Microfinance Delivery: Challenges & Innovative Strategies of Microfinance Institutions of Ahmedabad & Gandhinagar City 123 Chapter 6 DATA ANALYSIS, INTERPRETATION AND HYPOTHESIS TESTING 6.1 Analysis In this chapter, the focus was on the analysis of the data and the empirical examination of the methodological objectives of the study. The analysis presented in this chapter, comprised of three parts. In the first part, factor analysis was used to identify the type of challenges faced by Micro Finance Institutions in Ahmedabad and Gandhinagar district. Second part of the study is to identify the available opportunities for the microfinance institutions. The data collection from executives, through structured questionnaire, after due compilation and sorting, is presented both in tabular form and in graphical form. Each graph shows the analysis on the respondent’s response to the questions asked. In order to study the challenges affecting Microfinance institutions, a questionnaire was framed using items previously used in literature. The techno-graphics were measured using a category scale whereas others items were measured using a five point likert scale wherein respondents indicate their degree of agreement or disagreement (Strongly Disagree, Disagree, Neither Agree nor Disagree, Agree, Strongly Agree) for detailed description of the entire questionnaire along with the source for the items. Sample size was 90, researcher has distributed 90 questionnaires and due to non response error, 75 responses were received (83.3%) from Ahmedabad and Gandhinagar cities of Gujarat state from MFIs.
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Microfinance Delivery: Challenges & Innovative Strategies of Microfinance Institutions of Ahmedabad & Gandhinagar City
123
Chapter 6
DATA ANALYSIS, INTERPRETATION AND HYPOTHESIS
TESTING
6.1 Analysis
In this chapter, the focus was on the analysis of the data and the empirical examination of the
methodological objectives of the study.
The analysis presented in this chapter, comprised of three parts. In the first part, factor analysis was
used to identify the type of challenges faced by Micro Finance Institutions in Ahmedabad and
Gandhinagar district. Second part of the study is to identify the available opportunities for the
microfinance institutions. The data collection from executives, through structured questionnaire,
after due compilation and sorting, is presented both in tabular form and in graphical form. Each
graph shows the analysis on the respondent’s response to the questions asked. In order to study the
challenges affecting Microfinance institutions, a questionnaire was framed using items previously
used in literature. The techno-graphics were measured using a category scale whereas others items
were measured using a five point likert scale wherein respondents indicate their degree of agreement
or disagreement (Strongly Disagree, Disagree, Neither Agree nor Disagree, Agree, Strongly Agree)
for detailed description of the entire questionnaire along with the source for the items. Sample size
was 90, researcher has distributed 90 questionnaires and due to non response error, 75 responses
were received (83.3%) from Ahmedabad and Gandhinagar cities of Gujarat state from MFIs.
Microfinance Delivery: Challenges & Innovative Strategies of Microfinance Institutions of Ahmedabad & Gandhinagar City
124
6.2 Summary of Data Analysis & Discussions
Various technographic items have been represented in a tabular form, illustrating relatively
magnitude or frequencies (Table 1).
Table 1 Frequency table based on Questionnaire
Items Frequency Percentage
Operational Area Ahmedabad 56 67 Gandhinagar 19 33
Legal Entity
Trust 3 4 Society 31 41 Section 25 Company 9 12 NBFC 32 43
Source: Own data calculated using SPSS Fig 12: Scree Plot of Variables
Source: Own data calculated using SPSS
The Scree plot in Figure 12, is breaking at 33 sub- factor, which indicate that all these sub
factors are significantly influencing Nine factors respectively.
Microfinance Delivery: Challenges & Innovative Strategies of Microfinance Institutions of Ahmedabad & Gandhinagar City
138
Table 5 : Summary Sheet of Factors generated
Components Name of the factor
Eigen Value
% of Variance
Cronbach Alpha
Financial Issues
High Transaction cost
6.22 18.522 0.912
Inadequacy of financial resources as the primary constraint (cheap fund) Rescheduling loans High personnel & admin expenses relative to loan portfolio Use of asset to generate return Frequency of financial reporting to Management Quality of portfolio
Operational Issues
Quality human resources
4.957 15.02 0.874
Provision of a range of products and services Lack of basic infrastructure Availability of inadequate network Management and processing of data
HR issues
No. of borrowers per field staff worker
3.597 10.899 0.751
Reaching the very poor No. of active borrowers Average loan balance per borrower Flexibility w.r.t timing of its operation
Social issues
Collection & delivery of money to remote areas
3.129 4.128 0.713
low profitability of dealing with poor clients Difficult to cover cost with operating revenue
External issues
Govt. Regulatory actions for MF industry
2.866 8.684 0.675
Loans used in Consumption not invested Competition Banks and lending institution’s role in MF industry
Expansion
Going into new areas
2.16 6.547 0.699 Constraints in Reaching Frontier Areas Retention rate
Financial Literacy
Client’ financial literacy 1.984 6.012 0.823 Borrower per staff member
Microfinance Delivery: Challenges & Innovative Strategies of Microfinance Institutions of Ahmedabad & Gandhinagar City
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Management Information System
Governance problems
1.525 4.622 0.784 Management Information System
Institutional Goals
Development mindset of staff
1.394 4.21 0.664 Education and skill set and of staff member
Source: Own data calculated using SPSS
Table 5 indicates the factor loading is more than 0.5 for all variables which indicate that all of them
are significant in influencing their respective factors. The Eigen values of Nine factors found are
more than 1. Cronbach Alpha for nine factors is 0.7, which signifies that the data is reliable.
