This study explores a number of the issues around the provision of micro-loans by credit unions and the agencies with which they work. One of the issues is how information asymmetry in the provision of microcredit and the resulting rationing of credit to low collateral entrepreneurs are addressed by the bundling of microcredit with the provision of non-financial services (e.g., mentoring). The other issue of interest is the advantages and disadvantages of investor-owned firms (IOFs) -- e.g., chartered banks -- versus credit unions in providing microcredit.<p> Two models of the credit market with both adverse selection and moral hazard are set up to analyze credit rationing of low collateral entrepreneurs and the potential role of non-financial services as a selection instrument in mitigating information asymmetry. The first model investigates the situation where entrepreneurs cannot be distinguished by wealth and the second model looks at the situation where entrepreneurs cannot be distinguished by entrepreneurial skill.<p> A model of a monopoly credit union is developed to examine whether credit unions have advantages over IOFs in providing microcredit. By offering a community investment saving deposit program, the credit union has access to loan funds for microcredit at below-market rates of interest. The model takes into account both pecuniary and non-pecuniary incentives of savers for participating in the saving program.<p> A key result is that with information asymmetry, a perfectly competitive credit market will not produce the first-best efficient level of investment when collateralizable wealth is unavailable. Micro-entrepreneurs with insufficient collateral face credit rationing. Rationing arises because, in a perfectly competitive credit market, the collateral constraint limits lenders' ability to design a set of incentive-compatible contracts. In response, lenders randomize the credit delivered under the contract designed for the low collateral entrepreneurs to deter other entrepreneurs from choosing it. The smaller is the collateralizable wealth of the low collateral entrepreneurs, the greater is the credit rationing that occurs.<p> This study provides a new explanation for the provision of non-financial services such as mentoring along with microcredit. Non-financial services have traditionally been seen as a way of providing training to borrowers and increasing the likelihood of them repaying their loans. The research in this thesis demonstrates that non-financial services can play a role in having borrowers select the types of loans they wish to obtain. The resulting separation means that the resources designated for micro-entrepreneurs will not be used by other entrepreneurs. The bundling of micro-loans with the provision of non-financial services imposes extra costs on entrepreneurs that obtain a micro-loan in comparison to a traditional loan. Assuming heterogeneity in the entrepreneurs' costs of obtaining a micro-loan, it is argued that entrepreneurs who are the target clients of microcredit programs incur the lowest cost of obtaining a micro-loan, while other entrepreneurs incur a relatively higher cost of obtaining a micro-loan. If this outcome occurs, then the higher cost discourages the latter from obtaining micro-loans. Thus, the use of non-financial services, along with the interest rate and collateral, in the loan contract results in a perfect separation and a more efficient level of investment.<p> The analysis also suggests that credit unions, in comparison with IOFs, have advantages in providing microcredit to micro-entrepreneurs. Credit unions' advantage stems from their focus on the welfare of their members rather than on the profits earned. The result suggests that credit unions are likely to be more capable of successfully operating a microcredit program than are IOFs. All else equal, credit unions are able to obtain greater support from their saver members, and thus have more loan funds available for delivering microcredit. <p> The result also suggests that the member orientation of a credit union can create a deadweight loss -- the stronger the credit union prefers one member group over the other group, the greater is the deadweight loss -- and thus have an impact on both the total benefits for members and the distribution of the benefits between micro-loan borrower members and saver members. Despite this, the presence of a credit union leads to a better outcome in terms of both the level of investment that is financed and the benefits to borrowers and savers.

