Determinants of the demand for microenterprise finance in urban Egypt

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Finance and Growth for Microenterprises: Evidence from Rural China

Using a survey dataset of Chinese rural households, we find that access to external finance is positively associated with the decision to become entrepreneur and the initial investment for microenterprises. Also, we find that use of informal finance, especially financing from friends and family, is positively associated with sales growth of microenterprises with employees, but not of self-employed. We do not find any significant relationship between the use of formal finance and firm growth. Our findings underline the importance of finance for entrepreneurship and microenterprise growth, and the role of informal finance in the absence of efficient formal financial institutions

Finance and Growth for Microenterprises:Evidence from Rural China

Abstract: Using a survey dataset of Chinese rural households, we find that access to external finance is positively associated with the decision to become entrepreneur, the initial investment for microenterprises and the use of external finance. Also, we find that the use of informal finance is positively associated with sales growth of microenterprises with employees, but not of self-employed. We do not find any significant relationship between the use of formal finance and firm growth. Our findings underline the importance of finance for entrepreneurship and microenterprise growth, and the role of informal finance in the absence of efficient formal financial institutions. Key Words: Finance, Entrepreneurship, Growth, China.

An Analysis of Repayment Among Clients of the Microfinance Institution Esperanza International, Dominican Republic

This research considers default among borrowers of Esperanza International, a microfinance institution in the Dominican Republic. Though Esperanza holds high repayment rates, it is of value to examine the 3 to 5 percent of clients that have not had success with the program. If success is defined as repayment and can be correlated with socioâ€economic characteristics, it may point towards the development of remedial programs and/or interventions. In coordination with organizational interests, this study examines 15,104 loans divided amongst 8,991 borrowers between April 2005 and October 2007. Default for each loan (defined as the failure to repay any quota for 120 days) is considered against gender, marital status, number of dependents, level of education, age, size of loan, type of microenterprise, and regional office. Results of a first linear regression indicate that regional office is most important among included variables. This is followed by education, gender, and marital status †with women, those with less education, and those classified as cohabitating defaulting less often. A second linear regression indicates that an alternate categorical division of microenterprise does not improve the variable’s significance. Two final regressions consider default separately among borrowers that were and were not identified as Dominicanâ€Haitian. These results showed that Dominicanâ€Haitians defaulted least often when widowed or married, and defaulted most often at the Santo Domingo office. Overall these results call for further investigation, particularly into dissimilarities among Esperanza’s various branches.Financial Economics,

The long term impact of microfinance on income, wages and the sectoral distribution of economic activity

This paper analyses the long-term effects of improved small-scale lending, often provided by microfinance institutions set up with the support of development aid. The analysis shows that some common assumptions about microfinance are not true at all: First, it shows that the impact on income will accrue not to the microenterprises themselves, but rather to the consumers of their products. Second, microfinance will have a significant positive effect on the wage levels of employees in the informal sector. Third, microfinance will cause high growth rates in the informal production sector, whereas the trade sector will either contract or at best grow very little

Islamic Microfinance in Indonesia: A Comparative Analysis between Islamic Financial Cooperative (BMT) and Shari’ah Rural Bank (BPRS) on Experiences, Challenges, Prospect and Role in Developing Microenterprises

Different institutions are engaged in the development efforts in Indonesia by appealing to different sectors of socio-economic life. Among such institutions, BMT (Baitul Maal wat Tamwil) and BPRS (Shari’ah Rural Bank) can be mentioned as the main players of Shari’ah microfinance institution in Indonesia. However, these two institutions are different in nature; while, as a bank BPRS enjoys sufficient support, regulation and monitoring from the Central Bank, BMT, on the other hand, as a Shari’ah cooperative has limited support, regulation and monitoring. In their attempt to contribute socio-economic development, these institutions overwhelmingly prevail in urban and rural part of Indonesia. The main aim of this study is to explore role and potentials of BMT and BPRS in developing microenterprises (MEs) in East Java, Indonesia. In doing so, this study also aims to measure the impact that their clients have had in their economic and social well-being. This study also aims to propose strategies on how to improve their roles through an informed understanding of the findings established in the empirical part of the study. To fulfil the objectives, this research adopted triangulation as a research method, in which quantitative and qualitative data collection (questionnaire and interview) and analyses methods were utilised. Thus, the empirical analyses in this research are based on the data collected from 348 completed questionnaires with the clients and 22 interviews with Directors/Managers of BMT and BPRS. The findings suggest that despite their large numbers, potential and important role in the macro economy, MEs face challenges in gaining access to financing. Similarly, the BMT and BPRS also experienced challenges in terms of risk and moral hazard, difficulty in accessing borrowers’ financial flows, lack of capital particularly during seasonal circumstances, managerial problems, lack of infrastructure, lack of personnel, lack of staff skills, lack of vehicles and lack of appropriate legal basis for BMT. With particular regard to the socio-economic impact, the empirical findings show significant statistical improvements in annual sales, business expenditures, net income and employment. It should be noted that the empirical evidence, therefore, show that the variables that correlate to the economic impact are assets owned, financing received and duration of relationship with BMT and BPRS. Similarly, a positive social impact is reported by less than half of the respondents, with fewer respondents reporting religious impact and other impacts. The strong predictor of the social, religious and other impact are social development programme/services, which indicate the importance of improving this services in term of frequency and coverage to improve the impact. Although they present a mixed picture, these findings suggest a reduction in the number of poor respondents after financing indicating positive impact. In order to improve their role, this study suggests that BMT and BPRS should consider to improve the trainings services in collaboration with related educational institutions, to provide more information of financing services to wider community, to better train their customers to improve customers’ understandings on Islamic terms used in financing products, and to be innovative in their financial product development to meet the particular needs of their clients. With such a proactive strategy, it is expected that a further positive impact can be achieved

