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    How does financial literacy impact on inclusive finance?
    (Springer Nature on behalf of the Southwestern University of Finance and Economics, 2021-12-01) Hasan M; Le T; Hoque A
    Inclusive finance is a core concept of finance that makes various financial products and services accessible and affordable to all individuals and businesses, especially those excluded from the formal financial system. One of the leading forces affecting people's ability to access financial services in rural areas is financial literacy. This study investigated the impacts of financial knowledge on financial access through banking, microfinance, and fintech access using the Bangladesh rural population data. We employed three econometrics models: logistic regression, probit regression, and complementary log–log regression to examine whether financial literacy significantly affects removing the barriers that prevent people from participating and using financial services to improve their lives. The empirical findings showed that knowledge regarding various financial services factors had significant impacts on getting financial access. Some variables such as profession, income level, knowledge regarding depositing and withdrawing money, and knowledge regarding interest rate highly affected the overall access to finance. The study's results provide valuable recommendations for the policymaker to improve financial inclusion in the developing country context. A comprehensive and long-term education program should be delivered broadly to the rural population to make a big stride in financial inclusion, a key driver of poverty reduction and prosperity boosting.
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    Determinants and effects of the internal audit function in microfinance institutions : a global perspective : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Accountancy at Massey University, Manawatu Campus, New Zealand
    (Massey University, 2022) Omidiji, Abiodun
    This research investigates the determinants and effects of the internal audit (IA) function in microfinance institutions (MFIs) using data from the World Bank’s Microfinance Information Exchange database. The sample is comprised of 1,025 MFIs during the period 2010–2018. MFIs are specialised financial institutions established to provide vital financial services to the poor, and it is of particular interest to identify and understand the determinants of their IA function. Moreover, IA has wider implications for the microfinance industry which is reported to lack effective governance and control mechanisms. This thesis therefore consists of two distinct studies: (i) the study of the determinants of IA function in MFIs; (ii) the study of the association between IA function, loan losses, and financial performance in MFIs. In the first study, I find that as MFIs increase outreach, proportion of female board directors, and level of financial performance, the existence of the IA function in MFIs is advanced. I also find that sensitivity to operational costs can deter MFIs from investing in the IA function. In the second study, I find that the IA function reduces the rate of loan loss occurrence in MFIs. I also find that the IA function improves the financial performance of MFIs through its significant positive effect on institutional operational self-sufficiency. Furthermore, I find that the negative association between loan losses and financial performance is not significantly higher in MFIs without IA, than in those with IA. The IA function therefore both reduces the risk of writing off bad loans and improves profitability, but it cannot solitarily eliminate the adverse impact of loan losses on MFI financial performance. This thesis extends the corporate governance and IA literature by identifying the factors that determine IA existence from the MFI perspective. It also provides evidence of the effect of the IA function on MFI loan losses and financial performance. This thesis reveals the potentiality of the IA function for improving governance and risk management in MFIs and its findings provide policy and practice implications for the microfinance industry, development agencies and governments to consider.
