Existing literature indicates that transaction costs are a major contributor to high interest rates on microcredit loans. A study was conducted using the case study method in order to examine the transaction costs of three established microfinance institutions. Transaction cost includes the costs of group formation, training, appraisal, documentation, disbursement and monitoring. First year and repeat loan transaction costs were studied. Life cycle transaction costs, namely the costs over the group's life cycle were also examined. Based on the findings, implications for policy makers and microfinance institutions (MFIs) were drawn.
The policy literature has long recognized the inherent need for a program to fit the unique conditions found in a certain context. We present a theory of institutional contextualism that focuses on the mechanisms by which actors adapt a policy design to fit a situation. We conceptualize institutions as phenomena that are constituted by a constant dialectic between text (the general blueprint) and context (the particular setting). The first half of this dialectic, which is the diffusion of the constitutive text or norm onto the institutional setting, has been discussed in the literature. Our research focuses on the second half, and we delineate, in concept, mechanisms for fitting the program to the local context. We then use a case study of improvised microfinance programs in Tamil Nadu, India, to illustrate how this occurs in reality. The research underscores the unexamined link between effective governance and contextual fit and offers a typology of mechanisms for fit that should inform future research.
This article aims to fill a gap in the social security literature on India by examining the role of micro-pensions. The analysis suggests that because of the heterogeneity of the target population, micro-pension products -with microfinance institutions (MFIs) as the main, but not only sponsors -should be voluntary and portable and permit experimentation in their design and in the delivery of services. Accordingly, decentralized micro-pension schemes that operate within an appropriate regulatory framework and according to sound governance practices are deemed more fitting for the Indian context than centralized schemes with limited flexibility. The article discusses two case studies of recentlyinitiated micro-pension schemes in India, which reveal the need for rigorous analytical research on the micro-pension sector, particularly concerning the structuring of pay-out options and innovative delivery mechanisms. The article concludes that micro-pensions have the potential to be one of the most useful components in India's multi-tiered social security system, and should be encouraged.i ssr_1390 1..21
Microfinance institutions can enhance their contribution to financial inclusion promotion by expanding their suite of financial services, participating in a credit bureau, and providing portability of accounts, greater flexibility in operation, and financial literacy training.
Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Working papers are subject to formal revision and correction before they are finalized and considered published.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractWith maturity in the microfinance market in South Asia, it is observed that some microfinance members' needs grow beyond the boundaries of traditional microfinance group loans. In addition, there are other small enterprises whose needs are not met by microfinance institutions or commercial banks. It is important to address the financing needs of these firms given their employment potential, and hence this issue is on the policy agenda of the three countries studied in this paper: India, Bangladesh, and Pakistan. Drawing on interviews with chief executives of lending organizations and desk research, this paper reviews the options currently available to such firms in each country, the lending models being used, and recent policy initiatives to promote them. Based on the country experiences, the features of successful lending models for this segment and the specific challenges that need to be addressed are summarized and conclusions drawn.
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