Factors affecting multiple borrowing among microfinance clients: evidences from Bangladesh

Abstract

PurposeAlthough microfinance had experienced rapid growth in most developing economies, multiple borrowing remains a growing concern for practitioners and researchers in recent years. Hence, the main purpose of the study is to evaluate the factors affecting multiple borrowing among microfinance clients.Design/methodology/approachThe primary survey data of 400 microfinance clients from Bangladesh was collected to execute the research objective. Considering the types of dependent variable, this study employed logistics, probit, ordinary least squares (OLS) and Poisson regression techniques to analyze the data.FindingsAmong others, it was discovered that the expected (requested) loan amount is positively associated with multiple borrowing, while the level of training, small cattle farming business and marital status (widow/separated) exhibited negative effects under logistic regression. These results are robust with respect to the regression method, the specification and the definition of the outcome variable. Also, supply-side incentives (e.g. training) were found to partly influence the multiple-borrowing behavior of microfinance clients. These findings reiterate the contribution of both demand and supply-side factors to the multiple-borrowing behavior of clients. Consequently, policy implications and future research direction are advanced.Originality/valueThe authors have examined some individual-level characteristics as well as some supply-side incentives to better understand the underexplored issue of multiple-borrowing behavior among microfinance clients.

The transformation of conventional microfinance into Islamic microfinance in Bangladesh: proposed Shariah-based model(s)

“…Although we do not have extensive country-level statistics on multiple borrowings for recent years, we argue that the individual and household levels of multiple borrowings are increasing over the years. This has been evidenced in the studies ofAli et al (2023) andAfroze et al (2014).3. MethodologyThis is a conceptual paper that is based on the desk research method, involving the collection of existing literature from different journals, reports and books, consistent with other studies(Vong and Song, 2015;Zain and Muhamad Sori, 2020).…”

“…This practice is considered one of the key factors leading to over-indebtedness and loan defaults among borrowers (Armend ariz and Morduch, 2010;Mia, 2017a). Studies by Afroze et al (2014) and Ali et al (2023) in the context of Bangladesh indicated multiple borrowing rates of 71% and 54.25%, respectively, among surveyed respondents. The high multiple borrowing rates not only compromise the welfare of the poor but also deplete the scarce resources of MFIs (Mia, 2017a).…”

Social assistance programs during the COVID‐19 pandemic in Bangladesh: Does faith‐based approach matters?

“…Zakat is an Arabic word which means “purity” and “cleanliness,” and it is the obligatory transfer of 2.5% of one's wealth to the poor to purify the wealth and soul from greediness (Ali & Hatta, 2014 ). Other voluntary charities encouraged in Islam such as Zakat and Sadakah (voluntary charity) also contribute to humanitarian aids among the Muslim community (Ali et al, 2022 ; Atia, 2012 ; Ferris, 2011 ; Montagné‐Villette et al, 2011 ).…”

“…While some of the world largest NGOs have been contributing to the development of various sectors, some Islamic NGOs are also engaged in different developmental activities, including microfinance program. Ali et al ( 2022 ) present the successful adoption of Islamic microfinance by Muslim women as opposed to the traditional microfinance system imposed by secular NGOs. It was found that the Islamic‐based microfinance system contributes to the development of rural Bangladesh.…”

“…Despite many lapses, the local government has been trying its best to manage the SSN efficiently (Ali et al, 2020 ; Ali & Hatta, 2014 ). Historically, FBOs worldwide have a long history of supporting people struggling in adverse situation, such as the pandemic (Ali et al, 2022 ; Ferris, 2011 ; Olowu, 2015 ; Pyles, 2017 ). FBOs have built ties with government and communities over a long period and will continue to support communities for many years (Civic Engagement Alliance [CEA], 2020 ).…”