The impact of ICT use on livelihoods of microenterprises : case of South Africa

This thesis aims to contribute to the understanding of impact of using Information and Communications Technology (ICT) on the livelihoods of microenterprises in the developing countries context

Integration of waqf-Islamic microfinance model for poverty reduction: the case of Bangladesh

Purpose – This paper aims to develop an integrated waqf-based Islamic microfinance (IsMF) for poverty reduction in Bangladesh. Microfinance institutions (MFIs) have been constrained by the high cost of funds, high interest rate charges and poor human resource quality of the recipients. Islamic MFIs have recently evolved with the hope of overcoming these financial, ethical and human capital deficiencies faced by the conventional financial institutions. Moreover, a good number of integrated models have been proposed to enhance the role played by Islamic MFIs. Most of these models, however, lack empirical justifications. Design/methodology/approach – The research uses survey techniques. A total of 381 respondents were included in the survey. The integrated waqf-based Islamic microfinance model (IWIMM) was earlier on developed using literature and intellectual discussions. There are six constructs presenting the IWIMM, namely, waqf resources, IsMF, takaful, project financing, human resource development and poverty alleviation. In the survey instrument, 45 items represent the six constructs, but only 26 items have been retained after factor analysis. Structural equation modelling has been adopted to examine the relationship among the constructs. Findings – The results show that there are significant relationships between IsMF and takaful, waqf resources and human resource development, takaful and human resource development, IsMF and human resource development and, waqf resources and project financing. The results also indicate that poverty alleviation is possible through the integration of these constructs. Research limitations/implications – Though the paper has studied conventional and Islamic MFIs in Bangladesh, one of the populated Organisation of Islamic Cooperation (OIC) member countries and also where poverty incidence is high, further studies need to be conducted in other OIC member countries to adopt the model in line with practical and regulatory environment of those countries. Similarly, the study is based on the perception of the respondents, which limits the generalization of the result. Practical implications – The paper proposed a model that has the potential of being applied for poverty alleviation programmes in most of the OIC member states. Originality/value – The present paper has developed an IWIMM for poverty reduction

Modeling the Demand for Islamic Microfinance Services: An Application of PLS-SEM Approach

The access to capital is very crucial for ensuring the financial sustainability of microfinance clients. It is also equally important to determine the demand for microfinance services among the clients. This study aims to identify the factors affecting the demand for Islamic microfinance (IsMF) services among the women micro-entrepreneurs in Malaysia. This study has collected a total of 250 samples from the field survey on women micro-entrepreneurs who are also the clients of Amanah Ikhtiar Malaysia (AIM). In addition, Partial Least Squares (PLS) method used to identify the potential factors (4As) i.e., affordability, accessibility, adequacy and awareness affecting the demand for IsMF. The results show that only “accessibility” has significant and positive relation with the demand for IsMF. Besides, the measurements items of accessibility such as distance of IsMF institution, collateral requirement, guarantor requirement, application procedure and process, repayment method, service efficiency, advise and consultation, and number of IsMF centers are the key factors affecting the demand for IsMF services in Malaysia. This paper provides some insights for the policy makers of Islamic microfinance and recommends that IsMF providers should take accessibility factor into greater consideration for the economic upliftment of women in microenterprises in Malaysi

The competitive environment of community banking and the potential impact on microenterprise entrepreneurs\u27 access to bank financing

Over the past 35 years, Great Depression era regulatory restrictions on the geographic area of operation and the scope of financial services banks can offer have change significantly. These changes fueled a surge of merger activity and resulted in a 70% decrease in the number of bank charters by 2015. Currently, community banks hold only 14% of bank assets in the US; nonetheless, they play an important role in the US economy because they continue to provide the majority of funding to small businesses. This study finds that over 83% of bank failures occurred in metropolitan areas despite the distribution of community banks being almost equal at 49.5% rural and 50.5% metropolitan. An analysis of FDIC data from 2000 through 2014 indicates that rural and community banks do differ significantly on variables related to bank profitability and loan portfolio risk. Metropolitan banks have lower ratios on pre-tax return on assets, and return on equity. On average, metropolitan banks are approximately 30% less profitable than their rural counterparts. Since the 2007 financial crisis, on average, metropolitan banks have higher ratios on variables related to loan portfolio risk and since 2010 they have lower capital to asset ratios. The higher bank failure rates, riskier loan portfolios, and lower capital to asset ratios associated with metropolitan community banks provides support for the competition-fragility view that increased competition in banking leads to more bank failures. The nationwide survey in this study indicates that metropolitan community bankers perceive the competitive environment to be more intense and that their marketing capabilities are inferior to the large nationwide and regional banks that they compete against. Community bankers perceive that the merger and acquisition activity will continue and that it is driven by the need to achieve economies of scale in technology and regulatory compliance. Based on previous research that larger banks extend less credit to small businesses, this will further restrict the availability of bank credit to new businesses and existing microenterprises. Given that microenterprises employ the majority of people and contribute to new job creation, there are serious economic implications