scholarly journals Microfinance is a Non-productive and Expensive Source of Borrowing: A Case Study of District Sargodha (Pakistan)

2020 ◽  
Vol 2 (1) ◽  
pp. 1-5
Author(s):  
Tahir Mahmood ◽  
Allah Bakhsh
Keyword(s):  
Interest Rates ◽  
Farm Size ◽  
Productive Capacity ◽  
Microfinance Institutions ◽  
Feed Cost ◽  
Large Farm ◽  
Livestock Productivity ◽  
Loan Size ◽  
The Impact ◽  
Loan Amount

The study examines Pakistan’s microfinance institutions' performance and checks the productivity of microfinance institutions. For this purpose primary data was collected from a sample of 260 respondents from 6 microfinance banks in Sargodha District. This paper examined the livestock sector and the impact of microfinance on livestock productivity. According to the results of the role of microfinance was non-productive due to the high cost of borrowing, small loan size, high feed cost and use of the loan in a non-productive term. According to the results microfinance productivity is negative due to small loan size and high cost of borrowing. While the productivity of borrowing amount for large farm size is positive which is three times greater as compared to small farm size. So results showed that the efficiency of production increase through large scale farming. Small loan size and high cost of borrowing is a basic cause of negative microfinance productivity. Small loan size is not benefited for investment because the loan amount is unable to meet the basic requirements at the farm level for the increase in productivity of livestock farming. The main reason for the high productivity of livestock financing in large farming is due to its economies of size. Replacement of dilapidated equipment with modern equipment is one way to increase productivity in an organization. Large loan size decreases the inefficiency in input costs. The major three factors of livestock productivity are the amount of interest rates, milk production and feed cost which are responsible to make efficient use of loan amount in its productivity. Productive capacity is a basic characteristic of large farm size and loan productivity depends on productive capacity.

IMPACT OF DEVELOPMENT EXCHANGE CENTRE (DEC) MICROCREDIT PROGRAMME ON CROP OUTPUT AND STANDARD OF LIVING AMONG WOMEN FARMERS IN KADUNA STATE, NIGERIA

2021 ◽  
Vol 5 (1) ◽  
pp. 65-75
Author(s):  
B. D. Adamu ◽  
H. Y. Michael
Keyword(s):  
Interest Rates ◽  
Positive Impact ◽  
Women Farmers ◽  
Standard Of Living ◽  
Farm Size ◽  
Primary Data ◽  
Living Standard ◽  
Farming Communities ◽  
Multi Stage ◽  
The Impact

This study examined the impact of Development Exchange Centre microcredit programme on crops output and standard of living among women farmers in Kaduna State, Nigeria. A multi-stage sampling method was employed to select 420 respondents. Primary data were collected through the use of questionnaires and were subjected to both descriptive and inferential statistics. The mean farming experience was 22 years for DEC participants and 19 years for non-DEC participants while mean farm size for participants and non-DEC participants was 2.0 ha. Determinant of standard of living on programme participants, the study concludes that, age (0.0405, P<0.01), farm size (47.510, P<0.01), education, credit (0.6031, P< 0.01) and extension contact (0.002, P< 0.01), had direct relationship with the standard of living of programme  participants, This implies DEC, increase the standard of living of  programme participants in Kaduna State. Determinant of crops output of programme participants shows that, farm size (0.046, P<0.01), credit (0.821, P< 0.01), extension contact (0.0542, P< 0.05). F-chow statistics shows that DEC microcredit had positive impact on crops output of programme participants. Z – statistics also indicated positive impact on living standard of the participants. It was recommended that, DEC microcredit organization should increase the amount of loan disbursement to N100, 000, so as to increase participation; extend the repayment period, lowered interest rates and extend the programme to other farming communities in Kaduna State, there by improving the standard of living of women farmers in the state

Factors influencing the borrower loan size in microfinance group lending: a survey from Indian microfinance institutions

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sunil Sangwan ◽  
Narayan Chandra Nayak
Keyword(s):  
Size Variation ◽  
Primary Data ◽  
Individual Member ◽  
Limited Information ◽  
Microfinance Institutions ◽  
Group Lending ◽  
Content Type ◽  
Loan Size ◽  
The Cost ◽  
The Impact

