Academic literature on the topic 'Microfinance institutions'

Microfinance institutions are established to promote the financial activities mainly saving and credit in community. Microfinance’s activities are focused on reducing poverty level of community people. Poor, disadvantaged, marginalize and women are in mainstream of microfinance’s programs. The study was focused on finding out the contribution of microfinance on socio-economic development of rural community. The study was based on the quantitative design. Cross-sectional data was collected from the 8 microfinances of Syangja district. Purposive sampling technique was adopted to select the respondents. The perceptual analysis of data reported the significant contribution of micro-finance in social change and development. Microfinances working since 2 to 20 years covering the diverse field of social activities were the samples of the study. There was a need to improve the internal management of microfinance to provide the services more effectively.

An important pillar in the development of Islamic microfinance institutions is Total Quality Management and Sharia Governance. This pillar is the main differentiator between conventional Islamic finance institutions. Institutional efforts to provide satisfaction to customers. The concept of quality (quality) for service and non-service basically includes various things that are focused on the customer. Shari'ah supervision is needed to ensure the implementation of Shari'ah principles in the financial institution, which is played by the Shari'ah Supervisory Board. Implicitly this shows that the practice of shari'ah microfinance institutions has not been concerned with shari'ah principles and the quality of good governance, one of the causes of reputation and public trust in Islamic microfinance institutions will also have an impact on community loyalty use the services of a Shari'ah microfinance institution. Improved reputation and customer trust can be used as an indicator of the success of the development of Islamic microfinance institutions and at the same time predicting their future success in order to increase market share.

Statistics indicate that about 1.7 billion people can’t access a savings account and slightly above 200 million small and medium-sized enterprises are deprived access to satisfactory financial solution. Kenya views microfinances as a development instrument for poverty lessening and economic growth through ensuring financial inclusion. It is due to the acceptance of this vital role of Microfinance that Kenya has undertaken strategic microfinance reforms and regulations aimed at promoting financial inclusion through microfinance business. The research’s general objective is to examine the effect of microfinance reforms on financial inclusion. Specifically, to determine the influence of microfinance transformation from non-deposit taking into a deposit-taking microfinance institutions on financial inclusion, to examine the association between microfinance board characteristics and public trust, to investigate the effect of microfinance licensing requirements on financial inclusion and to examine the effect of microfinance prudential standards requirements on financial inclusion in Kenya. The research adopted Financial Intermediation Theory and Public Interest Theory of Regulation. This research utilized descriptive research design and the population targeted included all the thirteen Microfinance institutions, which were licensed by the central bank of Kenya as at 2018. The study used purposive sampling to select six microfinance banks. Both descriptive and inferential statistics were done by use of multiple linear regression analysis. The research results indicated that microfinance transformation (pvalue=0.001), board characteristics (pvalue=0.042), licensing requirements (pvalue=0.035) and prudential standards (pvalue=0.002) significantly influenced financial inclusion. Results from regression analysis indicated a strong relationship between microfinance transformation, board characteristics, licensing requirements and prudential standards and financial inclusion. The study concluded that financial inclusion in micro financial institutions increases when there is sound microfinance transformation, board characteristics, legal requirements, and prudential standards. From the findings, the study recommended that micro financial institutions should support institutions reform functions and processes. Further the study recommended that micro financial institutions should recruit adequate and proficient workers and offer satisfactory training as well as certification for professional appreciation on strategies for microfinance reform processes and their influence on the financial inclusion of the micro financial institution. The research recommends that board members should be reliable and open so as to substantially contribute to financial performance.

Sound liquidity management is integral for any financial institution’s stability and profitability, since deteriorating liquidity management is the most frequent cause of poor financial performance. As with any financial institution, the biggest risk in microfinance sector is lending money and not getting it back leading to liquidity problems as most of them have no access to lender of the last resort which is the Central Bank of Kenya. The study sought to investigate the effect of liquidity management on financial performance of microfinance institutions in Kenya. The target population of the study was all the twenty-six microfinance in Kenya that are members of Association of Microfinance Institutions and were licensed by the Central Bank of Kenya as at 2017. A census of all the twenty-six 26 Microfinance Institutions in Kenya was conducted for five years from 2012 to 2016. Secondary data on the study variables was gathered from the audited financial statements of the Microfinance Institutions. The study employed random effect model on a 5-year panel data from 2012 to 2016 on all the 26 Microfinance Institutions in Kenya. The study found a positive relationship between capital adequacy and financial performance and a negative relationship between asset quality, maturity gap and financial performance. The study would help Microfinance Institutions as they would use the research findings to develop liquidity management strategies to enable Microfinance Institutions improve on their financial performance.

