Transmittal Group Lending Model as an Innovative Alternative for Managing Risk and Reducing Cost in Micro-Lending (original) (raw)
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FACTORS IMPEDING GROUP LENDING IN THE MICRO FINANCE INSTITUTIONS (MFI’S)
Richard Nkrumah, 2013
ABSTRACT The study assessed factors impeding group lending in the Micro finance Institutions (MFI’s), a case study of Opportunity international Savings and Loans Company. Purposive sampling procedure was used to select five different groups of borrowers from three branches of opportunity international in Accra; a total sample of 100 borrowers was used. Questionnaires were used to obtain data from the borrowers. Four objective questions were answered based on the borrowers’ responses; The study observed that, as part of the criteria used by Micro finance Institutions (MFI’s) to assess loans; the number of group members and the number of loans accessed elsewhere by the applicants were less considered, however this contributed to a higher default rate. The study also found that the major challenge of group borrowing was risk sharing, punishment of group member defaulters was difficult because there were no strong and proper agreements on defaults, More so the institutions left the responsibility of repayment on the groups. The consequential effect of the challenges on the MFI was that most borrowers defaulted as a result profit on lending grew downwards. There were also lots of litigation which affected the public credibility of the institution.
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Micro-Finance & Micro-Credit for Sustainable Development
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Risk is an integral part of financial intermediation. Hence, risk management must be at the heart of finance. However, it is disturbing to note that systematic risk management is still not as widespread as it should be in the microfinance industry. Except for a few flagship microfinance institutions (MFIs), which constitute the core of the industry, most MFIs do not pay adequate attention to systematic risk management. The microfinance industry has grown rapidly during the last decade in breadth, depth, and scope of outreach. The rapid growth seems to continue, given the massive unserved and underserved market. The growth of the industry has changed the risk profile of MFIs. Yet many MFIs seem to continue to seek growth without much attention to attendant risks. Surprisingly, many MFIs appear to neglect even the basic credit risk management which helped MFIs achieve high growth rates historically. The growing interest of many MFIs in agricultural microfinance must be seen in the bro...
RISK MANAGEMENT IN MICROFINANCE INSTITUTIONS
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Microfinance is a mechanism for the development of the country with especially focusing on poor women in rural areas. Micro Finance has had several successful initiatives, including the range of outreach, as well as the development of innovative products and local institutions that reach out to marginalized communities. Micro-finance has been accepted at the national policy level for poverty reduction. The present paper purports to examine the role of JLGs in microfinance in India. The paper is based on mainly primary data. The research design is descriptive. The data for the present study is based on a major research study on microfinance in the state of Uttar Pradesh conducted in 2019 by the researcher. Chi-square test is used to know the level of significance. While many studies relate to microfinance, only a few studies have been conducted so far to assess the effect of JLGs. Against this backdrop, the present paper purports to examine the Relationship between microfinance institutions and group lending model in Uttar Pradesh, India.
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Microfinance has received a lot of attention recently, both from policy makers as well as in academic circles. Two of the main topics that have been hotly debated are explaining joint liability group lending and its implications for reducing information asymmetries, and the trade-off between the financial sustainability and outreach of microfinance programmes. This Feature contains three novel empirical contributions providing new insights with respect to why and how joint liability group lending works. It also contains the first large-scale systematic analysis of the trade-off between financial performance and outreach of microfinance institutions.
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Microfinance as pioneered in Bangladesh by Mohammed Yunus was to assist low-income women and men through micro-enterprises for their economic development. Growing concerns about poverty stands out in political agendas all over the world, as stubbornness of poverty even in the richest nations is being met with increasing impatience (Mwangi et al, 1998). Governments and international aid donors have been subsidizing credit to small farmers in rural areas of many developing countries. These subsidized credit from donor Non-Governmental Organizations (NGOs) made it possible for large numbers of low-income people to have access to financial services. According to Consultative Group to Assist the Poor (CGAP, 2001) report, nearly three billion (3bn) poor people lack access to the basic financial services essential for them to manage their businesses and it is estimated that about 35% of people in developing countries live below the poverty line subrata. In Ghana, it has been estimated that...