This study explores a number of the issues around the provision of micro-loans by credit unions and the agencies with which they work. One of the issues is how information asymmetry in the provision of microcredit and the resulting rationing of credit to low collateral entrepreneurs are addressed by the bundling of microcredit with the provision of non-financial services (e.g., mentoring). The other issue of interest is the advantages and disadvantages of investor-owned firms (IOFs) -- e.g., chartered banks -- versus credit unions in providing microcredit.<p> Two models of the credit market with both adverse selection and moral hazard are set up to analyze credit rationing of low collateral entrepreneurs and the potential role of non-financial services as a selection instrument in mitigating information asymmetry. The first model investigates the situation where entrepreneurs cannot be distinguished by wealth and the second model looks at the situation where entrepreneurs cannot be distinguished by entrepreneurial skill.<p> A model of a monopoly credit union is developed to examine whether credit unions have advantages over IOFs in providing microcredit. By offering a community investment saving deposit program, the credit union has access to loan funds for microcredit at below-market rates of interest. The model takes into account both pecuniary and non-pecuniary incentives of savers for participating in the saving program.<p> A key result is that with information asymmetry, a perfectly competitive credit market will not produce the first-best efficient level of investment when collateralizable wealth is unavailable. Micro-entrepreneurs with insufficient collateral face credit rationing. Rationing arises because, in a perfectly competitive credit market, the collateral constraint limits lenders' ability to design a set of incentive-compatible contracts. In response, lenders randomize the credit delivered under the contract designed for the low collateral entrepreneurs to deter other entrepreneurs from choosing it. The smaller is the collateralizable wealth of the low collateral entrepreneurs, the greater is the credit rationing that occurs.<p> This study provides a new explanation for the provision of non-financial services such as mentoring along with microcredit. Non-financial services have traditionally been seen as a way of providing training to borrowers and increasing the likelihood of them repaying their loans. The research in this thesis demonstrates that non-financial services can play a role in having borrowers select the types of loans they wish to obtain. The resulting separation means that the resources designated for micro-entrepreneurs will not be used by other entrepreneurs. The bundling of micro-loans with the provision of non-financial services imposes extra costs on entrepreneurs that obtain a micro-loan in comparison to a traditional loan. Assuming heterogeneity in the entrepreneurs' costs of obtaining a micro-loan, it is argued that entrepreneurs who are the target clients of microcredit programs incur the lowest cost of obtaining a micro-loan, while other entrepreneurs incur a relatively higher cost of obtaining a micro-loan. If this outcome occurs, then the higher cost discourages the latter from obtaining micro-loans. Thus, the use of non-financial services, along with the interest rate and collateral, in the loan contract results in a perfect separation and a more efficient level of investment.<p> The analysis also suggests that credit unions, in comparison with IOFs, have advantages in providing microcredit to micro-entrepreneurs. Credit unions' advantage stems from their focus on the welfare of their members rather than on the profits earned. The result suggests that credit unions are likely to be more capable of successfully operating a microcredit program than are IOFs. All else equal, credit unions are able to obtain greater support from their saver members, and thus have more loan funds available for delivering microcredit. <p> The result also suggests that the member orientation of a credit union can create a deadweight loss -- the stronger the credit union prefers one member group over the other group, the greater is the deadweight loss -- and thus have an impact on both the total benefits for members and the distribution of the benefits between micro-loan borrower members and saver members. Despite this, the presence of a credit union leads to a better outcome in terms of both the level of investment that is financed and the benefits to borrowers and savers.

The Grameen Bank in Bangladesh has pioneered a credit delivery system with a vision to bring banking services to poor villagers. It extends small collateral-free loans, known as microcredit (or microfinance in broader terms), to group of poor borrowers in order that they may engage in income generating activities. Conventional banks usually do not consider the poor as bankable due to a lack of collateral and the incidence of high costs and risks. Grameen Bank's peer lending methodology has overcome these barriers to provide credit to the poor (www.grameen-info.org). The joint liability condition is one of the prominent features of the group lending methodology introduced by the Grameen Bank in the 1970s. Group lending with joint liability refers to the practice of disbursing loans to individual members within a group while the group as a whole is held liable if any repayment difficulty arises. In chapter 1 we theoretically examine an incentive mechanism in microfinance that may enhance repayment rates without applying the joint-liability condition introduced by the Grameen Bank in Bangladesh. In a two-period model of micro-lending with individual liability, we incorporate a savings scheme as an incentive device to prevent strategic default. Our theoretical analysis shows that a proper savings plan increases the borrower's future consumption, raises her utility and thus provides her with an incentive to repay even the second-period debt under a two-period financial contract. In chapter 2 we incorporate uncertainty into our two-period model of microcredit and savings with individual liability. We theoretically show that the borrower's savings and future consumption in high-income state are higher than those in low income state. Moreover, as the probability of generating high income from an investment project decreases, the interest rate on the borrower's savings to be offered by the lender increases to prevent strategic default. In chapter 3, based on a case study of Association for Social Advancement (a leading microfinance institution in Bangladesh), we empirically explore the impact of female borrowers' savings and male borrowers' savings on financial self-sufficiency and "depth" of outreach of the microfinance institutions. The results of our study highlight the possibility of mobilizing borrowers' savings to enhance the achievement of financial self-sufficiency of the microcredit programs and to improve outreach to poor borrowers. However, we find that female borrowers' savings, not male borrowers' savings (as the cointegrating regression results show) have statistically significant impact on the microcredit program's financial self-sufficiency and "depth" of outreach.

