Security design, incentives, and Islamic microfinance: Cross country evidence

Fan, Yaoyao; John, Kose; Liu, Frank Hong; Tamannid, Luqyan

doi:10.1016/j.intfin.2019.08.002

Cited by 23 publications

(26 citation statements)

References 54 publications

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“…Morover, many authors (Hassan et al, 2021;Widiarto and Emrouznejad, 2015;Mobin et al's, 2017) highlight the need for further research that explores theperformance of conventional and Islamic MFIs within a region. Besides, because there are real cases in Middle East and North Africa (MENA) countries to support diversification and focus (Fan et al, 2019), it makes sense to investigate which sight is appropriate for Islamic MFIs. Accordingly, this paper investigates the case of Islamic microfinance in MENA region by answering the questions: Q1.…”

Section: Introductionmentioning

confidence: 99%

Diversification and performance of microfinance institutions: does Islamic microfinance model matter?

Salem

Abdelkader

2023

IMEFM

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Purpose The aim of this study is to investigate the effect of income and geographic diversification on the double bottom line of microfinance institutions (MFIs) in Middle East and North Africa (MENA) countries where conventional and Islamic MFIs coexist. The idea is to explore whether diversification impacts MFIs' financial performance and outreach differ for Islamic microfinance. Design/methodology/approach The authors test the effect of diversification and business models of MFIs on their performance and poverty outreach. The authors’ data set is an unbalanced panel sample of 81 (Islamic and conventional) MFIs in MENA countries covering 1999–2018, comprising 743 MFI-year observations. Findings The authors find that increasing income diversification in microfinance and focusing on rural areas decreases the financial performance of MFIs in MENA countries. Islamic MFIs benefit from income diversification by increasing their financial performance. The results provide evidence of a nonlinear relationship between income diversification and the financial performance of MFIs. Although conventional MFIs improve their depth of outreach by diversifying their income, Islamic MFIs have a lower breadth of outreach because they show a higher degree of income diversification. Practical implications This research contributes to the ongoing debate of whether MFIs should focus on or diversify their services to Islamic microfinance. Therefore, the findings of this study are practically crucial for MFIs' stakeholders to understand the contribution of diversification strategies in improving the Islamic MFIs to achieve both financial and social objectives. Originality/value To the best of the authors’ knowledge, it is the first research that addresses the impact of diversification strategies in Islamic microfinance. Additionally, using a panel data set of conventional and Islamic MFIs in MENA countries spanning 1999–2018, this study provides empirical evidence on the diversification versus focus issue from the microfinance industry and the subset of Islamic microfinance.

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Section: Introductionmentioning

confidence: 99%

Diversification and performance of microfinance institutions: does Islamic microfinance model matter?

Salem

Abdelkader

2023

IMEFM

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“…Studies on the effectiveness of these institutions have, in their greatest part, been based on accounting indicators (Fersi and Boujelbéne, 2016, Berguiga et al , 2017; Ibrahim et al , 2016; Fan et al , 2017; Henock, 2019; Le et al , 2019; Chmelíková et al , 2019; Yimga, 2018; Shafi and Reddy, 2019; Tamanni and Haji Besar, 2019; Ahmad et al , 2020). However, recently, several studies have focused on the efficiency of MFIs using nonparametric (data envelopment analysis (DEA)) (Farooq and Khan, 204; Ben Abdelkader and Ben Salem, 2013; Mahmood et al , 2014), and parametric (SFA) techniques to analyze it (Quayes and Khalily, 2013; Riaz and Gopal, 2015; Bos and Millone, 2015; Widiarto and Emrouznejad, 2015).…”

