DOCSLIB.ORG

The Social Performance of Microfinance Institutions in Rural Bangladesh

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Social Performance of Microfinance Institutions in Rural Bangladesh The Social Performance of Microfinance Institutions in Rural Bangladesh A thesis submitted to the University of Manchester for the degree of Doctor of Philosophy in the Faculty of Humanities Mathilde Maitrot 2014 School of Environment and Development The University of Manchester 1 TABLE OF CONTENT LIST OF TABLES 9 LIST OF FIGURES 10 ABSTRACT 11 DECLARATION 13 COPYRIGHT STATEMENT 14 LIST OF ABBREVIATIONS 15 GLOSSARY 17 ACKNOWLEDGMENTS 19 1. INTRODUCTION ........................................................................................ 20 1.1 INTRODUCTION .................................................................................................... 20 1.2 OBJECTIVES AND SCOPE OF THE STUDY ............................................................. 22 1.3 MAIN ARGUMENTS AND STRUCTURE OF THE THESIS ........................................ 24 1.4 STRUCTURE OF THE THESIS ................................................................................ 25 2. MICROFINANCE: EVIDENCE OF IMPACTS....................................... 27 2.1 MICROFINANCE AND POVERTY REDUCTION : WHAT DO WE KNOW ? ................ 27 2.1.1 REVIEWING THE IMPACT OF MICROFINANCE ON POVERTY 28 2.1.1.1. What is expected from microfinance? .............................................. 29 2.1.1.2. Reported positive impacts on poverty and empowerment ............... 30 2.1.1.3. Inconclusive and contested evidence ............................................... 32 2.1.2 IMPACT STUDIES : CONCEPTS AND LIMITATIONS 36 2.1.2.1 Quantitative indicators ..................................................................... 37 2.1.2.2 Nature and level of impact ............................................................... 37 2.1.2.3 Substantiating causation ................................................................... 39 2.2 THEORETICAL AND PRACTICAL CHALLENGES TO MANAGING MICROFINANCE ........................................................................................................... 40 2.2.1 SOCIO -FINANCIAL TRADE -OFF MANAGEMENT 40 2.2.1.1 Microfinance schism and social enterprise ...................................... 40 2.2.1.2 The governance of commercial microfinance .................................. 44 2.2.1.3 The risks of mission drift .................................................................. 47 2.2.2 GROUP -LENDING : A DOUBLE -EDGED SWORD ? 48 2.2.2.1 Social capital and poverty ................................................................ 49 2 2.2.2.2 Social capital in group-lending ........................................................ 50 2.3 SOCIAL PERFORMANCE FOR MFI S ..................................................................... 54 2.3.1 SOCIAL PERFORMANCE IN THE BUSINESS LITERATURE 55 2.3.1.1 Corporate social responsibility ......................................................... 55 2.3.1.2 Corporate social responsibility: challenges and pitfalls ................... 56 2.3.2 A FRAMEWORK FOR CONCEPTUALISING MFI S’ SOCIAL PERFORMANCE 58 2.3.2.1 What is at stake? .............................................................................. 59 2.3.2.2 Main approaches to social performance assessments ...................... 60 2.3.2.3 Conceptual framework for social performance in microfinance ...... 65 3. MICROFINANCE IN BANGLADESH: CONTEXT AND DEVELOPMENTS .............................................................................................. 69 3.1 BANGLADESH : ECONOMIC , SOCIAL AND POLITICAL OVERVIEW ..................... 69 3.1.1 POLITICAL HISTORY AND CULTURE 70 3.1.1.1 Industrial development and economic growth ................................. 71 3.1.1.2 Economic growth and poverty reduction ......................................... 72 3.1.2 RURAL LIVELIHOODS AND POVERTY 79 3.1.2.1 Natural capital .................................................................................. 79 3.1.2.2 Human capital .................................................................................. 80 3.1.2.3 Physical capital ................................................................................ 80 3.1.2.4 Social capital .................................................................................... 81 3.1.2.5 Financial capital ............................................................................... 85 3.2 MICROFINANCE IN BANGLADESH ...................................................................... 86 3.2.1 THE EMERGENCE OF MICROFINANCE 86 3.2.1.1 National motivations ........................................................................ 86 3.2.1.2 Regional pressures ........................................................................... 