La présente thèse vise à confirmer le rôle important des institutions financières coopératives en Arabie saoudite. La finance coopérative dans KSA est un nouveau modèle d'institutions financières créées à des fins non lucratives, fermement liées à l'économie sociale. Les principaux objectifs de la thèse élaborée est d'identifier la contribution des institutions de microcrédit en Arabie Saoudite comme une alternative de financement pour aider les pauvres à améliorer leurs conditions de vie et à éradiquer la pauvreté.La thèse offre une nouvelle alternative de financement pour les personnes exclues de l'accès aux fonds du système bancaire classique et tente de mettre en évidence les effets positifs du microcrédit sur ces bénéficiaires. Dans la recherche empirique, l'auteur a principalement mené une enquête sur les clients des institutions de microcrédit en essayant de déterminer si l'attribution du microcrédit avait changé la vie des bénéficiaires et amélioré leurs conditions de vie et de lutter contre la pauvreté.L'enquête empirique est axée sur une approche quantitative. La recherche repose sur la distribution d'un questionnaire sur un échantillon de clients recevant les services financiers des institutions de microcrédit. Le choix de l'échantillon de l'étude a été sévèrement mené : les questions ont été posées sur 2 groupes d'individus : le premier groupe est composé des clients des institutions de microcrédit et le second comprend les témoins du programme (ne recevant pas de crédits).Les résultats de la recherche empirique encouragent les services financiers fournis par les institutions de microcrédit, jouant un rôle central dans l'amélioration des conditions de vie des populations pauvres et l'amélioration des activités économiques des bénéficiaires des crédits. L'enquête a permis de déduire que le microcrédit a eu des effets positifs à différents niveaux. Il a eu une incidence positive sur la capacité de contrôle des ressources et la capacité de gestion des clients et a augmenté le fonds de roulement de l'activité économique et a amélioré la taille de l'entreprise dans la communauté des bénéficiaires en créant de nouvelles opportunités d'emplois. / The present dissertation is an attempt to bear out the significant role of cooperative finance institutions in Saudi Arabia. Cooperative finance in KSA is a new pattern of finance institutions created for non-lucrative purpose, firmly related to social economy. The main objectives of the elaborated thesis is to identify the contribution of institutions of microcredit in Saudi Arabia as an alternative of funding to assist the poor to improve their conditions of living and to eradicate poverty.The dissertation is providing a new alternative of funding for excluded individuals from the access to the funds of classical banking system and attempts to highlight the positive effects of microcredit on those beneficiaries. In the empirical research, the author principally conducted a survey on the customers of the microcredit institutions trying to determine if the attribution of microcredit had changed the life of the beneficiaries and enhanced their living conditions and to fight poverty.The empirical investigation focuses on a quantitative approach survey. The research relies on the distribution of a questionnaire on a sample of customers receiving the financial services of microcredit institutions. The choice of the sample of the study was severely conducted: the questions was posed on 2 groups of individuals: the first group is made up of the customers of the microcredit institutions and the second is including the witnesses of the program (not receiving credits).The findings of the empirical research are encouraging the financial services provided by microcredit institutions, playing a pivotal role in enhancing the conditions of living of poor population and improving the economic activities of the recipients of the credits. The survey allowed to deduce that microcredit had positive effects on various levels. It positively affected the abilities of control of the resources and the ability of management the customers and had increased the working capital of the economic activity and had improved the size of the business in the community of the beneficiaries through creating new opportunities for jobs.

