[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/47176.html
   My bibliography  Save this paper

Assessing the Viability of a Rural Microfinance Network : The Case of FONGS FINRURAL

Author

Listed:
  • AGAÏ, Oniankitan Gregoire
Abstract
This paper endeavours to assess the viability of the FONGS FINRURAL, a nascent network of 09 rural savings and credit cooperatives in Senegal. More specifically it strives to measure first how the social and financial performance and the governance vary among the network affiliated organizations, and second to what extent all this aspects in each MFI could affect the viability of the network. For cause of data availability, the research was carried on 7 out of the 9 affiliated MFIs. The methodology has consisted first in the exploitation of financial reports, financial statements, business plans, manual of procedures, minutes, reports and any kind of internal documents seeming useful and second in visits at basic affiliated associations and client information. Four data collection tools were used: the factsheet of financial assessment devised by BRS and ADA, the ECHOS© tool of social performance assessment of Incofin, version 2012, the aggregated index of governance grid, and specific interview grids to each MFIs based on their financial and social performance recorded and on their governance score as well. Financial data were collected over four years (2008-2011), while social and governance data were a snapshot of the MFIs as of may-august 2012. Different descriptive statistics were used for comparisons. The coefficient of correlation rho of Spearman was used to make links between financial performance, social performance and governance. It comes out from the peer group analysis that the membership of the entire seven MFIs, dominated by women (50%), is growing over years with an average of 23% sharply higher than that of the country (8.7%). This trend presents however some specificities pertaining to each MFI. In the same vein, the network records an increase in savings collection which is however concentrated within 02 MFIs (29%) which contributed for 54% of the total deposit of the entire network in 2011. If for the first MFI (CREC of Méckhé), the situation is due to the involvement of its groups membership, the second (MEC of v Tattaguine) owes its records to its savings policy mainly based on high rate of compulsory savings (33%) as requirement for loan application. Regarding the credit delivery, it appears that except ordinary loans, most of the loan products catered for are seasonal or working capital loans and investment loans (more than one year) with bullet repayment albeit variability in the loans maturity. To provide such credit products, MFIs rely on three main sources: the deposits, the borrowings and their equity. Most of the MFIs provide their loans from the member’s deposits and tend to report improvement of their leverage except the MEC of Dakar and that of Malicounda. Overall, all the MFIs loan portfolios are growing with an average growth rate of 17% except the CREC of Méckhé which faced a decrease in its portfolio of about 47% over the four years. However this MFI still records the highest gross portfolio amount compared to the others. Nevertheless, the growth in portfolio is facing also a growth in portfolio at risk 180 days for all the seven surveyed MFIs meaning some weaknesses in the loan portfolio management. In contrast to the PAR, some improvements are reported in operating expenses ratios which were roughly fewer than 20% except at the MEC of Dakar which mostly recorded OER over 40% in 2011 and at the MEC of Malicounda with about 90% in 2009. As consequence, the OSS of the entire 07 MFIs was appreciable between 2008 and 2010 (127%-148%) but dropped down to 88% in 2011 due to high operating expenses at the MECs of Tattaguine and Pékesse. The results also reveals that albeit claiming to be social oriented MFIs, the entire MFIs lack adequate tools, information and indicators to track and to prove that they are putting into practice their social mission, which often was not clearly stated. Based on the ECHOS© scale, it appears that the MFIs recorded low social performance in general (55%) but seemed to get better score in access and outreach and customers services, while social mission, human resources and social responsibility are lessened. vi Regarding the governance, the score reveals some acceptable governance (62%) however with some differences between institutions. The results of linkages between financial performance, social performance and governance reveals no trade-off between financial and social performance, rather it reveals significant synergies between governance and social perform, and between OSS and human resources. All these results prove that rural microfinance institutions, rather rural microfinance network can be viable. It is just a matter of more governance, more discipline in procedure and more reportage of required information.

