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No.3

Good Money’ Chasing ’Bad Money’: Implications for MFIs Management and Governance in Ghana


Pages: 503-517
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Good Money’ Chasing ’Bad Money’: Implications for MFIs Management and Governance in Ghana

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James Atta Peprah 
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James Atta Peprah  (2012). Good Money’ Chasing ’Bad Money’: Implications for MFIs Management and Governance in Ghana. Asian Economic and Financial Review, 2(3): 503-517. DOI:
Despite the conviction that microfinance is able to reduce poverty among low income groups, one challenge that still remains in the sector is high default rate. One of the major causes of this situation seems to be the involvement of management, staff and board in loan processing and approval. The current study seeks to explore the cost of retrieving bad loans as a result of taking court actions against clients. The study adopts the qualitative approach to analyze the data from selected MFIs in Ghana. The use of good money for chasing bad money is unprofitable for MFIs. At least MFIs spend about 10.7% of their good money to chase bad money. This has the effect of minimizing the value of shareholders??? wealth and as a consequence reduces profitability. In all the institutions interviewed, there is no code of ethics on loans for the board and management. Among the recommendations include the sale of outstanding debts to debt collection agencies (DCA) which is uncommon in Ghana at a fee less than cost of court actions. Board, staff and management are strongly encouraged to desist from the practice of influencing loan application and approval processes for friends and relations. There should be a high level of trust between board members and that board members should be ethical and have high level integrity. 

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A Quantile Regression Analysis of Micro-lending’s Poverty Impact


Pages: 491-502
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Stephen W. Polk, Daniel K.N. Johnson 
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Stephen W. Polk, Daniel K.N. Johnson  (2012). A Quantile Regression Analysis of Micro-lending’s Poverty Impact. Asian Economic and Financial Review, 2(3): 491-502. DOI:
This paper aims to evaluate the impact of a microlending program on ameliorating measured poverty within its client population, with the aim of improving that impact.  We analyze over 18,000 women micro-finance clients of the Negros Women for Tomorrow Foundation (NWTF), a database using the Progress out of Poverty (PPI) Scorecard as a measure of poverty.  Analysis using both OLS and quantile multivariate regression models shows how observable borrower attributes affect the ability of clients to reduce their measured poverty.  Loan size, duration, and the economic activity supported all have strongly identifiable effects.  Moreover, estimates suggest which among the poor are receiving the greatest effective help by the program.  Results offer specific advice to the NWTF and other micro-lenders:  impact is greatest with fewer, larger loans in particular economic sectors (sari-sari, service and trade) but require patience as each additional year increases the client???s average change in poverty score.  

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Inside Productivity of Microcredit in Bangladesh: A Surgical Analysis


Pages: 478-490
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Inside Productivity of Microcredit in Bangladesh: A Surgical Analysis

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Md. Mahmudul Alam and Rafiqul Islam Molla 
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Md. Mahmudul Alam and Rafiqul Islam Molla  (2012). Inside Productivity of Microcredit in Bangladesh: A Surgical Analysis. Asian Economic and Financial Review, 2(3): 478-490. DOI:
Microcredit typically refers to petty collateral-free credits given to groups of poor members in the society for their socioeconomic emancipation. It is claimed to be an effective tool for enhancing income of the poor primarily through creation of self-employment opportunities for them in a variety of small economic activities. However, in this survey of microcredit borrowers in Bangladesh it is found that when self-employed family labor is paid wages at market rate, under the framework of economic-profit counting, economic productivity of credit for about 48 % of the borrowers is not enough to support payment of any interest. Similarly its social productivity in terms of job creation and women???s empowerment at family level is also found to be low and marginal. Even then about 90% of the borrowers prefer taking microcredit from microfinance institutions (MFIs) even at exorbitantly high interest rate, ostensibly to avoid compromising their socio-political rights and potentials at the hands of the local moneylenders or friends and relatives if credits are obtained from them. They see microcredit as a means of socio-political empowerment of the economically weak and underprivileged members of the society. As such they regard it as a more credible social than economic program. 