<p>The aim of this study is to investigate the role of micro-credit in women empowerment. Microcredit is a small-scale credit which becomes effectual for the growth of micro enterprises and thus works in poverty alleviation in Pakistan. The major part of this research is to examine the impact of Khushhali Bank Limited (KBL), the largest microfinance bank with a huge network of branches all across the country, on the socio-economic characteristics of beneficiary women and to study the improvement in their economy and social status. The type of economic activities women have started and extent of poverty alleviation have also been studied. The empirical study is conducted in Pakistan. Based on qualitative research, the data is collected through in-depth interviews from borrowers and National Distribution Manager of Khushhali Bank Limited. The findings suggest that micro-credit has positive impact on women socio-economic status and empowerment. It increases to some extent self-confidence and feelings of identity for women in the society. Through interviews we came to know that microcredit has dual effect on the lives of borrowers. It not only helped women to increase their businesses, but also helped them to provide better education to their children. They feel much independence and decision making power in routine life. It has also increased their prestige and status in their family and society. Micro-credit is much helpful for the women who have their own businesses or have some ideas and expertise about the business before getting credit. The women who don’t have pre-requisite knowledge or expertise of business, they could not make any positive change in their status. Microcredit rather put an extra burden of repayment with an extensive amount of interest. They used the loan amount on personal expenses and it made difficult for them to return the loan amount. The study also entailed lack of centralized system between the microfinance institutions that increased the risk of dual loaning. This trend adversely affects the repayment capacity of borrowers and limits the positive impact of micro-credit.</p>

Boston University. University Professors Program Senior theses. / PLEASE NOTE: Boston University Libraries did not receive an Authorization To Manage form for this thesis. It is therefore not openly accessible, though it may be available by request. If you are the author or principal advisor of this work and would like to request open access for it, please contact us at open-help@bu.edu. Thank you. / 2031-01-02

Peru's microfinance market is dynamic and is comprised of a plethora of financial institutions that offer numerous microfinance services. With increasingly more institutions adding microfinance to their loan portfolio, and with no interest rate cap on microloans in Peru, what impact will this growing market have on the poor? In the past, microfinance institutions (MFIs) have had clients abuse the system, but increased transparency between microfinance institutions and new managing practices are now used to minimize adverse selection. Yet as the microfinance market expands with more large banks gaining control how are borrowers, particularly the most vulnerable, going to be impacted? This, paper evaluates the dynamics of how microfinance institutions have emerged and evolved throughout Latin America and then introduces an atypical model, the Uniones de Credito y Ahorro (UNICA). Six UNICA programs from rural villages outside Cayaltí are evaluated using both aggregate loan data that measures the frequency of loan use in the village, and surveys with open-ended response questions to bring in UNICA members' perspective. With the data collected this paper attempts to understand the diverse factors that make the UNICA approach different from the traditional Latin American model. And ultimately strives to discover whether the UNICA model provides distinctive benefits to the borrowers and the financial markets that are not provided by traditional Latin American MFI models.

The aim of this study is to investigate the role of micro-credit in women empowerment. Microcredit is a small-scale credit which becomes effectual for the growth of micro enterprises and thus works in poverty alleviation in Pakistan. The major part of this research is to examine the impact of Khushhali Bank Limited (KBL), the largest microfinance bank with a huge network of branches all across the country, on the socio-economic characteristics of beneficiary women and to study the improvement in their economy and social status. The type of economic activities women have started and extent of poverty alleviation have also been studied. The empirical study is conducted in Pakistan. Based on qualitative research, the data is collected through in-depth interviews from borrowers and National Distribution Manager of Khushhali Bank Limited. The findings suggest that micro-credit has positive impact on women socio-economic status and empowerment. It increases to some extent self-confidence and feelings of identity for women in the society. Through interviews we came to know that microcredit has dual effect on the lives of borrowers. It not only helped women to increase their businesses, but also helped them to provide better education to their children. They feel much independence and decision making power in routine life. It has also increased their prestige and status in their family and society. Micro-credit is much helpful for the women who have their own businesses or have some ideas and expertise about the business before getting credit. The women who don’t have pre-requisite knowledge or expertise of business, they could not make any positive change in their status. Microcredit rather put an extra burden of repayment with an extensive amount of interest. They used the loan amount on personal expenses and it made difficult for them to return the loan amount. The study also entailed lack of centralized system between the microfinance institutions that increased the risk of dual loaning. This trend adversely affects the repayment capacity of borrowers and limits the positive impact of micro-credit.