Suggested Citation

  • AGAÏ, Oniankitan Gregoire, 2012. "Assessing the Viability of a Rural Microfinance Network : The Case of FONGS FINRURAL," MPRA Paper 47176, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:47176
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/47176/1/MPRA_paper_47176.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hartarska, Valentina, 2005. "Governance and performance of microfinance institutions in Central and Eastern Europe and the Newly Independent States," World Development, Elsevier, vol. 33(10), pages 1627-1643, October.
    2. Marc Labie & Anaïs A Périlleux, 2008. "Corporate governance in microfinance: credit unions," Working Papers CEB 08-003.RS, ULB -- Universite Libre de Bruxelles.
    3. Jonathan Conning & Jonathan Morduch, 2011. "Microfinance and Social Investment," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 407-434, December.
    4. Hermes, Niels & Lensink, Robert & Meesters, Aljar, 2011. "Outreach and Efficiency of Microfinance Institutions," World Development, Elsevier, vol. 39(6), pages 938-948, June.
    5. repec:idb:brikps:46838 is not listed on IDEAS
    6. Mersland, Roy & Randøy, Trond & Strøm, Reidar Øystein, 2011. "The impact of international influence on microbanks' performance: A global survey," International Business Review, Elsevier, vol. 20(2), pages 163-176, April.
    7. Hartarska, Valentina M., 2005. "Governance and Performance of Microfinance Institutions in Central and Eastern Europe and the Newly Independent States," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24568, European Association of Agricultural Economists.
    8. Anaïs A Périlleux, 2010. "Maturity Mismatch and Governance of Microfinance Cooperatives: Lessons from History," Working Papers CEB 10-005.RS, ULB -- Universite Libre de Bruxelles.
    9. Marek Hudon, 2007. "Use of donor funds in the financing of MFIs," Working Papers CEB 07-020.RS, ULB -- Universite Libre de Bruxelles.
    10. Beatriz Armendáriz, 2011. "Women and Microsavings," World Scientific Book Chapters, in: Beatriz Armendáriz & Marc Labie (ed.), The Handbook Of Microfinance, chapter 23, pages 503-515, World Scientific Publishing Co. Pte. Ltd..
    11. Mersland, Roy & Øystein Strøm, R., 2009. "Performance and governance in microfinance institutions," Journal of Banking & Finance, Elsevier, vol. 33(4), pages 662-669, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kwame Ohene Djan & Roy Mersland, 2022. "Are NGOs and cooperatives similar or different? A global survey using microfinance data," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(2), pages 641-683, June.
    2. Janda, Karel & Zetek, Pavel, 2014. "Mikrofinanční Revoluce: Aktuální Kontroverze A Výzvy [Microfinance Revolution: Recent Controversies And Challenges]," MPRA Paper 54098, University Library of Munich, Germany.
    3. Niels Hermes & Marek Hudon, 2018. "Determinants Of The Performance Of Microfinance Institutions: A Systematic Review," Journal of Economic Surveys, Wiley Blackwell, vol. 32(5), pages 1483-1513, December.
    4. Janda, Karel & Zetek, Pavel, 2014. "Survey of Microfinance Controversies and Challenges," MPRA Paper 56657, University Library of Munich, Germany.
    5. Beisland, Leif Atle & Mersland, Roy & Randøy, Trond, 2014. "The Association between microfinance rating scores and corporate governance: a global survey," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 268-280.
    6. Namrata Gupta & Anita Mirchandani, 2020. "Corporate governance and performance of microfinance institutions: recent global evidences," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(2), pages 307-326, June.
    7. Moez Bennouri & Anastasia Cozarenco & Samuel Anokye Nyarko, 2024. "Women on Boards and Performance Trade-offs in Social Enterprises: Insights from Microfinance," Journal of Business Ethics, Springer, vol. 190(1), pages 165-198, February.
    8. Simon Cornée & Gervais Thenet, 2016. "Efficience des institutions de microfinance en Bolivie et au Pérou:une approche data envelopment analysis en deux étapes," Revue Finance Contrôle Stratégie, revues.org, vol. 19(1), pages 65-91, March.
    9. Karel Janda & Pavel Zetek, 2015. "Mikrofinanční revoluce: kontroverze a výzvy [Microfinance Revolution: Controversies and Challenges]," Politická ekonomie, Prague University of Economics and Business, vol. 2015(1), pages 108-130.
    10. Hermes, Cornelis & Hudon, M., 2018. "Determinants of the Performance of Microfinance Institutions: A Systematic Review," Research Report 2018008, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    11. Neema Mori & Roy Mersland, 2014. "Boards in microfinance institutions: how do stakeholders matter?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(1), pages 285-313, February.
    12. Bibi, Uzma & Balli, Hatice Ozer & Matthews, Claire D. & Tripe, David W.L., 2018. "New approaches to measure the social performance of microfinance institutions (MFIs)," International Review of Economics & Finance, Elsevier, vol. 53(C), pages 88-97.
    13. Islam, Asadul & Nguyen, Chau & Smyth, Russell, 2015. "Does microfinance change informal lending in village economies? Evidence from Bangladesh," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 141-156.
    14. Simon Zaby, 2019. "Science Mapping of the Global Knowledge Base on Microfinance: Influential Authors and Documents, 1989–2019," Sustainability, MDPI, vol. 11(14), pages 1-21, July.
    15. Nawaz, Ahmad & Iqbal, Sana, 2015. "Financial Performance And Corporate Governance In Microfinance: Who Drives Who? An Evidence From Asia," MPRA Paper 65327, University Library of Munich, Germany.
    16. Gutiérrez-Nieto, Begoña & Serrano-Cinca, Carlos, 2019. "20 years of research in microfinance: An information management approach," International Journal of Information Management, Elsevier, vol. 47(C), pages 183-197.
    17. Chrysovalantis Gaganis, 2016. "Assessing the overall performance of microfinance institutions," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 7(1), pages 52-83.
    18. Labie, Marc & Méon, Pierre-Guillaume & Mersland, Roy & Szafarz, Ariane, 2015. "Discrimination by microcredit officers: Theory and evidence on disability in Uganda," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 44-55.
    19. N’Guessan, Marie Noëlle & Hartarska, Valentina, 2021. "Funding for BOP in Emerging Markets: Organizational Forms and Capital Structures of Microfinance Institutions," Research in International Business and Finance, Elsevier, vol. 58(C).
    20. Mira Nurmakhanova & Gavin Kretzschmar & Hassouna Fedhila, 2015. "Trade-off between financial sustainability and outreach of microfinance institutions," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 231-250, December.

    More about this item

    Keywords

    microfinance; savings; credit; financial performance; social perfomance; governance; Portfolio at Risk; Operational selfsufficiency;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G3 - Financial Economics - - Corporate Finance and Governance
    • Y4 - Miscellaneous Categories - - Dissertations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:47176. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.