87 3.2.1.3 Local politics .................................................................................... 88 3.2.2 THE STATE OF MICROFINANCE 89 3.2.2.1 The growth of the sector .................................................................. 89 3.2.2.2 A segmented sector .......................................................................... 90 3.2.2.3 Implications of the sector’s expansion ............................................. 93 3.3 CONCLUSION ......................................................................................................... 96 4. THE RESEARCH METHODOLOGY, TOOLS AND THEORY BUILDING ........................................................................................................... 98 4.1 THE RESEARCH STRATEGY ................................................................................. 98 3 4.1.1 RATIONALE 98 4.1.2 RESEARCH DESIGN 99 4.1.3 MIXED -METHODS RESEARCH 100 4.2 PHASE I: COMMUNITY STUDY ........................................................................... 101 4.2.1 CASE -STUDY SELECTION 101 4.2.2 THE COMMUNITY SURVEY 104 4.2.2.1 households’ selection ..................................................................... 105 4.2.2.2 Questions ........................................................................................ 105 4.2.2.3 Answers .......................................................................................... 107 4.2.3 QUALITATIVE TOOLS 109 4.2.3.1 Respondents’ selection ................................................................... 109 4.2.3.2 In-depth semi-structured interviews with former-clients ............... 110 4.2.3.3 Focus groups with current-clients .................................................. 111 4.2.3.4 Key informant interviews ............................................................... 112 4.3 PHASE II: MFI ETHNOGRAPHIES ..................................................................... 113 4.3.1 THE CREDIT OFFICERS ’ SURVEY 114 4.3.1.1 Accessing credit officers ................................................................ 114 4.3.2 QUALITATIVE TOOLS 116 4.3.2.1 Observation .................................................................................... 116 4.3.2.2 Semi-structured interviews ............................................................. 117 4.3.2.3 Secondary data ............................................................................... 118 4.4 ROAD MAP TO THEORY BUILDING .................................................................... 119 4.4.1 MANAGING CASE STUDY DATA 119 4.4.2 PHASE III: THEORIZING MFI MANAGEMENT 121 4.5 FIELDWORK ETHICS AND CHALLENGES AND DATA ANALYSIS ....................... 123 4.5.1 ETHICS AND CHALLENGES OF THE FIELDWORK 123 4.5.1.1 Ethics .............................................................................................. 123 4.5.1.2 Personal challenges ........................................................................ 124 4.5.1.3 Data confidentiality and anonymisation ......................................... 126 4.5.2 DATA COLLECTION AND ANALYSIS 127 5. LIVELIHOODS OF MODHUPUR .......................................................... 130 5.1 RURAL POVERTY ............................................................................................... 130 5.1.1 THE STUDIED POPULATION 130 5.1.2 DEFINING POVERTY 137 4 5.1.2.1 Assets for resilience ....................................................................... 138 5.1.2.2 Education for power ....................................................................... 140 5.1.3 SOCIAL STRUCTURES AND LIVELIHOODS IN RURAL BANGLADESH 145 5.1.3.1 Households ..................................................................................... 145 5.1.3.2 Gender and age ............................................................................... 146 5.1.3.3 Migration and households’ structure and dynamics ....................... 148 5.2 VULNERABILITIES , FINANCIAL CONCERNS , AND COPING TACTICS ................ 149 5.2.1 FINANCIAL CONCERNS 149 5.2.1.1 The “ rudiments ” ............................................................................. 151 5.2.1.2 The “ predictables ” ......................................................................... 152 5.2.1.3 The “ unexpected ” ........................................................................... 158 5.2.2 COPING TACTICS 161 5.2.2.1 Extra work ...................................................................................... 162 5.2.2.2 Selling assets .................................................................................. 163 5.2.2.3 Informal borrowing ........................................................................ 163 5.2.3 RISKS AND LIMITATIONS OF INFORMAL NETWORKS 164 5.2.3.1 Financial limitations and risks ....................................................... 165 5.2.3.2 Social limitations and risks ...........................................................
