Mohamed Abdi Elmi Xalane ◽  
Marhanum Che Mohd Salleh
Keyword(s):  
Poverty Alleviation ◽  
Poverty Reduction ◽  
Current Practice ◽  
Descriptive Analysis ◽  
Quantitative Methodology ◽  
Microfinance Institutions ◽  
The Poor ◽  
Standards Of Living ◽  
Islamic Microfinance

This research aims to investigate the current practice of Islamic microfinance in Mogadishu, Somalia and to examine the effectiveness of Islamic microfinance institutions in Somalia on poverty reduction. In total, 65 microfinance recipients participated in the survey. This research adopts a quantitative methodology, using a survey and descriptive analysis. Findings show that the current practice of Islamic microfinance in Mogadishu is serving the poor and that these microfinance activities are effective in terms of obtaining loans, enhancement of standards of living and usefulness of the system. Nonetheless, there is a low level of awareness among the locals regarding the availability of Islamic microfinance.

scholarly journals CAN ISLAMIC MICROFINANCE ALLEVIATES POVERTY IN INDONESIA? AN INVESTIGATION FROM THE PERSPECTIVE OF THE MICROFINANCE INSTITUTIONS

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Adhitya Ginanjar ◽  
Salina Kassim
Keyword(s):  
Decision Making ◽  
Poverty Alleviation ◽  
Financial Inclusion ◽  
Survey Questionnaire ◽  
Model Design ◽  
Microfinance Institutions ◽  
The Poor ◽  
Depth Interview ◽  
Islamic Microfinance

This study examines the poverty alleviation efforts undertaken by the Islamic microfinance institutions (IMFIs) in Indonesia. We focused on the role played by the IMFIs in view of their direct involvements in the process of dealing with the borrowers, and their better understanding about the financial inclusion agenda as well as the financial guidelines and regulations issued by the relevant authorities. In methodology, a total of 34 managers of Baitul Maal wat Tamwil (BMTs) were taken as respondents from the Jakarta, Bogor, Depok, Tangerang and Bekasi (JABODETABEK) areas. A two-step approach was adopted in arriving at enriching findings: first, a survey questionnaire was distributed to the respondents, and subsequently, an in-depth interview was conducted to outline data related to the model design. The findings of this study highlight specific dimensions to improve financial inclusion among the poor. Apart from providing important inputs for better decision-making for the BMTs to further enhance its role in poverty alleviation, this study suggests a variety of strategies to warrant success of poverty alleviation efforts by BMT.

scholarly journals Assessing the Determinants of Operational Self-Sufficiency of Microfinance Institutions (MFIs) in Afghanistan

2018 ◽  
pp. 31-48
Keyword(s):  
At Risk ◽  
Financial Services ◽  
Poverty Alleviation ◽  
Microfinance Institutions ◽  
Economic Activities ◽  
Loan Portfolio ◽  
The Poor ◽  
Self Sufficiency ◽  
Significant Factors

Microfinance Institutions (MFIs) started providing financial services in Afghanistan since 2003 to take part in poverty alleviation and providing micro loans for the poor entrepreneurs enabling them to expand their economic activities. Since the inception, the Microfinance sector in Afghanistan experienced serious ups and downs and most of the MFIs collapsed and could not become sustainable. Therefore, the aim of this study is to assess the determinants of MFIs sustainability in Afghanistan. To best of researcher’s knowledge, yet, no quantitative researches have been done in the context of Afghanistan to assess the determinants of MFIs sustainability. Using 2SLS econometrics approach through STATA and Eviews, the data of 5 MFIs from 2004 to 2015 was used to assess the determinants of MFIs sustainability. The research’s findings reveal that number of offices, total gross loan portfolio, operational expense to gross loan portfolio and portfolio at risk are statistically significant factors which determine the operational self-Sufficiency of MFIs in Afghanistan. However, other finding of this research shows that ratio of deposit to loan and total expenses to assets have not significant impact on the operational Self-Sufficiency of MFIs in Afghanistan during the study period.

scholarly journals Credit Elasticities in Less-Developed Economies: Implications for Microfinance

2008 ◽  
Vol 98 (3) ◽  
pp. 1040-1068 ◽  
Author(s):  
Dean S Karlan ◽  
Jonathan Zinman
Keyword(s):  
Interest Rates ◽  
Randomized Trials ◽  
Microfinance Institutions ◽  
Access To Credit ◽  
Developed Economies ◽  
Price Increases ◽  
The Poor ◽  
Inelastic Demand ◽  
Demand Curves ◽  
Loan Size

Policymakers often prescribe that microfinance institutions increase interest rates to eliminate their reliance on subsidies. This strategy makes sense if the poor are rate insensitive: then microlenders increase profitability (or achieve sustainability) without reducing the poor's access to credit. We test the assumption of price inelastic demand using randomized trials conducted by a consumer lender in South Africa. The demand curves are downward sloping, and steeper for price increases relative to the lender's standard rates. We also find that loan size is far more responsive to changes in loan maturity than to changes in interest rates, which is consistent with binding liquidity constraints. (JEL G21, O16)

scholarly journals Outreach and sustainability of inventory credit programme in Ghana