Purpose The purpose of this paper is to analyze the impact of the cost of microfinance intermediation on borrowers’ loan size. The identified transaction cost and credit risk factors tell about what a lender takes into accounts while screening and allocating loan amounts to the borrowers, where the lender has limited information about the client’s ability to repay. Design/methodology/approach The analysis is based on the primary data collected from a sample of 498 microfinance institutions (MFI) linked group clients covering two microfinance leading states of India. Findings Empirical findings suggest that the cost of microfinance intermediation has an impact on borrowers’ loan size. To reduce the cost, the MFIs lend big loans to clients having a high income, assets, land size, lower informal borrowings and having longer loan experiences. In MFI lending, the younger and less educated people are the ones who demand bigger loan amounts. The geographical distance of borrowers’ location from MFI offices, group size and interest rate are the other factors that influence the loan size. Originality/value The past empirical works seem to have not focused on how the cost of microfinance intermediation creates loan size variation among the borrowers in joint liability group lending. The endogeneity problem has not been resolved. The present article thus identifies the factors that influence the individual member loan size by using two-stage least squared regression to tackle the issue of endogeneity.

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 Aid Volatility and Social Performance in Microfinance

2016 ◽  
Vol 46 (1) ◽  
pp. 116-140 ◽  
Author(s):  
Bert D’Espallier ◽  
Marek Hudon ◽  
Ariane Szafarz
Keyword(s):  
Interest Rates ◽  
Social Performance ◽  
Microfinance Institutions ◽  
Mission Drift ◽  
Social Mission ◽  
Signaling Device ◽  
Adjustment Variable ◽  
Donor Agencies ◽  
Loan Size ◽  
Policy Prescription

Uncertainty makes objectives harder to reach. This article examines whether uncertainty in subsidies leads to mission drift in microfinance institutions (MFIs). Using a worldwide sample of 1,151 MFIs active in 104 countries, we find that interest rates increase with aid volatility while average loan size (ALS) is inversely related to aid volatility. These results suggest that MFIs consider ALS as a signaling device for commitment to their social mission, but use interest rates as an adjustment variable to cope with uncertainty. The policy prescription to donor agencies wishing to curtail the rise in interest rates is to deliver subsidies predictably and transparently.

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 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.

scholarly journals How Mortgage Finance Reform Could Affect Housing

2016 ◽  
Vol 106 (5) ◽  
pp. 620-624 ◽  
Author(s):  
John V. Duca ◽  
John Muellbauer ◽  
Anthony Murphy
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
Capital Requirements ◽  
Finance Reform ◽  
Fannie Mae ◽  
Mortgage Finance ◽  
Mortgage Interest Rates ◽  
Size Limits ◽  
Loan Size ◽  
The Impact

Although major changes in mortgage finance have occurred since the subprime bust, several issues remain unresolved, centering on the roles of Fannie Mae, Freddie Mac, and the FHA. We analyze how some reforms might affect house prices in a framework rich enough to simulate the impact of several reforms which change mortgage interest rates and/or loan-to-value (LTV) ratios of first time home buyers, the key drivers of house prices in recent decades. Simulations suggest that ending the GSE interest rate subsidy would have small effects, while changes in capital requirements or maximum FHA loan size limits would have larger effects.

scholarly journals Financial Linkages and Active Poor Access to Microcredit in Tanzania and Kenya

2017 ◽  
Vol 1 (1) ◽  
pp. 54
Author(s):  
Isidore Minani ◽  
Esther K. Ishengoma
Keyword(s):  
Content Analysis ◽  
Interest Rates ◽  
Exploratory Research ◽  
Microfinance Institutions ◽  
Grace Period ◽  
Analysis Technique ◽  
Poor Access ◽  
Loan Size