The purpose of this study is to obtain an overview of the sharia microfinance issues, sharia microfinance solutions to solve problems, and institutions strategies for strengthening sharia microfinance. The method used in this study is a qualitativeanalysis method using the tool Analytical Network Process (ANP) is used to find the priority of problems, solutions and strategies for improvement of sharia microfinance institutions. The results of studies suggest that the improvement in sharia microfinance institutions have 4 aspects, those are the problems of the human resource aspects (SDI), infrastructure aspects, market aspects, and management aspects. Aspect of the priority issues in the sharia microfinance institutional improvement is a human resources (SDI), while the improvement solution of sharia microfinance institutional is an aspect of human resources(SDI) as well. Then the strategy which becomes a priority in the improvement of sharia microfinance institutions is the optimization of the board of sharia (DPS)

The objective of this study were: 1) To know the potential of Microfinance Institution (LKM) in Jombang Regency, 2) To know the role of Microfinance Institution (LKM) towards economic performance in Jombang Regency, 3)To know the needs of Microfinance Institution (LKM) Development in increasing LKM roles on the Jombang Regency economy. The results showed: First, the overall number of Microfinance Institutions (MFIs) in as many as 425 Jombang spread in 21 regencies. The regency which had LKM at most in Jombang regency for 154, the second was Ngusikan Regency. Second,The results of Econometric analysis were able to concluded that the amount of LKM, LKM capital, and the volume of bussiness impacted to the variable of economic growth in Jombang Regncy. Third, easy and soft loan had a degree of interest by 87% whereas direct aid only had a degree of interest of 13%. Meanwhile, institutions which was more effective to provide capital loans on LKM development was institutional in rural areas, for example, through another microfinance.

Microfinance institutions are the main source of finance for the poor and the women in many country, therefore the sustainability of these companies is a concern, but that cannot be achieved without proper internal control mechanism to detect any attempt frauds that could harm the operations of microfinance institutions. The research will used literature review method by digging into previous researches to see the main courses of the failure of many microfinance institutions. The research found out that most of the microfinance institution failed due to inadequate control in place to detect malfunctions or fraud at the earlier stages that can safeguard the operations of microfinance institutions.

Social performance management refers to the ability to achieve social goals by putting customers at the center of strategy and operations in microfinance institutions. The social performance of a microfinance institution means its effectiveness in achieving social goals and creating value for customers. This is just one aspect of social performance management. Social performance management examines the whole process through which an effect occurs. In the present study, social performance is considered as an assessment of social goals such as targeting the poor and marginalized, an adaptation of services that deliver economic benefits to customers, and the environment, and employees to improve social responsibility towards customers and the community. The overall performance of microfinance institutions contributes to the long-term sustainability of the organization. Sustainability of microfinance institutions means the long-term continuation of the microfinance program, which includes continuity of financial and non-financial services of microfinance institutions. The sustainability of microfinance institutions are measured by using a portfolio, performance, financial management, and profit-to-financial ratio. In the present study, the sustainability of microfinance considered as a long-term continuation of the program that benefits all stakeholders in the microfinance sector and society. Most microfinance institutions devote their efforts to achieving the social and financial goals of the organization. Social performance facilitates progress in achieving the social goals of microfinance institutions. As such, sustainability is a dynamic concept that aims to meet the expected cost of all programs and return on investment.

This study is a discussion on the ‘Non-Governmental Organization-Microfinance Institution Partnership Model’ and ‘Securitization Model’ used by Indian microfinance institutions to achieve cost efficiency. These two models are effective strategies devised and used by efficient and sustainable Indian MFIs to reduce their operating cost and financing cost. Achieving such cost efficiency is crucial for microfinance institutions to attain operational self-sustainability without levying high interest rates. Using interview method the study elicits information on these innovative strategies and recommends them to be worthy of emulation for other microfinance institutions operating in the Indian microfinance industry.

Microfinance is a development tool used to reduce poverty among extremely poor households. Impoverished households can access lines of credit through microfinance institutions (MFIs), in order to create a new business, smooth household consumption, fund medical emergencies, etc. Many authors postulate that MFIs are drifting from a welfarist to an institutionalist approach to lending. Using MIXMarket data on specific MFIs in 118 countries between 1995 and 2011, the average loan balance of these organizations will be regressed against measure of outreach and sustainability of these institutions by charter type through a series of four, fixed effects models. The main research question is: given that a positive, overall shift in average loan balance indicates an institutionalist shift in mission, how does this impact microfinance institutions and the demographics they target on the intensive and extensive margins? These analyses will test the theory that MFIs with larger average loan balances serve households closer to the subsistence poverty level, a manifestation of mission drift toward the institutionalist philosophy of lending. The phenomenon of mission drift directly impacts the outcomes of microfinance institutions and the target demographic of the organization. The results of this study indicate that the mission of these organizations is drifting toward the institutionalist philosophy of lending. With this general result, mission drift can be observed within both the internal and external margins of the microfinance industry, which influences the chosen target market, profit generated, and structure of MFIs, as determined by the mission of the organization.

Inspired by the 1999 Program of Action defined by the United Nations, which describes eight pragmatic areas for a Culture of Peace. My proposal will work on the section 'Sustainable economic and social development' evaluating microfinance and the organizations that manage them, as a tool to achieve this objective. Immersed in a global context and under the prism of sustainability, the performance analysis of the organizations activity can not be done only from its economic exercise, but it is necessary to measure its impact under a wider range of criteria (Fernández et al., 2013). The main objective of this thesis will be to contribute to the improvement of research in this sector, presenting a global vision of the behaviour of MFIs in terms of sustainable performance, based on a model that articulates the financial, environmental, social and governance dimensions of integrated form.
Inspirado en el Programa de Acción de 1999 definido por Naciones Unidas en el que se describen ocho ámbitos pragmáticos para una Cultura de Paz. Mi propuesta trabajará sobre el apartado ‘Desarrollo económico y social sostenible’ evaluando las microfinanzas y las organizaciones que las gestionan, como herramienta para la consecución de este objetivo. Inmersos en un contexto global y bajo el prisma de la sostenibilidad, el análisis de desempeño de la actividad de las organizaciones no puede realizarse únicamente desde su ejercicio económico, sino que es preciso medir su impacto bajo una mayor amplitud de criterios (Fernández et al., 2013). El principal objetivo de esta tesis será contribuir a la mejora de la investigación de este sector, presentando una visión global del comportamiento de las IMFs en términos de desempeño sostenible, basado en un modelo que articule las dimensiones financiera, ambiental, social y de gobernanza de forma integrada.