Section: Literature Reviewmentioning

confidence: 99%

Financial and social efficiency analysis of Islamic microfinance institutions

Fersi

Boujelbène

2021

IJOEM

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PurposeThe purpose of this paper was to investigate the impact of credit risk-taking on financial and social efficiency and examine the relationship between credit risk, capital structure and efficiency in the context of Islamic microfinance institutions (MFIs) compared to their conventional counterparts.Design/methodology/approachThe stochastic frontier approach was used to estimate the financial and social efficiency scores, in a first step. In a second step, the impact of risk-taking on efficiency was evaluated. The authors also took into account the moderating role of capital structure in this effect using the fixed and random effects generalized least squares (GLS) with a first-order autoregressive disturbance. The used dataset covers 326 conventional MFIs and 57 Islamic MFIs in six different regions of the world over the period of 2005–2015.FindingsThe overall average efficiency scores are less than 50%, where CMFIs could have produced their outputs using 48% of their actual inputs. IMFIs record the lowest financial (cost) efficiency that is equal to 28% on average. The estimation results also reveal a negative impact of nonperforming loan on financial and social efficiency. Finally, the moderating effect of leverage funding on the relationship between credit risk-taking and financial efficiency was confirmed in CMFIs. However, leverage seems to moderate the effect of risk-taking behavior on social efficiency for IMFIs.Originality/valueThis paper makes an initial attempt to evaluate the effect of risk-taking decision and its implication on efficiency and MFIs' sustainability. Besides, it takes into consideration the role played by the mode of governance through the ownership structure. In addition, this research study sheds light on the importance of the financial support for the development and sustainability of these institutions, which in return, contributes to a sustainable economic development.

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“…Religion becomes part of the academic discussion in that field, in particular with Fan et al (2019) that provide credit risk analysis with cross country evidence from microfinance institutions (MFIs) that are Sharia-compliant and their comparisons with non-Sharia-compliant MFIs. They find that, compared with non-Sharia-compliant conventional MFIs, Sharia-compliant Islamic MFIs have less credit risk but are less profitable and financially sustainable, have better poverty outreach, and are less likely to `mission drift'.…”

Section: Keyword Co-occurrences Networkmentioning

confidence: 99%

Islamic Finance as Social Finance: A Bibliometric Analysis from 2000 to 2021

Lanzara¹

2021

IJBM

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The main purpose of this research is to map the academic contribution of social finance to the discussion in the field of Islamic finance. An analysis of 788 contributions published in international academic journals, books review and chapters, editorial material and proceedings papers has been done using the bibliometric method. The findings show that there are a number of journals that have had a higher production on the topic with an impact on research and, furthermore, it emerges that the works of the most relevant authors are made with qualitative methods that have been the most used to demonstrate the link between Islamic finance and social finance. The analysis also shows that the relation between Islamic finance and social finance is linked, among the others, to the words PERFORMANCE, IMPACT RISK, OWNERSHIP, CORPORATE SOCIAL-RESPONSIBILITY, MANAGEMENT, BEHAVIOR and EFFICIENCY, demonstrating that there is also a link with Sustainable Development Goals (SDGs). It has also been observed the keyword evolution through the years which proved a dramatic increase on the academic attention to the topic particularly in the last five years. Research limitations/implications – The paper’s main limitation is due to the adoption of the bibliometric method because the databases include only part of the scientific papers and not all world’s sources. However, WOS database, the one adopted for the research, is the world’s most complete index even though it is not complete at all. On the other hand, to have a wider landscape of knowledge on the field of research, they have been considered all kind of sources: papers published in international and academic journals, books chapters and reviews, editorial materials and proceedings papers. The implications for academics, institutions, banks, enterprises and customers seem to be very relevant because it is assumed that a lot of work on the field must be done to strengthen the practical relation between Islamic finance and social finance. Originality/value – This research highlights the increasing relation, from an academic point of view, between Islamic finance and social finance has increased in the last 21 years, especially in the last 5. According to the literature, social finance is a relevant aspect in the present academic discussion on Islamic finance. For these reasons, to map the researches that have been done in this field, the study analyzes the relationship between Islamic finance and social finance.

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Security design, incentives, and Islamic microfinance: Cross country evidence

Cited by 23 publications

References 54 publications

Diversification and performance of microfinance institutions: does Islamic microfinance model matter?

Diversification and performance of microfinance institutions: does Islamic microfinance model matter?

Financial and social efficiency analysis of Islamic microfinance institutions

Islamic Finance as Social Finance: A Bibliometric Analysis from 2000 to 2021

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