This study explores the role of financial linkages in mitigating barriers to rural active poor for accessing microcredit. Through the interview to 34 Microfinance institutions and their 74 clients selected from Tanzania and Kenya, the exploratory research using the Content Analysis technique established that financial linkages have significantly contributed in increasing MFIs loanable funds. However, they have not mitigated the barriers to microcredit access including the types and size of collaterals, mandatory savings/deposits amount, higher-than-market interest rates, hidden charges, unbending repayment arrangement, short grace period and inflexible initial loan size which are among key barriers to rural active poor to access microcredit despite its availability. Findings implication appeals for objective national microfinance policy revisit to address aforementioned barriers in both countries if the sector is to benefit the rural active poor.

scholarly journals SMALL AND MEDIUM-SCALE ENTERPRISE FINANCING AND INDUSTRIAL GROWTH IN AFRICA

2018 ◽  
Vol 1 (2) ◽  
Author(s):  
Uju Regina Ezenekwe ◽  
Amaka G. Metu ◽  
Chekwube Vitus Madichie
Keyword(s):  
Interest Rates ◽  
Time Series Data ◽  
Negative Impact ◽  
Series Data ◽  
Easy Access ◽  
Microfinance Institutions ◽  
Access To Finance ◽  
Industrial Growth ◽  
Medium Scale ◽  
The Impact

Small and medium-scale enterprises (SMEs) have been identified as the engine and foundation of rapid industrial growth. Unfortunately, the potentials of the SMEs to accelerate the process of industrialization in Africa have been undermined by numerous constraints, prominent among which is lack of access to finance. The study examined the impact of SMEs financing on industrial growth in Africa using panel time-series data from all the 15 ECOWAS countries from 1986 – 2016. In implementing the panel data regression, the study engaged in panel unit root using the LLC, IPM, Fisher-type ADF and PP tests, and co-integration tests using the Kao residual-based and Johansen- Fisher combined tests. The study also placed adequate control for any unobserved heterogeneity among the ECOWAS countries, using a well-specified fixed effect in exploiting the time dimension present in the dataset. The result shows that SMEs output significantly affects industrial growth positively while the Deposit Money Banks’ credit to SME’s do not have significant impact on industrial performance during the review period. The result further reveals that interest rates have a significant negative impact on industrial growth. Based on these findings, the study recommends that monetary authorities in ECOWAS countries can encourage easy access to finance by making available interest-free loans using microfinance institutions.

The impact of microfinance programs on monetary poverty reduction

2019 ◽  
Vol 16 (1) ◽  
pp. 30-43
Author(s):  
Mustafa Hassan Elsafi ◽  
Elsadig Musa Ahmed ◽  
Santhi Ramanathan
Keyword(s):  
Poverty Reduction ◽  
Poverty Line ◽  
Control Group ◽  
Microfinance Institutions ◽  
Content Type ◽  
Welfare Indicators ◽  
The Difference ◽  
Loan Size ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of microfinance programs sponsored by Sudanese microfinance institutions (SMFIs) on monetary poverty reduction in Sudan where poverty is widely spread. Design/methodology/approach The study adopted the control group approach, where income and expenditure are taken as welfare indicators. The updated World Bank’s international poverty line of 1.90 per person per day was adopted to separate the poor from non-poor. The data were collected by the means of a questionnaire distributed to a random sample of beneficiaries in the institution under study. The study adapted the Foster, Greer and Thorbecke (FGT) model to evaluate the role of microfinance programs in poverty reduction. Furthermore, to gain more insight into the impact of the program, a preliminary analysis was conducted using the independent-samples t-test to examine the difference in the welfare indicators for the sample of the control group and treatment group as well as that of the small loan group and micro-loan group. Findings The findings show that the microfinance program provided by SMFIs has reduced the monetary poverty among the participants. The results also reveal that beneficiaries who had received a larger volume of loan were noted lesser poverty than those who had received very small loan size. Moreover, the results demonstrate that poverty indices based on expenditure as a welfare indicator are far lower than those based on income for both groups. Originality/value This study contributes to the available literature by filling the gaps through including income and expenditure as monetary variables, which included separately in previous studies adopted the FGT model in the area of microfinance, in addition to exploring the role of loan size in the effect of microfinance on poverty reduction.

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