Microfinance is regarded as a financial development tool used in fighting poverty by providing the poor with financial services such as microloans, savings, insurance and money transfers thereby gradually lifting them out of poverty. Improving the performance of Microfinance Institutions (MFIs) makes them more capable of better serving more poor people, contributing to the development and enhancement of their economies and improving the welfare of the poor. It is therefore of great importance to study the performance of MFIs from different aspects in order to understand how they operate, what causes their success/failure, and try to find ways to enhance MFI performance to get the most possible benefit out of them. This thesis consists of three interconnected studies, each of which addresses the performance of MFIs from a different aspect. The first study examines the effect of the external environment on MFI performance worldwide in order to identify the context that is best suitable for MFI success, with a special emphasis on the MENA region. The second study investigates the causal relationship between microfinance and formal banking sector development in order to help improve the performance of MFIs with the possible help of the banking sector. The third study tests whether a trade-off exists between the two most pursued goals by MFIs: profitability and outreach in order to help MFIs find a way to achieve both goals simultaneously. A balanced panel dataset of 124 MFIs from 45 countries worldwide for the period 2004-2011 is used in conducting the three studies by applying multiple linear regression models and PVAR model using GMM. Results reveal that the external environment surrounding an MFI significantly influences MFI performance which helps in explaining the uneven performance of MFIs worldwide. It is also concluded that MFIs in the MENA region are the most profitable on average compared to MFIs in other regions which is mainly driven by GDP per capita, whereas South Asian MFIs tend to outperform MFIs in the MENA region when it comes to outreach. Additionally, it is concluded that MFI sustainability and banking sector development do not Granger cause each other, but MFI outreach tends to Granger cause formal banking sector development. Finally, no evidence of trade-off between MFI profitability and outreach is found except when the effect of profitability on outreach is disaggregated by MFI type.

In the following paper I have tried to find the correlation between type of ownership and effective risk management in the operations of microfinance institutions in India. The results found are consistent with the current findings of how the type of ownership does not impact both the financial or social performance of MFIs. Dataset of 72 MFIs was acquired from the Microfinance Information Exchange on MFIs and evaluated using an OLS regression. The results show that the type of ownership insignificantly impacts both the credit and liquidity risk ratios of MFIs. It is possible that the impact of ownership type is more evident in other aspects of operations. In the future, a study on type of ownership and exposure to strategic and market risks could be a way forward.

Remittances (money sent home by migrants) to developing countries are estimated to have reached US$ 325 billion in 2010 (World Bank, 2011). These amounts reflect only officially recorded transfers, transferred through formal channels and calculated as the sum of three items of the Balance of Payments Statistics, namely: compensation of employees, workers’ remittances and migrants’ transfers (Salomone, 2006; Aggarwal et al. 2011). Unrecorded remittances could represent 50 to 100% of recorded flows (World Bank, 2006; Hagen-Zanker and Siegel, 2007).

Remittances are three times the size of official development assistance (ODA) and the second source of external funds after foreign direct investment (FDI) for developing countries. Given their weight in receiving countries’ economies and household livelihood in many developing countries (for instance, remittances flows represent more than 25% of Lesotho’ and Moldavia’s gross domestic product in 2008), there is increasing policy and research interest in remittances as development resource. Furthermore, unlike FDI and ODA, remittances have the particularity to be directly affected to families, even those in remote areas, where development funds don’t arrive (Shaw, 2006). The thesis addresses the relationship between microfinance and the impact remittances have on domestic investment in developing countries.

Like other sources of external finance, remittances allow the economy to invest in human and physical capital (health, education), which contribute to growth (Ziesemer, 2006; Acosta et al. 2008). However, as remittances may be either directly consumed (remittances allow households to smooth their consumption, see for instance Lucas and Stark, 1985 and Glytsos, 2005) or used to invest in physical and human capital, it appears that their impact on domestic investment is perceived to be low or limited, given the amount of money they represent each year. According to literature, this is due to the small share that is dedicated to the launch or the support of economic activities. Actually, the allocation between consumption and investment, which depends on various factors such as the level of dependence households have with remittances, the migrant gender, and the existence of a credit constraint, varies on average around 10-20% of remittances that are not directly consumed (Salomone, 2006; Sorensen, 2004; Orozco, 2004). In the thesis we focus on the share of remittances that is saved and wonder how to maximize its impact, whatever this share. We are interested in the role of microfinance institutions, as actors of the financial sector, on this issue. Actually, two recent contributions, Mundaca (2009), and Giuliano and Ruiz-Arranz (2009), stress the role of the development of the financial sector. More precisely, the thesis focuses on a set of questions or issues that may be important for the microfinance industry to consider when interested in remittances flows and the deposits they may generate.

