Institutional transformation of poverty focused microfinance institutions in Bangladesh, Nepal and Malaysia
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Date
2006
Authors
Hassan, Md. Mahmudul
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Abstract
A research discovery in 1976 on the role of microfinance in reducing poverty in
Jobra, Bangladesh facilitated the growth of an NGO-driven poverty-focused
microfinance movement. However, these NGO-driven microfinance institutions (MFIs)
face a number of challenges that can be overcome through the appropriate
transformation route.
The main objective of this study is to examine the link of leadership
characteristics (Professional Qualifications, Experience and Continuity of leader in the
management) with process of institutional transformation of MFIs in their efforts to
overcome constraints of rendering financial services to the poor in a sustainable
manner. To meet this objective, 33 MFIs in Bangladesh, Nepal and Malaysia were
studied empirically.
With the theoretical framework of North (1990) and Eckel et al. (1998), an
analysis of 33 matured MFIs of different original status, have uncovered important
dimensions. This study notes that irrespective of the diversity in the economic, social
and political environments of Bangladesh, Nepal and Malaysia on the one hand, and
the initial institutional status or identity on the other, the probability of reaching out to
huge numbers of poor clients while maintaining a high degree of financial selfsufficiency
is greater among microfinance institutions that are entrenched with the
economic and banking knowledge of their founding members, their continuity in the
management, and their ability to pursue financial and management efficiency. The
experience of Grameen Bank and ASA of Bangladesh and Nirdhan Uttan Bank Limited
of Nepal demonstrates the vital link.
At the other end of the spectrum, those NGO-driven poverty-focused
microfinance institutions founded by non-professionals and experiencing discontinuity
of professional leadership such as Women Entrepreneurs Association of Nepal and
Nepal Educational and Social Development Organisation of Nepal, KSUS of
Bangladesh and Yayasan Usaha Maju of Malaysia remain ineffectively small and
costly.
Nepal’s experience with a government-driven poverty-focused microfinance
institution and the Malaysian Amanah Ikhtiar Malaysia experience with favourable and
liberal funding did not bring about respectable achievements either.
The debate over the issue of trade-off has been put to rest by this study as
reaching out to a large number of poor households can be undertaken in a financially
sustainable manner through the continuity of professional leadership armed with
innovations towards maximising financial and management efficiency.
Irrespective of their operating environments and despite the variety of forms at
the point of start-up, this study demonstrates that poverty-focused microfinance
institutions have to secure appropriate transformation status that will strengthen and
entrench their dual mission of benefiting the poor and achieving financial self sufficiency.
Description
PhD
Keywords
Humanities , Poverty , Microfinance