2011 ◽  
Vol 56 (2) ◽  
pp. 145-164
Author(s):  
Ebo Onumah ◽  
Acquah De-Graft
Keyword(s):  
Lower Cost ◽  
Financial Sustainability ◽  
Qualitative And Quantitative ◽  
Cost Structures ◽  
The Poor ◽  
Performance Benchmarks ◽  
Per Capita ◽  
Low Efficiency ◽  
Loan Size ◽  
Female Clients

The study examined the outreach and sustainability of the inventory credit programme (ICP) in Ghana using both qualitative and quantitative data between 1996 and 2003. The findings revealed that the outreach of the ICP reached the poor with a depth of 25-47% (nationwide) measured in terms of loan size/GNP per capita. The outreach measured in terms of percentage of female clients served was initially 20%, but fairly increased to 59% over the study period. However, a comparative analysis with two successful MFIs in Ghana and standardized performance benchmarks indicate that the ICP did not perform well in reaching the very poor. The results of the financial performance indicate that the ICP was operationally and financially sustainable. Further, the study showed that the ICP had high loan recovery rate which underlies its profitability. However, the ICP operated with a low efficiency measured in terms of adjusted operational expenses ratio. Based on these findings the study concludes that there is a trade-off between outreach to the poorest and a financial sustainability of the ICP which can be mitigated by the enhanced credit allocation through lower cost structures.

scholarly journals Microfinance and Poverty Alleviation in Southwest Nigeria: Empirical Evidence

2016 ◽  
Vol 3 (4) ◽  
pp. 256-266 ◽  
Author(s):  
J.N. Taiwo ◽  
M.E. Agwu ◽  
A.I. Aregan ◽  
O.A. Ikpefan
Keyword(s):  
Financial Services ◽  
Poverty Alleviation ◽  
Ordinary Least Squares ◽  
Living Standard ◽  
Demand Model ◽  
Grameen Bank ◽  
Cross Sectional ◽  
The Poor ◽  
Loan Demand ◽  
Southwest Nigeria

In order to alleviate poverty and improve the living standard of the people of South-West Nigeria, it is imperative that micro/small financial services such as credit, insurance, money transfer, etc. are provided in order to engage them actively in productive activities. Globally, there are several failed policies by governments, particularly in Nigeria over the years aimed at poverty alleviation. This study examines microfinance scheme towards the dispersion of credit amongst the working poor; draws from the data collected from field survey and these were reported using tables, frequency counts and cross-tabulations to draw inferences and a loan demand model was specified and estimated using the Ordinary Least Squares (OLS) econometric technique.The study used cross-sectional data collected from selected respondents in selected areas of both the Lagos and Ogun States of Nigeria respectively. The study found that majority of the Microfinance banks in Nigeria are model after the Grameen Bank which is aimed at the poor and people with basic, little or no education and that loan demand is interest rate insensitive. Therefore, MFIs should design appropriate products that are flexible enough to meet the different needs of the poor for both production and consumption purposes. Besides, governments (local, state and Federal) should urgently tackle the infrastructural gaps such as electricity, water and efficient transportation system which impact greatly on the standard of living of the people.Int. J. Soc. Sc. Manage. Vol. 3, Issue-4: 256-266

Microfinancial inclusion nexus poverty alleviation: the case of Nigeria

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chi Aloysius Ngong ◽  
Kesuh Jude Thaddeus ◽  
Josaphat Uchechukwu Joe Onwumere
Keyword(s):  
Money Supply ◽  
Commercial Bank ◽  
Rural Areas ◽  
Poverty Alleviation ◽  
Poverty Reduction ◽  
Microfinance Institutions ◽  
Content Type ◽  
Bank Branches ◽  
The Poor ◽  
Long Run

PurposeThis research examines the long-run relationship between microfinancial inclusion and poverty alleviation in Nigeria from 1990 to 2018.Design/methodology/approachthe Engle–Granger two-step co-integration and autoregressive distributed lag (ARDL) techniques. Gross domestic product (GDP) per capita proxies poverty reduction. Number of microfinance banks, borrowers of microfinance institutions, commercial bank branches, commercial bank loan to small-scale businesses and broad money supply ratio measure microfinancial inclusion.FindingsThe results indicate a long-run relationship between microfinancial inclusion and poverty reduction. The error correction model reveals that microfinancial inclusion and poverty alleviation converge to long-run equilibrium. The number of microfinance banks, lagged value of borrowed funds and broad money supply negatively influences poverty while the lagged values of number of microfinance banks and broad money supply positively influence poverty.Research limitations/implicationsEffective ways to improve microcredit channels and liquidity flow to the poor through a microfinance bank's intermediation should be promoted by the Central Bank of Nigeria (CBN) using an aggressive policy, which provides access to credit to the poor.Practical implicationsTheoretically, microfinance institutions should increase credit to the poor, especially in rural areas at moderate cost. This study further suggests that many microfinance bank branches should be located in urban and rural areas targeting the poor.Social implicationsMicrofinancial inclusion reduces population's poverty in Nigeria and globally.Originality/valueContrary to other studies, this paper utilizes number of microfinance institutions and borrowers of microfinance institutions to examine the relationship between microfinancial inclusion and poverty alleviation in Nigeria.

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