Financial development is generally defined as “increasing efficiency of allocating financial resources and monitoring capital projects, through encouraging competition and increasing the importance of the financial system. In other words, the development is about structure, size and efficiency of a financial system” (Huang, 2006). A large line of research work provides evidence that development of a financial system is a key driver of economic growth.

King and Levine (1993) argue that greater financial development increases economic growth. Levine and Zervos (1993) shows that growth is related to stock market activity, among other variables. Levine (1999) finds a significant effect of determinants of financial intermediation on economic growth. Beck et al. (2004) find strong evidence in favor of the financial-services view which stresses that financial systems provide key financial services, crucial for firm creation, industrial expansion, and economic growth. Levine (1997), Levine et al. (2000), and Beck et al. (2000) also stress the impact of financial development on growth. There is also an empirical literature that argues that the expansion and the deepening of the financial system lead to higher investment (see for instance Rajan and Zingales, 1998; Demirgüç-Kunt and Macksimovic, 1998).

By providing financial services to people whom traditionally do not have access to financial institutions, microfinance institutions (MFIs) may contribute to increasing the size of the financial system in many developing countries. Actually, according to the CFSI’s 2011 report, the one thousand-plus MFIs that report to the Microfinance Information eXchange (MIX) have 88 million borrowers and 76 million savers. Total assets of these MFIs amount to US$ 60 billion (CFSI, 2011).

The quite recent literature on remittances, financial development and growth can be categorized under two main approaches (Brown et al. 2011). One approach explores the relationship between remittances and financial development, with a view to assessing their impact on the level of financial development in receiving countries. The underlying argument is that remittances potentially contribute to financial development through both demand- and supply- side effects: by increasing households’ demand for and use of banking services, and by increasing the availability of loanable funds to the financial sector. According to this approach which consider the direct relationship between remittances and financial development, remittances have an impact on both financial outreach and depth in receiving countries, respectively through the fostering of financial literacy among remittances receivers and through the increasing availability of funds (see for instance Gupta et al. 2009, Aggarwal et al. 2011, Brown et al. 2011).

The second approach examines the remittances – financial development relationship indirectly by investigating how the given level of financial development in a country affects the impact of remittances on growth. This growth-focused approach allows for interactions between remittances and financial development in estimating growth equations for remittances receiving countries. Within the set of studies related to this approach, two opposing positions have emerged. The first position hypothesizes that the greater availability of financial services helps channel remittances to better use, thus boosting their overall impact on growth. Remittances are seen as financial flows in search of good investment projects, and good financial institutions are needed to facilitate the channeling of remittances to such investments. In this sense, remittances and financial system are complements. This position is supported by Mundaca (2009) who find that financial intermediation increases the responsiveness of growth to remittances in Latin America and the Caribbean over the 1970-2002 period. Other few studies also argue that channeling remittances through the banking sector enhances their development impact (see for instance Hinojosa Ojeda, 2003 and Terry and Wilson, 2005).

The other position argues that remittances contribute to investment and growth by substituting for inefficiencies in credit and capital markets. Remittances provide an alternative source of funding for profitable investments by alleviating liquidity constraints. In this sense, remittances promote growth more in less financially developed countries by substituting for lack of credits from financial institutions. This hypothesis is supported by Giuliano and Ruiz-Arranz (2009) who argue that poor households use remittances to finance informal investment in poorly developed financial markets with liquidity constraints. In their study, they interact remittances with a measure of financial development in standard growth equations, for a sample of 73 countries over the 1975-2002 period. Ramirez and Sharma (2009) obtain similar results using data from 23 Latin American countries over the 1990-2005 period.

The thesis contributes to existing knowledge on this indirect, growth-focused approach. Given the two existing opposite views on remittances impact on investment and the level of financial intermediation (a high level of financial development implies a high level of financial intermediation), in the thesis we first analyze the relationship that links these variables. We then analyses questions related to microfinance institutions (MFIs), as financial intermediaries.

Our focus on microfinance is made from two different perspectives, leading to different research questions. First, from the demand or microfinance clients’ perspective, we question about the interest for them to have MFIs entering the money transfers market (through the money transfer facilities and/or financial products that may be directly linked to remittances). The underlying argument is that MFIs enter the remittances market by providing money transfer services because there is a need for such services (and for other financial services) from their (potential) clients who are remittances receivers and migrants. According to this point of view, MFIs can contribute to recycle remittances flows into the financial system by contributing to the financial inclusion of remittances receivers and migrants thanks to the supply of adapted financial products. The occurrence of this assumption can therefore be measured by considering the involvement of MFIs on the remittances market as a determinant of financial inclusion indicators. Second, from the supply or MFIs’ perspective, we question about the rationale for MFIs to enter the remittances market. Here, the underlying argument is that MFIs are interested in operating on the remittances market because working with migrants can potentially contributes to the improvement of their financial and social performances. According to this perspective, remittances market opportunities as well as MFIs’ characteristics will determine the offer of money transfer services by MFIs. This supply approach therefore leads to the consideration of money transfers activities in MFIs as depending on remittances market opportunities and institutional variables.

Therefore, our papers related to microfinance will be articulated around these two questions (interest for clients and rationale for MFIs to have MFIs operating on the money transfers industry) by focusing, as argued earlier, on the deposits resulting from remittances flows.