Microcredit has been considered one of the most significant innovations in the field of development in the last thirty years. It provides collateral free financial resources to the poor worldwide. It plays an important role in poverty eradication, socio-economic development, livelihood diversification and women empowerment especially in the developing and under-developed nations. It has contributed positively to the natural resources management by forming social capital, creating alternate income and diversifying livelihoods of the resource dependent rural people. Natural resource management, in general, and fisheries resources management in particular, are currently undergoing a major paradigm shift. In recent years, the notion of government as the only decision-making authority has been replaced by multi-scale, polycentric governance, which recognizes that a large number of stakeholders in different institutional settings contribute to overall management of resources. Improving the management of natural or common pool resources and empowering local communities, community-based management has become a common strategy in the last two decades. Community-Based Organizations are grassroots institutions that involve rural communities in co-management. Several factors influence the functioning and sustainability of these CBOs which contribute to the management of common-pool resources in Bangladesh. To address the complexities of socio-cultural systems and sustainable natural resource management, managers, practitioners, and theoreticians widely rely on social learning. The evidence of social learning is apparent in collaborative participation and group actions where individuals meet, interact, share ideas, learn collectively and take collective decisions. They adjust the management approaches and change their perceptions according to their social learning in natural resources management. The purpose of the research was to assess the role of microcredit in improving rural livelihoods (mainly fishing households), identify the challenges faced by microcredit institutions, and to explore the process of organizations and obstacles involved in the sustainability of Community-Based Organizations developed by CBFM-2 project in Hakaluki haor area. It was intended to explore the evidence of social learning and capacity building efforts related to microcredit and CBFM-2 project intervention in the study area. The main objective of this research was: to assess the roles of microcredit in improving rural livelihoods with a focus on fishing households and institutional capacity-building. The secondary objectives were: (i) to understand the processes of organization and the challenges that Community Based Organizations (CBOs) face, and (ii) to explore the evidence of social learning pertaining to microcredit and involving CBOs under CBFM-2 project, other local institutions, and fisher households. A qualitative research approach was followed in this case which was supplemented by quantitative data. Several Participatory Rural Appraisal tools, such as interviews (households) by administering semi-structured questionnaires, key informant interviews, focus group discussions, in-depth case studies, and mini-workshops were used at different stages of the research to attain the objective of the study. Together with local communities and other relevant stakeholders the research purposively selected three CBOs and three microcredit women groups in three different villages of Hakaluki haor. The research findings revealed that microcredit played a significant role in socio-economic development of Hakaluki haor, especially household income increment, livelihood diversification, creation of self-employment, poverty reduction and women empowerment though it entrapped few households in vicious cycle of poverty. The research established that CBOs are instrumental and essential for community-based natural resources management through empowering the local communities, and NGOs are important for mobilizing local people, capacity building and providing legal services to the community. It was evident that CBOs faced challenges towards its sustainability due to limited resources and wetland policy changes by the government. The study also revealed the evidence of social learning through microcredit operation and project intervention which changed their perceptions and fisheries management practices. Reforming operational mechanism of microcredit, national wetland leasing policy and legitimating CBOs can remove the challenges of microcredit and help the CBOs to be sustainable. Future research is encouraged to reveal the other issues of microcredit and community-based organizations sustainability.

The green microcredit project in Bangladesh started with the focus of promoting environmental-friendly livelihood practices among the rural marginalized people whose livelihoods were dependent on the extraction of local natural resources. This research examined at the livelihood practices and the livelihood capital of the green microcredit borrowers in Arpara, under Magura District, and in Borlekha, under Moulvibazar District, Bangladesh. Using the Department for International Development, UK (DFID) sustainable livelihood framework, the research analyzed the changes in the borrowers’ capital. The research used both qualitative and quantitative approaches to collect field data using different PRA tools and a survey. It was clear from the research that green microcredit is becoming more popular among the natural resource-dependent borrowers. It was also apparent that the green microcredit borrowers have greater social and human capital than the conventional microcredit borrowers. Although the concept has been in practice for only a short duration, the success of the green microcredit project has encouraged other borrowers to opt for green microcredit. In its short existence, the green microcredit project has had some successes and setbacks. During the data collection process, several strengths and weaknesses were identified. In the concluding chapter, a few recommendations have been put forward keeping in mind the strengths and weaknesses of the project. The positive effects of green microcredit on the environment and natural resource base could be seen in the long run if and when the project is scaled up.