Load more

Recommended publications
  • Social Entrepreneurship – Creating Value for the Society Dr
    Prabadevi M. N., International Journal of Advance Research, Ideas and Innovations in Technology. ISSN: 2454-132X Impact factor: 4.295 (Volume3, Issue2) Available online at www.ijariit.com Social Entrepreneurship – Creating Value for the Society Dr. M. N. Prabadevi SRM University [email protected] Abstract: Social entrepreneurship is the use of the techniques by start-up companies and other entrepreneurs to develop, fund and implement solutions to social, cultural, or environmental issues. This concept may be applied to a variety of organizations with different sizes, aims, and beliefs. Social Entrepreneurship is the attempt to draw upon business techniques to find solutions to social problems. Conventional entrepreneurs typically measure performance in profit and return, but social entrepreneurs also take into account a positive return to society. Social entrepreneurship typically attempts to further broad social, cultural, and environmental goals often associated with the voluntary sector. At times, profit also may be a consideration for certain companies or other social enterprises. Keywords: Social Entrepreneurship, Values, Society. 1. INTRODUCTION 1.1 Defining social entrepreneurship Social entrepreneurship refers to the practice of combining innovation, resourcefulness, and opportunity to address critical social and environmental challenges. Social entrepreneurs focus on transforming systems and practices that are the root causes of poverty, marginalization, environmental deterioration and accompanying the loss of human dignity. In so doing, they may set up for-profit or not-for-profit organizations, and in either case, their primary objective is to create sustainable systems change. The key concepts of social entrepreneurship are innovation, market orientation and systems change. 1.2 Who are Social Entrepreneurs? A social entrepreneur is a society’s change agent: pioneer of innovations that benefit humanity Social entrepreneurs are drivers of change.
    [Show full text]
  • No. 31 Page One.Pmd
    OECD DEVELOPMENT CENTRE www.oecd.org/dev/insights PolicPolicyy InsightsInsights No. 31 November 2006 Microfinance: How Bankers Could Buy Back Their Soul by Lucia Wegner, Economist, OECD Development Centre Muhammad Yunus was not awarded the Nobel Prize for Economics. He got the one for peace; and so it should be. Why is There a Need for Microfinance? He is not only being honoured for improving access to credit for the poor but for allowing millions of women in Bangladesh Only a fraction of the 4 billion people – households and in poor villages beyond to see a future for themselves. and micro-entrepreneurs – living on less than $1 500 With loans of just a few dollars, poor women could become a year, the so-called “bottom of the pyramid”, have entrepreneurs, send their children to school, improve access to basic financial services. Microfinance has health care for their families and protect themselves better proven very successful in expanding these people’s from sickness, death, and natural disasters. Ultimately, access to credit. Microfinance Institutions (MFIs) include they could pull themselves out of poverty. a broad range ofIn financial a continent sector of organisations stranded mobility such as In order for microfinance institutions to reach more poor banks, non-bank financial institutions, financial co- people they should become an integral part of the financial operatives and credit unions, finance companies and sector, and develop as sound domestic intermediaries. They NGOs specialising in serving people who lack access to should go commercial, broadening their client basis and traditional financial services. scaling up their loans to small enterprises.