As a matter of facts, by studying the relationship between microfinance and remittances respectively through the demand and the supply perspective, we raise causality issues related to MFIs’ money transfer activities and their impacts on MFIs performances. Actually, MFIs’ characteristics such as the right to collect public savings, as a potential source of efficiency gains, may significantly determine the supply of a money transfer service (MFIs’ perspective), while a money transfer service may itself be the determinant of some MFIs’ performance indicators related to financial inclusion, such as the volume of deposits made by clients (demand approach). However, given currently existing data on MFIs’ involvement on the remittances market we cannot consider simultaneously both perspectives in order to implement causality treatment techniques. Actually, the indicator of MFIs’ involvement we will use in our regressions is time invariant, therefore we are not able to build instrumental variables for instance (such as lagged values of our variable of interest) to eliminate econometric issues in our regressions. Nevertheless, through these two approaches taken separately, we contribute to some extend to the knowledge by putting in perspective different issues at stake for the microfinance industry.

Before we tackle our research questions we have an introductory chapter related to remittances flows: what are their trends, determinants and characteristics? The chapter also includes the definition of money transfer activities that we will use in the thesis, as well as an overview of MFIs’ involvement on the money transfers market.

Then, our research framework is divided into 4 sub-questions. The first one, treated in Chapter 2, is about the relationship between our variables of interest. What is the impact of the financial sector development (FSD) on the remittances’ impact on investment? This chapter aims at stressing the relationship existing between financial intermediation and remittances’ impacts on investment, which motivated our focus on MFIs (as financial intermediaries between remittances and the formal economy) in the following chapters. We focus on two transaction costs that decline with FSD. The first is the “Cost of Bank Depositing”, henceforth CDEP, which measures the difficulties of savers, particularly the less well-off, of depositing their savings in the formal banking system. The second transaction cost is the “Cost of External Finance”, henceforth CEXF, which measures the marginal cost for the banking system of borrowing in global financial markets. This cost is notably associated with the robustness of the country’s financial sector. In a stylized model of the lendable funds market, we analyze how both these variables affect the marginal effect of remittances on investment. We test model’s propositions using country-level data on remittances, investment, and proxies for both CDEP and CEXF, on a sample of 100 developing countries. We perform empirical tests using both cross-section and panel-data with country fixed effects, over the period 1975-2004. The results demonstrate, theoretically and empirically, that remittances and ease of access to the banking sector act as complements to stimulate domestic investment, while remittances and external borrowing are substitutes. We find that remittances flows stimulate local investment, as a part of remittances indeed become banks’ deposits, which increases the availability of lendable funds, reduces the interest rate and stimulates investment. In terms of policy implication, results suggest that enhancing financial sector development is crucial as it allows remittances to better fuel domestic investment. This is even truer when the access to international funds is difficult or costly. Improving the financial inclusion of remittances receivers by developing domestic banks’ ability to collect their savings is then a straightforward recommendation to policymakers who want to improve remittances impact on investment.

The second question, developed in Chapter 3 is related to the demand perspective of the relationship between microfinance and remittances. We want to assess whether there is a need from remittances receivers for financial products that may be linked to remittances. We aboard this question by assessing whether the supply of MTA leads to higher volume of deposits mobilized by MFIs, meaning that MFIs actually contribute or succeed in turning remittances into deposits. Using an original database of 114 MFIs –operating in Latin America and the Caribbean (LAC), South Asia (SA), East Asia and the Pacific (EAP), and Africa–, we perform empirical tests to study whether MFIs are able to capture migrants’ savings thanks to their money transfer activity. We test the impact of money transfer activity on deposits, using the natural logarithm of deposits as explained variable. Our main result suggests that money transfer activity has a significant positive impact on savings collection. MFIs involved in the remittances market thus attract more savings than MFIs that are not involved in it, probably coming from migrants and remittances receivers who are in need of adapted financial services. This confirms the opportunity MFIs may represent as a tool or a channel to improve remittances impact on investment. In that sense, MFIs should then be encouraged to operate on the remittances market, and to design financial products dedicated to migrants and remittances receivers.

The third question, developed in Chapter 4, is related to the supply approach of the relationship between remittances and microfinance. More precisely, we try to identify factors that seem to explain the availability of such service in the scope of services provided by MFIs. In this chapter, we focus first on potential sources of efficiency gains linked to the money transfer activity as a rationale for diversification (i.e. the expansion of the offer). And second, using an original database of 435 MFIs –operating in Latin America and the Caribbean (LAC), South Asia (SA), East Asia and the Pacific (EAP), and Africa–, we perform empirical tests using cross-section over the year 2006, to identify which environmental and institutional parameters have an impact on the willingness of a MFI to provide a money transfer service. We test the impact of various variables that are related to one of the rationale for MFIs to enter the money transfer market, namely economies of scale and scope as a source of efficiency gains, on the probability to have a money transfer service provided by a given MFI. Our main result suggests that the size, as well as the fact that an MFI collects savings have a positive and significant impact on this probability, while the level of financial development negatively impact it. This confirms among other things that the ability to realize economies of scale through a potential increase of collected deposits may be a determinant of managers’ choice to diversify. Policies that contribute to reduce entry barriers in low financially developed countries should then, among other things, be encouraged to have MFIs fully playing their role of intermediaries between remittances and the (formal) economy.

