A thesis Submitted in Partial fulfilment of the requirement of the university of Greenwich for the degree of Doctor of Philosophy - 2010


This article is also available at university of Greenwich Repository through this link http://core.ac.uk/display/316086

Financial Sustainability of Rural Micro Finance Institutions (MFIs) in Tanzania

The growing relevance of Microfinance Institutions (MFIs) has provoked the development of specialized MFI rating agencies that perform global risk assessments. In this paper we have conjectured different hypotheses pertaining to the relationship between financial indicators and the rating assigned. The hypotheses have been empirically tested, using MFIs accounting information and ratings from a leading agency. As expected, the larger, the more profitable, the more productive, and the less risky, achieved the better rating. This proves the usefulness of MFIs ratings for providers of funds. There is no observed relationship between social performance and rating. Given the social aim of MFIs, it is necessary to encourage rating agencies to engage in the development of social ratings. These social ratings should complement financial ratings, giving information about the accomplishment degree of the MFI social goals.

Factors explaining the rating of Microfinance Institutions

Research Question and Problem Statement: Developing a sustainable financial systems for poor is critical for any developing economy particularly Bangladesh for various reasons. Firstly, it will include a large population of bankable poor into formal financial sector who are currently excluded and hence will benefit both parties over a long run. Secondly, generating sustainable funds for skilled/semi-skilled poor to start a business will increase number of micro and small enterprises and employment. Thirdly, sustainable financial service with access to credit can help poverty reduction through improving the productivity of micro and small enterprises or creating new opportunities of livelihood. Though micro credit for helping poor in the context of Bangladesh is not a new idea, yet question remains on the sustainability of such institutions which are mostly backed by donor funds or government funds with high risk of insolvency along with high transaction cost (due to high cost of capital at 26.5 per cent on loan and advances) (Hossain, 1998, p.7). The micro finance institutions are not recognised as regulated financial institutions which impact the ability and cost of finance and transactions. The regulatory and operational restriction often result in rationing out sectors of the client population which the institutions and programmes want to serve and eventually questions the sustainability of micro-finance institutions and programmes working with the poor. In this bleak situation, a second generation social bank in Bangladesh focusing on a new model to bank with poor is considered to be a bold step towards building sustainable financial system for banking with the poor. The main research objective is to explore the views held by bank directors as well as managers towards their mission statement for ‘Empowering real poor families and create local income opportunities’ and ‘Providing support for social benefit organizations by way of mobilizing funds and social services’ and thus analyse the findings from the unique socio-economic-political-regulatory context of developing economy like Bangladesh. This longitudinal case study will explore the participatory three sector banking model developed by the bank which includes: i) Formal sector : dealing with human face approach to credit and banking on the profit and loss sharing ii) Non—formal sector: informal finance and credit package that empowers and humanizes real poor family and create local income opportunities and discourage internal migration iii) Voluntary sector: responding spontaneously to its social commitment to help hard core poor with various welfare activities The purpose of the study is to focus on the model for sustainable banking with the poor in the context of developing economy which will contribute towards reduction of poverty. Motivation – Why is this research undertaken? Sustainable Financial Intermediation for poor in developing country is an under-researched area. As a result, local and international bodies that are funding and monitoring global sustainability matters are not getting enough empirical evidences concerning the Social and Financial Intermediation performances in the developing countries. This study has derived its motivation to fill in such gap in research.

Sustainable banking with the poor- A case study of a social bank

Governance and efficiency of microfinance institutions

The aim of this thesis is to investigate whether there existed a trade-off between outreach to the poor and efficiency of MFIs between year 2000 and 2010. The study is conducted on a sample of 1679 observations from countries worldwide and is analyzed through Stochastic Frontier Analysis. The results from this study suggest that there was indeed a negative correlation between outreach to the poor and efficiency of MFIs, as have been found in previous studies. Although, this study also suggests that a high percentage of women borrowers not necessarily have to be positively correlated with a higher level of inefficiency, which is a new finding.

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Compatibility between Outreach and Efficiency in the Microfinance Market

A Dissertation Submitted In Partial Fulfillment of the Requirements for Award of the Degree of Masters of Science in Accounting and Finance of Mzumbe University

Evaluation of the determinants of efficiency in operation of microfinance institutions in Tanzania

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Evaluation of the determinants of efficiency in operation of microfinance institutions in Tanzania