    [Show full text]
  • UNIT 11 MICRO CREDIT STRUCTURE 11. 1 Introduction
    UNIT 11 MICRO CREDIT STRUCTURE 11. 1 Introduction 11.2 Objectives 11.3 Definition 11.4 Modern Micro credit 11.4.1 Early beginnings 11.4.2 Modern Micro credit 11.4.3 Grameen Credit 11.5 Economic principles of micro credit 11.5.1 Group lending 11.5.2 Self help group 11.5.3 Lending to women 11.6 Strategies of micro credit systems 11.7 Systems and methods of micro finance 11.7.1 Foreign investments in micro credit projects 11.7.2 Micro finance development fund 11.8 The developed world 11.8.1 Micro credit and the web 11.9 criticisms 11.10 Summing Up 11.11 Glossary 11.12 Answers to check your progress 11.13 References 11.14 Questions for reflection and practice 1 ______________________________________________________________________________ 11.1 INTRODUCTION This Unit starts with defining Micro credit and elaborately deals with early beginning of micro credit and modern micro credit system. To explain further, the Unit takes grameen bank model of micro credit as a case study. It also deals with economic principles of micro credit and self help movement. ______________________________________________________________________________ 11.2 OBJECTIVES After studying this Unit, you would be able to Define micro credit; Trace the early beginnings of micro credit; Discuss modern micro credit system with grameen bank as an example; Explain the economic principles of micro credit system; and Examine the micro credit and self help group movement in India. 11.3 DEFINITION Microcredit is a broad name for the programmes that extend small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families.
    [Show full text]
  • Microcredit and Social Business Movement As Catalyst for Poverty Eradication: the Grameen Experience
    International Journal of Management Science and Business Administration Volume 5, Issue 5, July 2019, Pages 32-42 DOI: 10.18775/ijmsba.1849-5664-5419.2014.55.1004 URL: http://dx.doi.org/10.18775/ijmsba.1849-5664-5419.2014.55.1004 Microcredit and Social Business Movement as Catalyst for Poverty Eradication: The Grameen Experience 1 Abdullahil MAMUN, 2 Harun BAL, 3 Tolga KABAŞ 1 Department of Economics, Cukurova University, Adana Research Fellow, TUBITAK, Turkey 2,3 Department of Economics, Cukurova University, Adana, Turkey Abstract: Being a country of developing world, Bangladesh has a long-standing history of fighting poverty by means of microcredit. Thanks to the development of group lending approach of Grameen Bank established by Nobel laureate Professor Mohammad Yunus, which has later been widely accepted as an alternative to the traditional collateral based lending in extending credit facilities to the door of hard core poor at affordable terms, Bangladesh has been able to register tremendous success in alleviating poverty. Apart from Bangladesh, Grameen type microcredit programmes are now being replicated in more than 100 countries both in the developing and developed world. At the same time, Grameen has constantly been devising new entrepreneurial solutions to the problems of the poor in the name of social business- a social cause driven, non-loss, non-dividend, self-reliant business dedicated to serve the most pressing needs of the disadvantaged. Muhammad Yunus has been successful to create a global infrastructure for social business which is working as a catalyst for encouraging social business experimentations around the world. The paper will critically examine the Grameen solidarity lending mechanism and social business framework and their efficiency in approaching poverty with their cross border experiences.
    [Show full text]
  • THE DEVELOPMENT of MICROFINANCE in PAKISTAN by Amer Saleem Khan & Stefan Platteau*
    THE DEVELOPMENT OF MICROFINANCE IN PAKISTAN By Amer Saleem Khan & Stefan Platteau* INTRODUCTION The Role of Financial Services in Poverty Alleviation1 Microfinance implies financial services of very small magnitude provided to the economically active poor usually for short to medium terms. These financial services include loans, savings, money transfer services and leasing services. The significant feature of microfinance is its reliance on “social collateral” as a means of risk management instead of physical collateral. The concept of Social Collateral merits further explanation. Collateral tries to solve the information asymmetry problem and reduce costs for the lender. Banks take physical collateral because they realize that their access to information about the borrower’s business and related cash flows is limited and strict borrower monitoring entails costs. However, the lender rests assured that in case of borrower’s failure to make payments, the collateral, value of which is independent of the borrower’s economic condition can be liquidated to cover the default risk. But this risk coverage is not applicable in case of microfinance where the poor cannot provide collateral. The lender in this case has to rely on its estimates of future cashflow and the past repayment behaviour of borrower as a measure of debt capacity as well as the willingness to repay loans. No one is a better judge of financial habits of a prospective borrower than his friend, neighbour or a family member. This is particularly effective when this social circle itself is a set of prospective borrowers. These potential borrowers provide cross guarantees taking responsibility individually as well as collectively for the repayment of their fellow “group” members.