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Effects of Microfinance on Micro and Small Enterprises (MSEs) Growth in Nigeria


Pages: 463-477
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Effects of Microfinance on Micro and Small Enterprises (MSEs) Growth in Nigeria

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Abiola Babajide 
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Abiola Babajide  (2012). Effects of Microfinance on Micro and Small Enterprises (MSEs) Growth in Nigeria. Asian Economic and Financial Review, 2(3): 463-477. DOI:
This paper investigates the effects of microfinance on micro and small business growth in Nigeria. The objectives are: one, to examine the effects of different loan administration practices (in terms of loan size and tenor) on small business growth criteria. Second, to examine the ability of Microfinance-Banks (MFBs) (given its loan-size and rates of interest charged) towards transforming micro-businesses to formal small scale enterprises. The paper employed panel data and multiple regression analysis to analyze a survey of 502 randomly selected enterprises finance by microfinance banks in Nigeria. We find strong evidence that access to microfinance does not enhance growth of micro and small enterprises in Nigeria. However, other firm level characteristics such as business size and business location, are found to have positive effect on enterprise growth. The paper recommends a recapitalization of the Microfinance banks to enhance their capacity to support small business growth and expansion. 

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Dangers in Mismanaging the Factors Affecting the Operational Self-Sustainability (OSS) of Indian Microfinance Institutions (MFIs)-An Exploration into Indian Microfinance Crisis


Pages: 448-462
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Dangers in Mismanaging the Factors Affecting the Operational Self-Sustainability (OSS) of Indian Microfinance Institutions (MFIs)-An Exploration into Indian Microfinance Crisis

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M Nadiya, Francisco Olivares-Polanco and T Radha Ramanan 
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M Nadiya, Francisco Olivares-Polanco and T Radha Ramanan  (2012). Dangers in Mismanaging the Factors Affecting the Operational Self-Sustainability (OSS) of Indian Microfinance Institutions (MFIs)-An Exploration into Indian Microfinance Crisis. Asian Economic and Financial Review, 2(3): 448-462. DOI:
This paper identifies the factors affecting the operational self-sustainability (OSS) of Indian Microfinance Institutions (MFIs) using multiple regression analysis. It shows revenue generation factor, cost efficiency factor and growth factor to have a positive influence on the OSS of Indian MFIs. Adjusted impairment loan loss allowance ratio, a portfolio risk factor and average loan size per borrower, a development factor, are seen to have a negative influence on OSS of Indian MFIs. The results thus infer five significant factors that Indian MFI managers must concentrate on to enhance the OSS of their organizations. The authors then discuss how mismanaging these five factors can deviate an MFI from its social goal of poverty alleviation. The crisis in Indian microfinance industry is explored to unveil the dangers involved in mismanagement of these factors. The paper concludes by stating that it is imperative for Indian MFI managers to introspect about their lending and recovery practices, so as to ensure that they manage the factors affecting their OSS, without exploiting the poor clientele.

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Microfinance: A Time to Deliberate


Pages: 445-447
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Microfinance: A Time to Deliberate

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Ayi Gavriel Ayayi
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Ayi Gavriel Ayayi (2012). Microfinance: A Time to Deliberate. Asian Economic and Financial Review, 2(3): 445-447. DOI:


  1. Alam, M., & Molla, R.I. (2012) Inside productivity of microcredit in Bangladesh: A surgical analysis”. Forthcoming in special issue of Asian Economics and Finance Review.
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  3. Ayayi, A. (2012) “Credit risk assessment in the microfinance industry: An application to a selected group of Vietnamese microfinance institutions and an extension to East Asia and Pacific MFI” The Economics of Transition, Vol. 20, No. 1, pp.b 37-72.
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  10. Nadiyaa, M., Olivares-Polancob, F., & Radha Ramananc, T. (2012) Dangers in mismanaging the factors affecting the operational self-sustainability (OSS) of Indian Microfinance Institutions (MFIs): An exploration into Indian microfinance crisis. Forthcoming in special issue of Asian Economics and Finance Review.
  11. Peprah, J.A. (2012) ‘Good money’ chasing ‘bad money’: Implications for MFIs management and governance in Ghana. Forthcoming in special issue of Asian Economics and Finance Review.
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