The chapter 5 questions about the institutional consequences for MFIs to collect migrants’ savings. The aim of this chapter is to give an insight on the opportunity migrants’ money (including remittances) could represent for the microfinance industry as a source of stable medium- and long-term funds. It is therefore related to the supply approach and the motivation for MFIs to enter the remittances market by analyzing the impact of migrants’ deposits (which include remittances) on another potential source of efficiency gains, namely the internal capital market. Through a case study approach, this chapter is devoted to the analysis of funding risk in microfinance, comparing migrants’ and locals’ time deposits. Migrants’ time deposits are expected to be of longer term and more stable (in terms of early withdrawals) than locals’ deposits. This assumption had never been tested yet. Based on an original database of 7,828 deposit contracts issued between 2002 and 2008 by 12 village banks belonging to a major Malian rural microfinance network (PASECA-Kayes), we used the Cox proportional hazard model to identify the variables that have an impact on the probability to have early withdrawals, and the technique of re-sampling to calculate withdrawal rates and deposits at risk. Results from the Cox methodology suggest that the migration status is not a direct determinant for the probability to have an early withdrawal. However, this probability increases with the amount deposited and the term of the contract which are both higher for migrants compared to non-migrants. The re-sampling method results suggest that withdrawal rates are not the same for the two categories of depositors observed. We find higher withdrawal rate distributions for migrants than for locals. The value at risk is also higher on migrants’ deposits than on locals’ deposits. However, as migrants tend to deposit for longer term than locals, through the calculation of durations we have measured to which extend migrants’ deposits still have a positive impact on MFIs’ liabilities. It appears that migrants’ money has a marginal but positive impact on time deposits durations, either when considering early withdrawals, which impacts are very limited, except in 2007 (the worst year in terms of amount withdrawn early). As our results show that MFIs that receive migrants’ deposits are not necessarily better-off than without migrants’ money in terms of funding risk - and durations - this paper has stressed the importance of assessing more carefully the role of migrants for the microfinance industry.

Doctorat en Sciences économiques et de gestion
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This thesis investigates the effects of micro-saving on the performance of microfinance institutions (MFIs) using unbalanced panels that straddle the period 2000-2012. This issue is also examined in a country-specific case study of Vietnam. There are four important findings. First, we found that serving more voluntary savers is costly and curtails depth of microfinance outreach. Second, micro-savings, in terms of the total deposits and the number of deposit accounts per staff member have a positive and significant impact on financial sustainability, cost-efficiency and breadth of outreach of MFIs. Third, a trade-off between financial sustainability and depth of outreach was found for deposit-taking MFIs, compared with MFIs that do not offer micro-savings financial products. Fourth, the findings from the cross-country studies are consistent with the findings from Vietnam. Overall, these findings have important implications for policy makers, microfinance practitioners and researchers.

The poor need a range of financial services to cope with shocks, to manage day-to-day transactions, and to grasp business opportunities, among others. To be successful in reaching the poor, microfinance institutions should offer products that meet the poor’s needs. Product design, therefore, is becoming a very important topic. “Behavioral” product design pinpoints the importance of individuals’ behavioral anomalies, such as procrastination behavior and lack of self-control. Financial products are seen as commitment devices to help individuals diverting money from immediate consumption to savings and investment.