    [Show full text]
  • Tanzania Microenterprise Impact Assessment – Bagamoyo Case Study
    Integrated Coastal Management, Livelihood Development and Micro-Loan Strategies: The Case of the TCMP-FINCA Partnership in the Bagamoyo District of Tanzania By: ElinTorell, Baraka Kalangahe, Renalda Munubi, Shalli Mwanahija, and Brian Crawford The Sustainable Coastal Communities and Ecosystems Program (SUCCESS) In Association with The Tanzania Coastal Management Partnership (TCMP) This publication is available electronically on the Coastal Resources Center’s website at http://www.crc.uri.edu. For more information contact: Coastal Resources Center, University of Rhode Island, Narragansett Bay Campus, South Ferry Road, Narragansett, Rhode Island 02882, USA. Tel: 401) 874-6224; Fax: 401) 789-4670; Email: [email protected] Citation: Torell, Elin, Baraka Kalangahe, Renalda Munubi, Shalli Mwanahija,and Brian Crawford, 2007, Integrated Coastal Management, Livelihood Development and Micro-Loan Strategies: The Case of the TCMP-FINCA Partnership in the Bagamoyo District of Tanzania, Coastal Resources Center, University of Rhode Island. pp. 14 Disclaimer: This report was made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of the authors and do not necessarily reflect the views of USAID or the United States Government. Cooperative agreement # EPP-A-00-04-00014-00 i Table of Contents Page Introduction.....................................................................................................................................1
    [Show full text]
  • Examining the Effects of Information and Group Member Relationships
    EXAMINING DETERMINANTS OF GROUP LOAN REPAYMENT IN THE DOMINICAN REPUBLIC A thesis presented to the faculty of the Center for International Studies of Ohio University In partial fulfillment of the requirements for the Masters of Arts Danielle Matta June 2004 This thesis entitled EXAMINING DETERMINANTS OF GROUP LOAN REPAYMENT IN THE DOMINICAN REPUBLIC By Danielle Matta Has been approved for the Center for International Studies by Julia Paxton Assistant Professor of Economics Josep Rota Director, Center for International Studies Matta, Danielle. M.A. June 2004. Examining Determinants of Group Loan Repayment in the Dominican Republic (88pp.) Thesis Advisor: Julia Paxton This thesis proposes to determine if different components of group dynamics in microfinance group lending programs such as information symmetry, group size, and group member relationships affect both group loan repayment and group mechanisms such as peer pressure and group solidarity. The research presents empirical evidence from the ADOPEM group lending program in the Dominican Republic. A Tobit Model was created from the data that shows smaller group size, groups composed of family members, and group solidarity can all lead to higher loan repayment rates. Approved: Julia Paxton Assistant Professor of Economics To Justin for his love and support 5 Table of Contents Chapter 1 Introduction..........................................................................................................................7 History of Microfinance.......................................................................................................8
    [Show full text]
  • Overview of Microfinance Outreach
    ISSN: 2278-3369 International Journal of Advances in Management and Economics Available online at: www.managementjournal.info RESEARCH ARTICLE Microfinance Industry: Sustainability, Outreach and Impact Drasarova Martina*, Srnec Karel Faculty of Tropical Agri Sciences, Czech University of Life Science, Prague, Czech Republic. *Corresponding Author: Address: E-mail:[email protected] Abstract Microfinance has been seen as a key tool for poverty alleviation in least developed countries (LDCs). Target groups of microfinance are very poor people who have no access to any financial resources and need loans. Credits help the poor in running their small businesses or in a creation of its own job opportunities. The loans are often embezzlemented, are not financial sustainable in the long term, and are frequently critised. The question is if microfinace is real universal cure and which influence has got on elimination poverty and social even economical effect. It also considers a perspective of