Does Regulation Influence Microfinance Institutions to Be More Client-Responsive?

Abstract

The regulation of microfinance services is likely to have a wide-ranging influence on the microfinance sector, particularly on institutions and their clients. This paper reveals the impact of a specific regulatory regime, the “Microcredit Regulatory Authority Act, 2006”, enacted by the Bangladesh government to monitor and supervise nonprofit nongovernment organizations (NGOs). We analyzed survey and interview data provided by clients of both nonprofit microfinance institutions (MFIs) registered under the Act and nonprofit institutions that are unregistered, all lending only to women. Client-level analysis using fixed effects for specific MFI membership is applied, focusing on the role of regulation by comparing protections as consumers of financial intermediations in terms of financial literacy, awareness, and status of clients of registered and unregistered MFIs. We found compelling evidence of a positive association between the financial status, financial literacy, and financial awareness of clients of registered MFIs, but not unregistered MFIs. These findings support the need for MFIs to implement consumer protection measures and inform their consumers about key issues to achieve improved client outcomes.

An evaluation of Egyptian microfinance laws and regulations preventing overindebtedness of women

“…These regulations should be strongly enforced. These recommendations are consistent with previous research (Agrawal, 2021;Brix & McKee, 2010;Morshed et al, 2020;Solli et al, 2011).…”

“…These regulations should be strongly enforced. These recommendations are consistent with previous research (Agrawal, 2021; Brix & McKee, 2010; Morshed et al, 2020; Solli et al, 2011). There needs to be greater protections and support services that acknowledge the vulnerability of poor rural women.…”

Differences in the Destination of Savings According to Gender, and Its Economic Rights Implications

“…The option of starting or expanding a business was the seventh priority, and significant differences were observed according to gender. The need to promote entrepreneurship programs for women finds support in Morshed et al (2020).…”

“…Microfinance is particularly important in driving financial inclusion in this area. For example, in Bangladesh, non-profit micro finance institutions (MFIs) focus on microloans aimed mainly at poor women so that they can start micro businesses (Morshed et al 2020). Their findings support the importance of financial literacy before awarding a micro credit.…”

Unveiling Corporate Social Responsibility in Philippine Microfinance Institutions: A Proposed Assessment Guidelines and Enhancement Activities

“…An assessment reveals that MFIs' employees perceived CSR initiatives' consistent implementation and public benefits, while clients often do not feel the positive impacts. To optimize CSR activities, unified assessment guidelines based on regulation and guidance are recommended to elevate financial literacy, rights awareness, and community awareness (Morshed et al, 2020). This will promote sustainable development.…”