Role of Microfinance in Sustainable Development in Rural Bangladesh

Abstract

Here, the effects of length of microfinance borrowing, service provider and other factors on microfinance participation and outcomes in Bangladesh are investigated. Data were collected from 300 microfinance respondents using face-to-face semi-structured interviews. Descriptive and econometric statistics were used for data analysis. The financing authorities gave preference to rural, powerless, illiterate and poor people in all groups of candidates. Spillover effects were minimized by considering endogeneity, attrition bias and unobserved bias. The fixed effect instrumental variable method was used to show that the microfinance effects changed over time, i.e. were greater in historical borrowing than in more recent borrowing. Farm size, repayment behavior, savings amount per week and annual household income were identified as significant factors that influenced recipients' effective participation in the microfinance program.

Sustainable Development and Microfinance: The Effect of Outreach and Profitability on Microfinance Institutions' Development Mission

“…This investigation offers preliminary significant and conclusive empirical evidence on the association between the development mission of microfinance and MFIs' outreach and profitability focus. It extends previous research that analyzes the MFI‐specific self‐sufficiency and profitability (Assefa et al ., ; Cull et al ., ; Mersland and Strøm, ), as well as that examining the (macroeconomic) effects of microfinance in individual countries (Islam et al ., ; Mazumder, ; Schicks, ) and verifies the MFI‐specific contribution to sustainable economic development.…”

“…The robustness of the model is further confirmed by aggregating the MFI‐specific data on country level (Hermes, ; Imai et al ., ) as well as by running a fixed‐effects regression with heteroskedasticity and serial correlation robust standard errors (Assefa et al ., ; Mazumder, ; Mersland and Strøm, ). These regression results are not tabulated but available upon request.…”

“…Yet, this approach again cannot directly measure the development mission of microfinance, as it only considers individual institution-level rather than country-level measures. Other literature explores MFIs' performance as well as their mission measured by financial, economic and poverty indicators in individual countries (Dehejia et al, 2012;Inoue and Hamori, 2012;Islam et al, 2015;Kleynjans and Hudon, 2014;Mazumder, 2015;Rajbanshi et al, 2015;Schicks, 2014) or based on international macro-level aggregations of microfinance and capital (Hermes, 2014;Imai et al, 2012). However, these studies' empirical results are limited by their arguable generalizability on an international level and by their lacking implications for the MFI-specific development contribution, respectively.…”

“…by speeding up financial development and economic growth (Delia, 2011;Lopatta and Tchikov, 2016;Swamy and Tulasimala, 2011;Vanroose and D'Espallier, 2013) and accounting for poverty alleviation (Barr, 2005;Casselman et al, 2015;Imai et al, 2012;Kleynjans and Hudon, 2014;Mazumder, 2015;Morduch, 1999;Prior and Argandoña, 2009). Committed to serving people who are usually excluded from the formal banking sector, microfinance providers are referred to as social enterprises (Hudon and Périlleux, 2014).…”

Science Mapping of the Global Knowledge Base on Microfinance: Influential Authors and Documents, 1989–2019

“…Yunus founded one of the first significant microfinance institutions (MFIs) in Bangladesh, which served as a model that spread throughout the world. Today microfinance is perceived as a financial instrument that contributes to sustainable social and economic development [1,4,[6][7][8][9][10][11][12][13][14][15][16][17][18]. In the last four years, the use of microfinance has migrated into the domain of environmental sustainability ('green microfinance') as well [19][20][21][22][23][24][25][26][27][28][29][30][31].…”