During the last decade, the microfinance movement has considerably changed the financial landscape around the world. It has inspired new banking concepts that, has assumedly given hope to the poor households for the betterment of their livelihoods through their own efforts and labour. The project aims to shed light on the effect that the stakeholders actions and interests have on the success (or failure) of microfinance institutions worldwide. Such interests; being as diverse in nature as are the institutes or organisations that present or signify them; there is a significant need to systematically differentiate the different tiers and levels of the complex environment in which they normally operate. In particular, the institutional infrastructure of the country of operation (comprising of the bureaucracy, the law keeping agencies and the politicians), the informal societal structures (comprising of the form of society be it feudal, patriarchal or traditional, in addition local money lenders and or local commercial banks etc.) and also external agencies like the NGOs and the donor aid agencies, both at the local and at the national level need to be taken into account. It is the objective of this Ph.D. project to shed some light on this aspect. More specifically, the objective of this project is to answer the following questions:
1. Is it possible to explain the success of the MFIs in terms of outreach to the poor and financial sustainability based on the external societal and political economic framework?
1.a. How does the governance in the country affect the MFIs operations?
1.b. How does the flow of official developmental Aid influence the success of MFIs?
2. Taking into consideration the interests of the different stakeholders, could the MFIs serve their objective of poverty alleviation more effectively?
2.a. Do the establishment of traditional informal commercial money lenders hinder MFIs in reaching more clients?
2.b. Is there domestic disharmony if/ when women are or want to become MFI clients, and whether this affects the MFI outreach to women?
3. To what extent (if at all) are the working of MFIs “adjusted” because of the intervention of the intricate societal and power structures in different regions?
3.a. Does clientele targeting vary geographically due to societal set up?
3.b. Do MFI lending mechanisms of replication programs world-wide vary from the parent program due to local conditions/ set up?
The cumulative PhD. project constitutes of a quantitative and a qualitative part. The first part is a macro quantitative empirical cross sectional analysis to see how the working of MFIs are influenced by governance, official developmental aid, political rights and civil liberties within a country. The micro qualitative part comprises of two South Asian case studies (one in India and Pakistan each) so as to find out how particular interests of groups and communal power structures influence the working of MFIs respectively.
Methodically, for the data analysis standard statistical tools were used, including descriptive statistics, correlations, contingency tables and multivariate panel data analysis. For the hypotheses testing various econometric models were used on the panel data and the result are briefly summarised here for the most relevant (preliminary/ final selection yet to be made) findings. Results for the macro analysis show that the MFIs success in terms of outreach is positively affected with good governance in the MFIs country and the volume of official developmental aid flowing to the MFIs country. Furthermore, results were significantly positive to the amount of aid volume flowing to the microfinance sector in the recipient country when women were the MFIs main target group.
For the qualitative micro study, the project has proceeded with two case studies of MFIs in different regions of South Asia, the Network for Entrepreneurship and Economical Development (NEED, an NGO invested in mainly by the National Bank for Agriculture and Rural Development India NABARD) in the states of Uttar Pradesh and Bihar, India and the KASHF Foundation in the province of Punjab, Pakistan. The instrument of data collection were semi structured individual Interviews with a sample of 55 households (HH) (of clients/ non-clients and their male counterpart within the HH) in India and Pakistan each, along with the MFI management and staff have to control for whether they were restrained in any way, tabooed, or faced threats etc., in approaching the MFIs as potential clients and working for the MFIs respectively; and how this has affected their lives as MFI clients/ staff. Furthermore interviews were also conducted with the local money lenders and politicians, microfinance experts etc. and gathered institutional data that will serve to establish the link between any difficulties and challenges to establish micro credit programs given the dominant feudal set up and already established local money lenders. Results for the micro analysis in Pakistan have so far shown that the familial, communal and the political milieus of the MFIs and their targeted borrowers have a significant effect on the outreach and operations of the MFIs. Most important thereby were opposition from male family members and religious communal groups but also the local politicians who have significantly curtailed MFIs operations and performance in lending supports to defaulters for personal political mileage.