ABSTRACT
International organizations such as OECD, WBG, IMF, UN and EU, as well as research studies, have highlighted the increasing contribution being made by microcredit finance institutions (MFIs) to financial inclusion, sustainable economic development and the fight against poverty. However, access to MFI credit is still far from the desired level for small and micro‐enterprises, especially in developing countries. The countries of Latin America and the Caribbean, where approximately half of the small formal companies do not have access to credit, have the world's highest financial gap ratio compared to potential demand (87%). In this context, effective instruments are needed to assess default risk, through credit ratings. Based on the Basel III regulations, an empirical study was conducted of two microcredit portfolios corresponding to two MFIs in two Latin American countries (Bolivia and Colombia) during the period 2012–2015, to identify the explanatory variables of the probability of default on loans granted by MFIs, using a logistic regression model and a neural network. The results obtained show that the main variables in this respect are the amount of the loan, the number of payments in arrears, the guarantees provided, the assessment of the credit analyst, male gender of the borrower and the level and trend of the general stock exchange index. The conclusions presented advance previous research findings and may be useful for MFI managers, regulatory institutions, financial analysts, scholars, policy‐makers and applicants for microcredits to undertake a business project, especially in times of emerging crisis, such as that caused by the Covid‐19 pandemic.
ABSTRACT
Financial inclusion remains a key political issue. Since microcredit first captured public attention, Microfinance Institutions (MFIs) have expanded rapidly all around the world. Although much economic and financial literature has highlighted the importance of microfinance as a factor of development, there is also an intense debate about its effectiveness as a development tool. This paper is a descriptive analysis of the microcredit state of the art contrasted with the fieldwork done in Peru. A qualitative research methodology was used;29 in-depth face-to-face interviews were done with different microfinance agents: MFIs, NPOs, microfinance associations, and microfinance customers in Peru. Peru has been chosen because it has a dynamic and well-regulated microfinance sector with more than 70 entities specialized in microfinance. Though statistical generalization is not possible, interview data provided rich and contextual evidence, which is often missing from a quantitative research approach. This paper highlights the importance of financial and accounting education in microcredit beneficiaries and how can it be enhanced in the digital age. The COVID-19 pandemic has forced vulnerable population to embrace new digital technologies and has highlighted the digital gap that still exists in Latin America although this situation presents opportunities and challenges. This present study contributes to the debate over how to improve microcredit intervention´s impact on the more vulnerable and identifies some unique insights into the interrelationships of financial education and financial inclusion. The results of the present study confirm that financial and accounting education are key elements in financial inclusion. ©2023 ASEPUC.
ABSTRACT
Financial inclusion remains a key political issue. Since microcredit first captured public attention, Microfin-ance Institutions (MFIs) have expanded rapidly all around the world. Although much economic and fin-ancial literature has highlighted the importance of microfinance as a factor of development, there is also an intense debate about its effectiveness as a development tool. This paper is a descriptive analysis of the microcredit state of the art contrasted with the fieldwork done in Peru. A qualitative research methodo-logy was used;29 in-depth face-to-face interviews were done with different microfinance agents: MFIs, NPOs, microfinance associations, and microfinance customers in Peru. Peru has been chosen because it has a dynamic and well-regulated microfinance sector with more than 70 entities specialized in microfin-ance. Though statistical generalization is not possible, interview data provided rich and contextual evidence, which is often missing from a quantitative research approach. This paper highlights the importance of fin-ancial and accounting education in microcredit beneficiaries and how can it be enhanced in the digital age. The COVID-19 pandemic has forced vulnerable population to embrace new digital technologies and has highlighted the digital gap that still exists in Latin America although this situation presents opportunities and challenges. This present study contributes to the debate over how to improve microcredit interventions ' impact on the more vulnerable and identifies some unique insights into the interrelationships of financial education and financial inclusion. The results of the present study confirm that financial and accounting education are key elements in financial inclusion. (c) 2023 ASEPUC. Published by EDITUM -Universidad de Murcia. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
ABSTRACT
Purpose The breakout of the COVID-19 pandemic has forced governments all over the globe to bring radical changes to all walks of life. Strict lockdowns are not only adversely affecting the social, economic, and psychological wellbeing of individuals but also questioning the sustainability of most businesses. In wake of the current scenario, this study is aimed at exploring how the COVID-19 pandemic is influencing the sustainability of entrepreneurship particularly from a female perspective and further providing insights into the role of Islamic financial institutions in the sustainability of businesses during COVID-19. Design/methodology/approach This is a qualitative study that takes social constructivism approach to study the underlying phenomenon. Semi-structured interviews are conducted to collect primary data. Secondary data are also utilized in this study to theoretically define various concepts relating to entrepreneurial sustainability. The application of thematic analysis revealed various risks associated with sustainability. The interviews reveal the ground realities and tell us about the hardships being faced by the entrepreneurs due to ongoing crises. The participants of the study also shed light on the role of Islamic financial institutions during the pandemic. Findings The study results revealed that it may look impossible for women entrepreneurs to halt or avoid the adverse consequences of the pandemic;however, a few female entrepreneurs strived to guard their existing portfolios with the help of Islamic microfinance institutions. Whereas, several women, especially those running home-based businesses, lost their income streams. Despite these rapid challenges, most female entrepreneurs are working on inventive online systems to sustain their business activities during the crisis. Finally, guidelines are suggested which can help achieve sustainability of the entrepreneurial startups. Research limitations/implications The outcomes of this study are expedient for funding agencies, government authorities and Islamic financial institutions as well as for non-government institutions to establish sustainable and broader policies for women to become successful entrepreneurs during severe disasters like COVID-19. Moreover, the study is a helpful tool for women entrepreneurs to avert the worst impact of the pandemic with the help of Islamic microfinance institutions. The themes of this study help generate realistic information to appraise the strategies to create facilitating business environments that drive the women to carry out the entrepreneurial activity during any crisis like the COVID-19. Practical implications The results of this study provide evidence that crisis can be anticipated up to some extent if entrepreneurs become able to take proactive decisions in case of expected or identifiable threats. The study may also help the women entrepreneurs to comprehend the serious consequences of the pandemic by shifting their mode of financing to Islamic finance. Although this pandemic is a cause of physical discomfort instead this research may encourage the female entrepreneurs not to lose heart, just find the potential opportunities for their home-based and small businesses and manage funding from the Islamic microfinance institutions. Originality/value The study adds to the existing literature on entrepreneurial sustainability with a particular focus on the role of Islamic microfinance institutions for women entrepreneurs' sustainability in Pakistan. Secondly, the study employs the entrepreneurial sustainability model (ESM) that, according to the best of our knowledge, has not been used by the researchers earlier to study the given research phenomenon. Thirdly, the study findings are expedient for funding agencies, government authorities and financial institutions as well as for non-government institutions to establish sustainable and broader policies for women to become successful entrepreneurs during disasters like COVID-19.
ABSTRACT
To contain the spread of the Covid-19 pandemic, the mandated social distancing and restricted market activities have adversely affected the employment and earnings of the poor who are considered the targeted beneficiaries of the Microfinance Institutions (MFIs). The MFI operation and more specifically fresh lending are under serious threat as the mode of operations primarily involve physical interaction while distributing credits at the clients' doorsteps, conducting periodic group meetings and carrying out regular collections. This short article attempts to analyze the various challenges that MFIs may encounter in their current and future operations due to the ongoing pandemic. It discusses how the government initiated coping mechanisms may help MFIs overcome or minimize the pandemic challenges. At the same time, MFIs' efforts towards continued services are expected to create a win-win situation.