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Models of Micro Finance With Selected Appedieces

Models of Micro Finance With Selected Appedieces

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Published by: oledr on Jan 13, 2010
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Department of Political Science
FACULTY OF SOCIAL SCIENCES
UNIVERSITY OF COPENHAGEN
Academic advisor: Martin MarcussenSubmitted: 23/5/2007
Master’s thesis
Ole Dahl Rasmussen
Models of Microfinance
Palm nuts are used for palm oil, which is akey component in Beninese cooking and acommon product for microfinance clients inBenin.
 
M
ODELS OF
M
ICROFINANCE
 1
Models of microfinance
AbstractMicrofinance is the provision of financial services like loans, savings and insurance to poorpeople, primarily in developing countries. The starting point for the thesis is "the microfinancepromise" (Morduch, 1999): The idea that microfinance can be financially sustainable andcontribute to poverty reduction at the same time.The assumption is that different types of institutions have different potentials to fulfill thepromise.
 Models of Microfinance
suggests that a key to the social and financial performance of microfinance institutions is the extent to which they are public or private. An institution is public if it is subject to what I call political authority, and this determines its
degree of publicness
. Bycoupling public administration theory with research on microfinance, I identify three core models,and use them as the analytical basis for two empirical analyses. The models are: Commercialmicrofinance institution, non-profit microfinance institution and member based microfinanceinstitution.These three models are analyzed quantitatively with data from 301 institutions worldwide,and qualitatively in three comparative case studies from Benin. The microfinance promise isoperationalized by looking at the financial and social performance of the institutions. Thequantitative analysis shows that the models differ on their social performance: The more publicinstitutions are better at reaching the poor than their commercial counterparts. On the other hand,variation of financial performance is insignificant across institutions. Unexpectedly, thecommercial model does not have financial advantages, on the average.The qualitative analysis outlines a number of mechanisms driving this difference: Thecommercial institution faces constraints in the legal framework and has problems with raisingcapital for initial investments. The member based institution has a strong social focus, most likelybecause its members are both owners and clients, but its governance is ineffective because of theinvolvement of members. The non-profit institution successfully manages to overcome thepossible downsides of publicness, but enjoys advantages like donor capital and technicalassistance. These results complement the conclusions from the quantitative analysis.The overall conclusion is that publicness matters greatly to implementation of microfinance.Institutions should think about how to balance and manage the complexities of publicness throughownership, investment, and their legal environment. Donors can assist here, by standardizingreporting criteria and supporting microfinance institutions when dealing with governments.
 
M
ODELS OF
M
ICROFINANCE
 2
Table of Contents - summary
CHAPTER 1.
 
INTRODUCTION................................................................................................5
 
CHAPTER 2.
 
INTRODUCTION TO MICROFINANCE.....................................................10
 
CHAPTER 3.
 
METHODOLOGY AND RESEARCH STRATEGY.....................................18
 
CHAPTER 4.
 
THEORY OF ORGANIZATIONAL PUBLICNESS.....................................25
 
CHAPTER 5.
 
QUANTITATIVE ANALYSIS.........................................................................45
 
CHAPTER 6.
 
QUALITATIVE ANALYSIS............................................................................58
 
CHAPTER 7.
 
CONCLUSIONS..............................................................................................102
 
LITERATURE.............................................................................................................................108
 
ACKNOWLEDGEMENTS........................................................................................................118
 
APPENDICES..............................................................................................................................119
 Total number of words, excluding front page, table of contents, footnotes, literature list, andappendices: 34,798.

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