The Effects of Services by Microfinance Institutions on the Welfare of Urban Households in Malaysia

Abstract

The primary aim of this paper is to investigate the impact of financial (microcredit and microinsurance) and nonfinancial services (training), services by microfinance on the welfare of their urban clients in Malaysia. We contribute to the existing literature by using income as a mediating variable in the analysis. Questionnaires were distributed to 400 respondents across three different urban areas in Malaysia in order to collect the relevant data for this study. We have adopted the quota sampling to collect the data. The results show that most of the services provided by the microfinance institutions including microcredit, micro insurance and training have assisted the urban households to earn more income and enhance their socioeconomic welfare. The recommendations arising from the results of this study are: 1) an environment that promotes cooperation between microfinance institutions and households should be enhanced and 2) well-diversified and dynamic microfinance programs and specific skills-building training programs should be created.

Social capital and loan credit terms: does it matter in microfinance contract?

“…It means the loan repayment performance (better repayment rate, regular payment of debt as cum due and sufficiency of net income to pay the outstanding debt) of microenterprises in Pakistan can be boosted through the provision of social capital (sales growth, profit growth, performance as compared to competitors and overall business performance). Such finding is in line with other studies (Kim et al, 2020;Jafarinejad et al, 2021;Siwale and Ritchie, 2011;Loke et al, 2020;Roslan and Karim, 2009).…”

“…, 2020; Jafarinejad et al. , 2021; Siwale and Ritchie, 2011; Loke et al. , 2020; Roslan and Karim, 2009).…”

“…They will also be provided with technical support regarding the proper utilization of loan amounts through interaction and intensive communication with the lending officers and other borrowers. Moreover, close and informal relationships between the borrowers and lending officers can ensure the early location of problems regarding loan repayment performance (Loke et al, 2020). The ratio of NPLs will be higher if the borrowers fail to participate in training programs or workshops arranged by the MFIs (Roslan and Karim, 2009).…”