model preferences focused on business (conditional high interests, possibility to contact intermediaters, gaining easier access into external finacial sources) or a charity that is resistant to crisis thanks to using internal financial sources. Microfinancial sector in least developed countries consists of microfinancial institutions (MFIs), microfinance products and the programs that cause poverty alleviation using an appropriate tools. Are microloans medicine or not? Is this sector indispensable for the elimination of the poverty? The results are evident in a triangle of finance that might be in a synergy of these components: financial sustainability, welfare impact (direct/indirect) and outreach (breadth and depth). This article is structured in four sections, each of them is analyzing its background, positions and limits across the microfinancial sector.
    [Show full text]
  • Individual Microcredit and Social Pressure
    View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Research Papers in Economics INDIVIDUAL MICROCREDIT AND SOCIAL PRESSURE Laure JAUNAUX1, Baptiste VENET2 Summary: The purpose of this article is to analyse the efficiency of the repayment incentive mechanisms used for individual microcredit, the guarantor mechanism in particular. Little academic research has been devoted to this instrument whereas it is very frequently used. Churchill (1999) notably underscored the fact that, within the framework of microfinance institutions (MFI), the guarantor acts as a vector of social pressure on the borrower rather than as an alternative source of reimbursement. Little to no econometric studies have been devoted to testing this assumption. This is what we propose to do in this article, based on original data from a Brazilian microcredit programme, VivaCred, operating in the Rio de Janeiro favelas. Using a simple theoretical model, we will first of all describe the relations between an individual microcredit institution and a borrower in order to highlight the role of social sanction. Next, with an ordered multinomial logit model, we will study the probability of a change in behaviour by the borrower in terms of adherence to the repayment schedule. To be more precise, we will analyse the behaviour of borrowers with repayments significantly overdue in order to determine what encourages them to adhere to repayment deadlines in the future (economic conditions, policy of the MFI, etc.). In particular, results show that the number of guarantors has a positive impact on the likelihood of adherence to the loan repayment schedule in the future.
    [Show full text]
  • Guidelines for Establishing and Operating Grameen-Style
    GUIDELINES FOR ESTABLISHING AND OPERATING GRAMEEN-STYLE MICROCREDIT PROGRAMS Based on the practices of Grameen Bank and the experiences of Grameen Trust and Grameen Foundation Partners M. Nurul Alam and Dr. Mike Getubig www.grameenfoundation.org © Grameen Foundation uSa, 2010 Guidelines for Establishing and opErating grameen-stylE microcrEdit programs basEd on thE practicEs of grameen bank and thE ExpEriEncEs of grameen trust and grameen foundation partnErs Mohammad Nurul Alam and Mike Getubig, with contributions from Andrea Findley, H.A. Shah Newaz, Joseph Mwangi-Kioi, and other colleagues at Grameen Bank, Grameen Trust and Grameen Foundation Design by Lloyd Greenberg Design, LLC www.grameenfoundation.org Contents www.grameenfoundation.org Contents list of tables and figures viii list of annexes xi list of acronyms x foreword xi preface and acknowledgement xiii sEction 1: introduction 1 i. introduction 1 ii. about the grameen bank 3 a. how grameen began 3 b. grameen’s achievements 4 iii. the grameen bank approach 5 a. philosophy and objectives 5 b. an overview of the grameen system 6 c. the Evolution of grameen: from the classic to the generalized system 7 iV. Worldwide replication Experience 8 a. What do grameen-style programs have in common? 8 V. conclusion 9 i Guidelines for sEction 2: basic concEpts and procEssEs of thE gramEEn mEthodology 11 e i. introduction 11 stablishing and ii. targeting 11 a. basic principles 11 o b. Examples of cost-effective targeting 14 perating Grameen-style 1. grameen bank’s “means test” 14 2. the cashpor housing index and asset test 15 3. sEf’s participatory Wealth ranking 16 4.