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    Drifting into debt? : exploring household over-indebtedness amongst salaried microborrowers in Bangladesh : a case study of Kailakuri Health Care Project : a thesis presented in partial fulfillment of the requirements for the degree of Masters of International Development, Massey University, Manuwatu, New Zealand
    (Massey University, 2017) Vickers, Nadine
    Salaried microborrowers in Bangladesh take loans for a variety of reasons but they can fall into repayment difficulties, leading to further loan-taking and potentially household overindebtedness. This thesis uses a case study of Kailakuri Health Care Project staff to explore over-indebtedness amongst salaried microborrowers. Data was gathered from two participantgroups, namely twenty four KHCP staff and eleven microfinance lenders. Four focus groups were held. Seven staff participated in a set of household interviews and financial diaries, which tracked their income, expenditure, savings and borrowing behaviour over a one-month period. The thesis explores local meanings of over-indebtedness and compares these to academic definitions. It compares the lending terms and conditions of microfinance lenders including moneylenders, banks, credit unions, NGOs and others with outstanding loans to research participants. It also examines how borrowers perceive the advantage and disadvantages of different lenders and the strategies they use to manage multiple repayments. Finally it considers how borrowers’ decision-making influences their risk of household over-indebtedness, as well as the effect of their income, expenditure, savings and borrowing-related behaviour. The research findings show that in contrast to the literature, which provides a mainly financial analysis, research participants focused on social symptoms of over-indebtedness such as the stigma attached to lender visits, deceitful behaviour by borrowers and debt-related stress. What is also illuminated is that borrowers weigh up a number of factors aside from interest rates when deciding on which lender to approach and they tend to prioritise NGO loan repayment because of the pressure on timely installments. This can lead borrowers to fall behind on other repayments to moneylenders, banks and credit unions, leading to an increased risk of overindebtedness. Many borrowers struggle with over-indebtedness because of insufficient income, social aspirations, cultural expectations and a number of other factors. However, microfinance lenders are unlikely to reduce interest rates and fees due to financial sustainability concerns. This thesis concludes that it is crucial to look outside the lender and borrower bubble and to consider the external pressures which are creating the demand for so much credit. The Bangladeshi government and international NGO community have an important role to play.
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    Microfinance in postwar Afghanistan : towards a conflict-sensitive approach : a thesis presented in partial fulfillment of the requirements for the degree of Master of Philosophy in Development Studies at Massey University
    (Massey University, 2006) Harvey, Michael David
    It is well established that microfinance has become a key tool to reduce poverty in developing countries. Previously unable to gain access to credit and savings products from formal providers such as banks, poor people can now take small loans to support income-generating activities, or build up small savings accounts for important expenditures. These services are offered by microfinance providers (MFPs), semi-formal institutions which often have development as well as financial goals. Because poverty tends to be widespread in countries emerging from war, the provision of microfinance is being increasingly recognised as crucial to post-conflict economic reconstruction. Most writers on post-conflict microfinance (PCM) have outlined the considerable challenges which MFPs face in these unstable situations, and have offered valuable operational advice on how to meet those challenges. However, little has been written on how PCM has impacted upon the clients themselves, or whether it has assisted them to re-establish viable livelihoods. Secondly, even though postwar situations are unstable due to unresolved sources of tension, most PCM literature lacks a systematic treatment of how the microfinance could be 'conflict-sensitive'. 'Conflict sensitivity' can be defined as taking preventative measures to reduce the possibility that development intervention will exacerbate tensions, and implementing pro-active strategies to help build peace. This study constructs a conflict sensitive system whereby microfinance goes beyond its traditional role of poverty alleviation to that of conflict mitigation. Afghanistan serves as context within which the concepts of conflict-sensitive microfinance are explored. Since the defeat of the Taliban in 2001, much of Afghanistan has enjoyed a period of relative peace and reconstruction after 22 years of intrastate war. However, the country still faces a number of challenges which could contribute to renewed violence, including poverty, inter-ethnic tensions, weak local governance, and the largest opium sector in the world. This study examines what role the young microfinance sector is playing in addressing these issues and what impact it is having on Afhgan livelihoods and society. The sector's success in helping to alleviate poverty and build peace depends on the extent to which MFPs in Afghanistan expand their services, coordinate efforts among themselves, and collaborate with other development and government actors in holistic, conflict-sensitive interventions.