This doctoral thesis contributes to this recent research stream by first surveying the literature on product design in microfinance, and then providing an empirical and a theoretical contribution. Precisely, the thesis is structured in four chapters. Chapter 1 and Chapter 2 are both reviewing the literature. Chapter 1, titled “Product Flexibility in Microfinance: A Survey”, reviews the academic literature on product flexibility in microfinance and offers a categorization scheme of flexible microfinance products. Chapter 2, titled “Innovative Flexible Products in Microfinance”, scrutinizes nine real-life practices covering microcredit, micro-savings and micro-insurance services that mix flexible features and commitment devices. Chapter 3, titled “The Debt Puzzle in Dhaka’s Slums: Do Liquidity Needs Explain Co-Holding?”, examines the use of flexible savings-and-loan accounts by SafeSave’s clients and tests whether the need for liquidity explains why the poor save and borrow simultaneously. Lastly, Chapter 4, titled “Having it Both Ways: A Theory of the Banking Firm with Time-consistent and Time-inconsistent Depositors,” proposes a theoretical model to determine the liquidity premium offered by a monopolistic bank to a pool of depositors composed of time-consistent and time-inconsistent agents.
Doctorat en Sciences économiques et de gestion
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El primer capítol examina la mesura que l'accés al crèdit i el racionament del crèdit estan influenciats pel tipus de microfinances basat en els principals factors que determinen les micro, accés de les petites i mitjanes empreses al crèdit de les institucions de microfinances en l'era de la liberalització financera. Les dades per a l'estudi van ser recollits dels registres de crèdit i préstecs de les institucions de microfinances que comprenia les diverses peces d'informació proporcionades pels prestataris en el procés de sol·licitud de préstec. Els nostres resultats són desconcertants i mostren que el racionament del crèdit no està influenciada pels tipus de microfinances sinó per les empreses microfinanceres individuals. Els nostres resultats també mostren que el tipus microfinances Govern és el més greu en el comportament de racionament El segon capítol té per objecte provar la política de microfinançament de Ghana, creat per donar suport i capacitar les persones vulnerables a través de l'accés al crèdit. Es recorre a la descomposició Blinder-Oaxaca per determinar si hi ha una discriminació positiva a favor de les dones i els joves empresaris en el comportament de racionament de les empreses de microfinances. Això és el que hauríem d'esperar si la política és efectiva. Els nostres resultats mostren que fins i tot després de controlar un gran nombre de característiques del prestatari, el tipus de microfinances i les variables de solvència creditícia, hi ha una discriminació positiva que afavoreix a les dones empresàries i joves. El tercer i últim capítol examina la importància de les característiques dels països africans "líders" i transicions de règim i com aquests factors afecten l'estat de salut com un indicador de desenvolupament dels seus ciutadans utilitzant taxa de mortalitat infantil com a mesura. Un conjunt de dades única que comprèn 45 països de l'Àfrica subsahariana que abasta des de 1970 t0 2010 es van utilitzar per a l'estudi. Els resultats globals suggereixen un avantatge democràtica en el procés d'aconseguir resultats eficaços de política de salut per promoure la salut i el benestar dels ciutadans a l'Àfrica subsahariana contemporània, almenys en el llarg termini.
El primer capítulo examina la medida en que el acceso al crédito y el racionamiento del crédito están influenciados por el tipo de microfinanzas basado en los principales factores que determinan las micro, acceso de las pequeñas y medianas empresas al crédito de las instituciones de microfinanzas en la era de la liberalización financiera. Los datos para el estudio fueron recogidos de los registros de crédito y préstamos de las instituciones de microfinanzas que comprendía las diversas piezas de información proporcionados por los prestatarios en el proceso de solicitud de préstamo. Nuestros resultados son desconcertantes y muestran que el racionamiento del crédito no está influenciada por los tipos de microfinanzas sino por las empresas microfinancieras individuales. Nuestros resultados también muestran que el tipo microfinanzas Gobierno es el más grave en el comportamiento de racionamiento El segundo capítulo tiene por objeto probar la política de microfinanciación de Ghana, creado para apoyar y capacitar a las personas vulnerables a través del acceso al crédito. Se recurre a la descomposición Blinder-Oaxaca para determinar si existe una discriminación positiva a favor de las mujeres y los jóvenes empresarios en el comportamiento de racionamiento de las empresas de microfinanzas. Esto es lo que deberíamos esperar si la política es efectiva. Nuestros resultados muestran que incluso después de controlar un gran número de características del prestatario, el tipo de microfinanzas y las variables de solvencia crediticia, existe una discriminación positiva que favorece a las mujeres empresarias y jóvenes. El tercer y último capítulo examina la importancia de las características de los países africanos "líderes" y transiciones de régimen y cómo estos factores afectan el estado de salud como un indicador de desarrollo de sus ciudadanos utilizando tasa de mortalidad infantil como medida. Un conjunto de datos única que comprende 45 países del África subsahariana que abarca desde 1970 t0 2010 se utilizaron para el estudio. Los resultados globales sugieren una ventaja democrática en el proceso de lograr resultados eficaces de política de salud para promover la salud y el bienestar de los ciudadanos en el África subsahariana contemporánea, al menos en el largo plazo.
The first chapter examines the extent to which access to credit and credit rationing are influenced by the microfinance type based on the major factors determining micro, small and medium enterprises’ access to credit from microfinance institutions in the era of financial liberalization. The data for the study were gleaned from the microfinance institutions’ credit and loan records consisting of the various pieces of information provided by the borrowers in the loan application process. Our results are puzzling and show that credit rationing is not influenced by the microfinance types but by the individual microfinance companies. Our results also show that the Government microfinance type is the most severe in the rationing behavior The second chapter aims at testing the Ghana Microfinance Policy, set up to support and empower the vulnerable through access to credit. We resort to the Blinder-Oaxaca decomposition to determine if there is positive discrimination in favour of women and young entrepreneurs in the rationing behavior of the microfinance companies. This is what we should expect if the policy is effective. Our results show that even after controlling for a large number of borrower characteristics, microfinance type and credit worthiness variables, there is positive discrimination that favors female and young entrepreneurs. The third and the last chapter looks at the importance of African countries’ leaders’ characteristics and regime transitions and how these factors affect the health status as a development indicator of their citizens using infant mortality rate as a measure. A unique dataset comprising 45 sub-Saharan African countries spanning from 1970 t0 2010 were used for the study. The overall results are suggestive of a democratic advantage in the process of achieving effective health policy outcomes for promoting health and the wellbeing of the citizens in contemporary sub-Saharan Africa, at least in the long run.

Microfinance targets the poor and very poor, both in urban and rural areas. It has become a common method of poverty alleviation in many developing countries. Several microfinance institutions have adopted a social mission to eradicate poverty by providing credit to the poor. In the past, microfinance organizations used to focus on farmers in rural areas. Modern microfinance programs are focused on the population that is largely neglected by the formal financial sector, specifically women. Due to the perceived risk in this type of uncollateralized lending, private equity markets are not keen on financing microfinance institutions. Furthermore, microfinance institutions are seen as socially motivated as opposed to being financially motivated. For that reason, their profitability and sustainability has come under question in the last decade. Two approaches to the issue of sustainability exist. The dominant institutionist approach argues that microfinance institutions should focus on being sustainable as this will improve their chances of alleviating poverty. The welfarist approach disagrees with this view by arguing that focusing on sustainability will result in the neglect of the poorest of the poor. This study analyses the sustainability of microfinance in South Africa by using a case study research approach. The study explores the challenges to sustainability in South Africa. The results of the study indicate that the microfinance institutions are not profitable nor self- sufficient. The most notable challenge to this sustainability is the high personnel costs. South African MFIs experience higher operating costs than their African counterparts. The study also indicates that the more financially sound microfinance institutions have a lower level of depth outreach than the more subsidy dependent institutions.