    [Show full text]
  • Governs the Making of Photocopies Or Other Reproductions of Copyrighted Materials
    Warning Concerning Copyright Restrictions The Copyright Law of the United States (Title 17, United States Code) governs the making of photocopies or other reproductions of copyrighted materials. Under certain conditions specified in the law, libraries and archives are authorized to furnish a photocopy or other reproduction. One of these specified conditions is that the photocopy or reproduction is not to be used for any purpose other than private study, scholarship, or research. If electronic transmission of reserve material is used for purposes in excess of what constitutes "fair use," that user may be liable for copyright infringement. University of Nevada, Reno Comparing the Effectiveness of Group Liability Contracts and Individual Liability Contracts by Bangladeshi Microfinance Institutions A thesis submitted in partial fulfillment of the requirements for the degree of Bachelor of Arts in Economics / Psychology and the Honors Program by Schinria R. Islam Dr. Robert L. Metts, Thesis Advisor May, 2012 UNIVERSITY OF NEVADA THE HONORS PROGRAM RENO We recommend that the thesis prepared under our supervision by SCHINRIA R. ISLAM entitled Comparing the Effectiveness of Group Liability Contracts and Individual Liability Contracts by Bangladeshi Microfinance Institutions be accepted in partial fulfillment of the requirements for the degree of BACHELOR OF ARTS, ECONOMICS AND PSYCHOLOGY ______________________________________________ Robert L. Metts, Ph.D., Thesis Advisor ______________________________________________ Tamara Valentine, Ph. D., Director, Honors Program May 2012 i ABSTRACT Microfinance, the provision of financial services to low-income people, assists over 67 million people in over 100 countries worldwide. One aspect of microfinance is the extension of small loans, or microloans, to those in poverty who wish to pursue entrepreneurial ventures.
    [Show full text]
  • Microfinance Industry in Bangladesh and India: International Perspectives
    The First International Credit Union Conference on Social Microfinance and Community Development, BKCU Kalimantan - Gunadarma University Microfinance Industry in Bangladesh and India: International Perspectives Dr. M. Saeed Professor, Department of Business Administration, Minot State University, Minot, North Dakota 58707 United States of America E-mail: Official - [email protected] Abstract The study explores the microfinance industry in Bangladesh and India. Grameen Bank proved that financial inclusion of low-income households is the way out of poverty and that lending to poor can be profitable to both the borrower as well as the lender. Since then many microfinance institutions came up either following the same operating model as Grameen Bank or some form of its derivative. Many microfinance institutions (MFIs) in India started as non-profit NGOs and soon became for-profit non- banking financial companies (NBFCs) reflecting the financial viability of these institutions. With high returns, promising growth and portfolio diversification capabilities, microfinance industry in India has become a hotspot for foreign as well as local investors. Apart from widely known benefits, the study also highlights the criticism and challenges faced by the microfinance industry worldwide. Keywords: microcredit, remittance, collateral, securitization, private equity, IPO 1 Overview Microfinance refers to financial intermediation between microsavings and microcredit, and in- Microfinance is a tool which offers poor people cludes a broader range of services, such as loans, access to basic financial services such as loans, savings, insurance and transfer services (remit- savings, and money transfer services and micro- tances) targeted at low-income clients. A variety insurance who are generally not considered as prof- of institutions can provide these services, including itable by commercial banks and hence not catered.
    [Show full text]