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    Performance measurement of South Asian microfinance institutions : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Banking at School of Economics and Finance, Massey University, Palmerston North, New Zealand
    (Massey University, 2015) Shahzad, Uzma Bibi
    This thesis studies microfinance institutions (MFIs), which are a special type of financial institution that pursue the dual objectives of outreach and financial sustainability. The study evaluates the social and financial efficiency of a panel data set of 372 MFIs in Bangladesh, India, Nepal, Pakistan and Sri Lanka, covering the period 1998 to 2013, using performance ratios and other techniques. The thesis introduces two new ways of measuring the social objectives of MFIs. The comparative results show that these new outreach indicators provide a better explanation of social performance of MFIs than those commonly used in the literature. We employ these new measures alongside financial sustainability to assess the performance of different types of MFIs in achieving their dual objectives. The results show that non-regulated and profit-oriented MFIs perform relatively well in terms of the dual objectives but face higher operating expenses, creating conflict between outreach and financial sustainability. In addition, the social and financial efficiency of MFIs are evaluated using data envelopment analysis (DEA) and stochastic frontier analysis (SFA). For DEA, to obtain more robust results, a double bootstrap approach is used and we find that the financial efficiency of these institutions appears stronger than their social efficiency. Cost efficiency estimates show that, on average, South Asian MFIs are operating with the same financial and social efficiency scores, while institutional and country differences matter more for financial efficiency than for social efficiency. The results also suggest that, on average, MFIs exhibit increasing returns to scale in financial sustainability but not when performance relative to the social objectives is measured. Similarly, improved technological progress is more evident for financial than social efficiency. The impact of women in various roles and corporate governance on the efficiency of MFIs is investigated for the first time. The presence of female loan officers is found to have a positive effect while female board members and female borrowers show a significant negative impact on financial and social efficiency of MFIs. We find a strong positive association between the governance of an MFI and its financial and social efficiency. We find similar effects of governance and gender roles on efficiency using both the DEA and SFA approaches.
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    Relationships between female-headed rural micro-enterprises and micro-enterprise assistance providers : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Rural Development at Massey University, New Zealand
    (Massey University, 2013) Utto, Grittaya
    Although there are financial and other services extensively provided by formal micro-enterprise assistance providers, including micro-finance institutions (MFIs) and government agencies, in order to assist female-headed rural micro-enterprises (female-headed RMEs), there is much evidence to show that these entrepreneurs still seek other services, in particular from moneylenders. Such evidence reflects the need for improvement in the relationship between formal providers and these entrepreneurs. This research aims to explore and understand existing social networks between the counterparts, the tenet underlying relationship developments. The research employs the qualitative approach, principally using purposive sampling and in-depth interview techniques. The case (thirty eight enterprises and six providers) are those operating in Khon Kaen province, Northeast Thailand — its economically poorest region of Thailand. The study found that these entrepreneurs’ social networks were limited but specific. Individual entrepreneurs (IEs) would rather develop relationships with moneylenders and (to a lesser extent) with MFIs. Relationships with government agencies are apparently absent. In contrast, community-based enterprises (CBEs) had strong relationships with government agencies, because, importantly, CBEs are fully supported by these agencies. The study found the establishment of certain CBEs was initiated by government agencies, although community members may not have had their own intentions to do so. The viability of such enterprises is solely dependent on the financial grants provided by the agencies. In order to gain resources for operating enterprises, IEs are willing to become indebted with loans issued by local moneylenders, whilst nearly all members of CBEs will solely apply for further grants from the providers. The members will leave the enterprises, if they become liable for debt incurred after joining a CBE. The research findings highlight that the characteristics of entrepreneurs are key factors affecting their relationship development with the providers. Small-scale activities, such as those of retailers and vendors, chiefly specified their relationships with moneylenders who promptly responded to their financial needs. Meanwhile, micro-entrepreneurs involved in larger scale activities tended to apply for assistance from government departments. The Relationships between female-headed RMEs and micro-enterprise assistance providers findings suggest that the absence of service branches of formal providers, at (or nearby) villages where entrepreneurs reside, could push them to apply for services from moneylenders. Whilst there is limited evidence of gender discrimination, female entrepreneurs prefer not to develop relationships with formal providers because they perceive that the application procedure for the formal providers is time-consuming. The entrepreneurs, accordingly, leave the application for their husbands to deal with. The female entrepreneurs would rather seek loans from the moneylenders, who, typically, provide quick services with minimal document requirements. The present work provides insights into social networks, in addition to relationship development and the key factors affecting relationships. These insights could be beneficial in assisting practitioners and providers, when they design and implement services consistent with the needs of female-headed RMEs.