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.

Microfinance is of a vital importance to the unprivileged people especially in the developing countries. People with no means of sustaining themselves, rely on microfinance for a variety of services as a means for poverty reduction and increasing happiness. This study employs a Fixed Effects Model to analyze the impact of microfinance and some other macroeconomic factors on poverty reduction in Albania, Montenegro and Bosnia and Hercegovina. Empirical findings suggest that inflation does not play a role on the poverty reduction. On the other hand, total output (GDP) and microfinance (GLP) are found to be highly statistically significant in explaining the poverty reduction in the respective countries. Therefore, putting serious efforts on increasing GDP and supporting microfinance institutions may help the countries reduce the poverty level. Keywords: Western Balkans, microfinance, GDP, poverty reduction, fixed effects model

Microfinance Institutions (MFIs) are organizations that provide small loans to borrowers who typically lack collateral, steady employment, or a verifiable credit history and therefore do not have access to traditional commercial banking. Blockchain technology could be used to create a more holistic view of the financial position of a potential borrower, which could result in better lending decisions. This study explores how blockchain technology has the potential to assist Microfinance Institutions in the water and sanitation sector through a pilot project developed in Peru. The improvements seen in the existing microfinance ecosystem during the implementation of the blockchain platform can be sorted into two main groups: improved institutional performance, and data ownership for the individuals.

This paper evaluates the impact of the introduction of savings groups on poverty, vulnerability, and financial inclusion outcomes in rural Peru. Using a cluster randomized control trial and relying on both survey and administrative records, we investigate the impact of savings groups after more than two years of exposure. We find t hat savings groups channel expensive investments such as housing improvements and reduce households' vulnerability to idiosyncratic shocks, particularly among households in poorer districts. The treatment also induces changes in households labor allocation choices: access to savings groups increases female labor market participation and, in poorer areas, it fosters greater specialization in agricultural activities. Access to savings groups also leads to a four-percentage point increase in access to credit among women, mainly driven by access to the groups loans. However, the introduction of savings groups has no impact on the likelihood of using formal financial services.On the contrary, it discourages access to loans from formal financial institutions and microfinance lenders among the unbanked.

Viet Nam’s new National Financial Inclusion Strategy issued on 22 January 2020, sets out targets for promoting financial inclusion by 2025. Achieving these targets requires considerable support from the microfinance sector as well as other stakeholders in the finance sector. This paper emphasizes the need to prioritize regulatory reform for microfinance development. Otherwise, the microfinance sector in Viet Nam could remain nonprofit rather commercial—making it difficult for the sector to attract wholesale funding. Aside from helping achieve the National Financial Inclusion Strategy, regulatory reform in the microfinance sector can also enable Viet Nam to become more active, prominent, and competitive on a regional level along with its neighbors in Asia.

The purpose of the work is the development and application of models for scoring assessment of microfinance institution borrowers. This model allows to increase the efficiency of work in the field of credit. The object of research is lending. The subject of the study is a direct scoring model for improving the quality of lending using machine learning methods. The objective of the study: to determine the criteria for choosing a solvent borrower, to develop a model for an early assessment, to create software based on neural networks to determine the probability of a loan default risk. Used research methods such as analysis of the literature on banking scoring; artificial intelligence methods for scoring; modeling of scoring estimation algorithm using neural networks, empirical method for determining the optimal parameters of the training model; method of object-oriented design and programming. The result of the work is a neural network scoring model with high accuracy of calculations, an implemented system of automatic customer lending.

The widespread prevalence of HIV/AIDS in sub-Saharan Africa adversely affects millions of households. In recent years, microfinance has been proposed as a strategy to help the households of microentrepreneurs respond to the negative economic impacts of HIV/AIDS. This attention to the potential role of microfinance builds upon earlier research that shows that microfinance institutions (MFIs) that charge commercial rates of interest and use sound business practices can become operationally self-sustainable and help improve the lives of the poor and vulnerable nonpoor. This type of MFI generally offers small loans, often combined with savings services. An MFI may also offer business management training, health and nutrition education, and other types of services. This brief presents findings from a study conducted in Zimbabwe that sought to better understand the relationship between a microfinance program, Zambuko Trust, and how microentrepreneurs’ households cope with the impact of HIV/AIDS. The study also examined how HIV/AIDS is affecting Zambuko’s operations and what MFIs can do to lessen the impact of HIV/AIDS on their clients and operations.

This report shows how innovative finance solutions can bolster climate resilience in the fast-urbanizing Asia and the Pacific by helping microfinance institutions (MFIs) funnel emergency support to small and medium-sized businesses. Explaining why MFIs struggle to support vulnerable SMEs when climate or geophysical shocks hit, it explores how disaster risk financing (DRF) solutions can harness global financial and insurance markets to transfer risk and provide capital. It recommends ADB spearheads a regional facility to manage risk transfer and ensure MFIs receive the contingent capital and credit they need to help SME owners rebuild their businesses and livelihoods.