Impact of Regulation on the Cost Efficiency of Microfinance Institutions in Bangladesh

Khalily, M. A. Banqui; Khaleque, Md. Abdul; Badruddoza, S.

doi:10.1057/9781137399663.0012

Cited by 11 publications

(14 citation statements)

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“…Even though their rates are much lower than those charged by the moneylenders, the MFIs have room to reduce their rates and still realize sufficient returns. This argument is consistent with the evidence of Quayes and Khalily (2014) and Khalily, Khaleque, and Badruddoza (2014), which show that the MFIs are increasingly becoming cost-efficient. In 2011, the Microcredit Regulatory Authority (MRA) capped the interest rates that the MFIs can charge at 27 percent, which, in fact, has encouraged the licensed MFIs to become more cost-efficient.…”

Section: Overcoming Barriers To Sustained Poverty Reductionsupporting

confidence: 90%

“…Recent regulation of the microfinance sector has imposed cost on the previously self-regulated MFIs, which influences their portfolio decisions. Khalily, Khaleque, and Badruddoza (2014) show that, since 2006, regulation by the MRA has contributed to the MFIs' cost efficiency but also higher loan size. This raises questions of whether the MFIs have drifted from their social mission of alleviating poverty through providing financial and nonfinancial services and whether the extreme poor may be deprived of required services.…”

Section: The Changing Role Of Microfinancementioning

confidence: 99%

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Beyond Ending Poverty: The Dynamics of Microfinance in Bangladesh

Samad¹,

Khalily²,

Khandker³

2016

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This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.

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Section: Overcoming Barriers To Sustained Poverty Reductionsupporting

confidence: 90%

Section: The Changing Role Of Microfinancementioning

confidence: 99%

Beyond Ending Poverty: The Dynamics of Microfinance in Bangladesh

Samad¹,

Khalily²,

Khandker³

2016

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“…Most MFIs in sub-Saharan Africa (SSA) are regulated and supervised by the individual country's central bank such as in Nigeria, Kenya, Uganda, Ghana and Zimbabwe (Khalily, et al, 2014). The central bank licenses the MFIs in these countries (Mago, 2013), but in South Africa, as per the Usury Act of 1999, the Microfinance Regulatory Council (MFRC) carries out the supervisory activities by conducting random off-site and on-site inspections on the MFIs (Santos, 2012).…”

Section: Microfinance Regulation In Sub-saharan Africamentioning

confidence: 99%

“…Nature and policy implementation modes for microfinance Literature identifies: no regulation, self-regulation, delegated supervision, use of existing banking law and special regulatory policy for MF (Macchiavello, 2012) as MFIs regulating modes. MFIs in Bangladesh India are required, by law, to register with the Microfinance Regulatory Authority (MRA) and any other apex institution (Magali, 2014;Khalily et al, 2014) after the Andhra Pradesh incidence, so is in Ghana, as per the specific MF operating guidelines.…”

Section: Implementation Theorymentioning

confidence: 99%

“…The BoG uses rigorous prudential requirements to control and direct the MFIs. So, where entry requirements based on minimum capital requirements, ownership criteria and capital to asset ratio are more prudential specifications (Khalily et al, 2014) and are preventive measures, rigorous preventive regulation might not be appropriate hence, MF sector in Ghana is less-regulated and subject to different jurisdiction (Bank of Ghana, 2011).…”

Section: Implementation Theorymentioning

confidence: 99%

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Policy implementation deficiencies: Ghana’s microfinance sector failures

Quao¹

2019

IJOES

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Purpose Regulations to promote sanity in microfinance institutions and improve their operational problems yielded some results but lacked equal voice for effective implementation for its full realization. Much therefore has not changed in sub-Sahara African countries, though various types of regulation for microfinance exist. The nature and implementation of such policies therefore matter more than their mere presence. This paper aims to evaluate the nature of microfinance financial policies, given their social nature and the dynamism of their operational environment, and explores factors mitigating effective implementation of microfinance policy in Ghana. Design/methodology/approach A structured questionnaire was used to obtain data from the management and other officials of 63 microfinance institutions, and the outcome was organized into graphs and tables for descriptive analysis. Findings The results identified adequate adapted prudential regulation for microfinance institutions, but the formulation process lacked user input and adequate supervision, hindering effective sector policy implementation. The author therefore recommends a more inclusive and participatory policy formulation approach, creation of information platform for complete microfinance data through semi-autonomous supervisory body for microfinance services and regular full stakeholder engagement. Research limitations/implications Though the study is limited to tier-two microfinance institutions in Accra, it is evident that the results can be applied to the entire sector and across national borders because microfinance institutions exhibit similar or same characteristics. Originality/value This paper has not been submitted to or published by any other journal. The author certifies that the content of this paper is the product of his own work, and that other sources used in preparing this paper and their respective sources have been duly acknowledged.

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The dynamics of overlapping borrowing in the microcredit sector of Bangladesh

Osmani,

Khalily,

Hasan

2024

J of Intl Development

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Overlapping borrowing – i.e., the practice of taking new loans before old loans have been fully repaid – has become an important phenomenon in the microcredit sector in many developing countries, including Bangladesh. This paper examines the rationale for overlapping and investigates its short‐term and long‐term consequences by using a panel data set that is representative of Bangladesh as a whole. The study finds that it is useful to distinguish between two broad groups of overlapping borrowers who differ in terms of both the rationale of overlapping and its consequences. The first group – consisting of more than half of all overlapping borrowers – uses it as a promotional strategy, to improve their economic conditions without incurring a sharp discrete jump in debt burden. The other group uses it as a coping strategy, to deal with contingencies that compel them to take loans of a non‐productive nature, again by avoiding a sharp discrete jump in the debt burden. Econometric analysis, allowing for the possibility of endogeneity bias, shows that the first group is able to achieve stronger financial viability in the long run in comparison with non‐overlapping microcredit borrowers. The second group, in contrast, does not enjoy any significant improvement in their living conditions, but they are able to stave off any decline that otherwise might have befallen them in the face of shocks. Thus, both groups succeed in their respective goals, which are promotion for the first group and protection for the second. Microcredit has always had this duality of promotion and protection; overlapping borrowing serves to strengthen these functions of microcredit.

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Impact of Regulation on the Cost Efficiency of Microfinance Institutions in Bangladesh

Cited by 11 publications

References 0 publications

Beyond Ending Poverty: The Dynamics of Microfinance in Bangladesh

Beyond Ending Poverty: The Dynamics of Microfinance in Bangladesh

Policy implementation deficiencies: Ghana’s microfinance sector failures

The dynamics of overlapping borrowing in the microcredit sector of Bangladesh

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