In case of the first factor, Financial Issues, factor loading is the highest for the sub factor, High
transaction cost (0.868) which indicates that it is a major financial issue among all given sub factors,
followed by Inadequacy of financial resources as the primary constraint,(cheap fund) 0.846. As all
sub-factor loads are more than 0.5, except rescheduling loans (-0.811); they are significant in
influencing Financial Issues.
In case of the second factor, operational Issues, factor loading is the highest for the sub factor,
management and processing of data which indicates that it is a major operational issue among all
given sub factors. As all sub-factor loads are more than 0.5, they are significant in influencing
operational Issues. Through the survey it was found that MFIs are having operational issues like
management and processing of data, provision of a range of products and services, lack of basic
infrastructure and availability of inadequate network.
In case of the third factor, Human Resource issues, factor loading is the highest for the sub factor,
No. of borrowers per field staff worker (0.888). This indicate that the MFIs in Ahmedabad and
Gandhinagar area the number of employees especially field staff worker are less. Moreover
sufficient training on time to time basis is required to be given to them so that the productivity
increases.
Microfinance Delivery: Challenges & Innovative Strategies of Microfinance Institutions of Ahmedabad & Gandhinagar City
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It can be seen that in the fourth factor, social issues, factor loading is highest for Collection &
delivery of money to remote areas (0.614). As all sub-factor loads are more than 0.5, they are
significant in influencing sustainability.
In case of the fifth factor, external issues, factor loading is the highest for the sub factor,
Government regulatory actions for MF industry (0.656). The reason for the same is the scams
coming out microfinance area. Due to which fortunately RBI has become active and has passed
Microfinance Act. In case of sub-factor, Banks and lending institution’s role in MF industry, the
factor loading is negative (-0.819) which indicate that the banks and lending institutions are not seen
as challenge, but as a supporter to smooth functioning of microfinance activities.
It can be seen that in the sixth factor, factor loading is highest for the sub factor retention rate
(0.915). This indicates that the attrition rate among employees in microfinance business is high.
Thus the salary package, incentives, regular training, work environment etc. to be improved to
reduce the attrition. It can be seen that in the seventh factor, financial literacy, factor loading is
highest for Client’ financial literacy (0.857). As all sub-factor loads are more than 0.5, they are
significant in influencing financial literacy. This means the staff members especially field officers
should be having proper training as to how to make the illiterate and uneducated clients financially
literate.
In case of the eighth factor, management information system, factor loading is the highest for the
sub factor, MIS system (0.956) followed by governance problem. The reason for the same is the
majority of MFIs are relatively small in size, due to which the use of sophisticated MIS tools are not
in much use. Due to less number of computers the use of software package is limited. Another
reason is that sophisticated tools costs high which these small MFIs could not able to afford.
It can be seen that in the ninth factor, institutional goals, factor loading is highest for development of
mind set of staff (0.796) followed by education and skill-set of staff member (0.643) indicates that
the MFIs are facing problems regarding availability of trained staff with mindset.
Microfinance Delivery: Challenges & Innovative Strategies of Microfinance Institutions of Ahmedabad & Gandhinagar City
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6.5 Hypothesis Testing 6.5.1 Hypothesis formulated based on Legal Entities as factor wise.
H11: Difference in legal entities has influence upon financial issues as a factor faced by MFIs.
H12: Difference in legal entities has influence upon operational Issues as a factor faced by MFIs.
H13: Difference in legal entities has influence upon social impact as a factor faced by MFIs.
H14: Difference in legal entities has influence upon sustainability as a factor faced by MFIs.
H15:. Difference in legal entities has influence upon external issues as a factor faced by MFIs.
H16: Difference in legal entities has influence upon expansion as a factor faced by MFIs.
H17: Difference in legal entities has influence upon financial literacy as a factor faced by MFIs.
H18: Difference in legal entities has influence upon management information system as a factor
faced by MFIs.
H19: Difference in legal entities has influence upon institutional goal as a factor faced by MFIs.
Table 6 Hypothesis tested based on Legal Entities
Items Legal Entity N Mean Sig.
Level df. F
Value Null
Hypothesis
Financial Issues
Trust 3 3.18
0.005 74 4.62 NA
Society 31 3.091 Section 25 Company 9 3.59 NBFC 32 3.979
Operational
Issues
Trust 3 1.933
0.003 74 5.05 NA
Society 31 3.123 Section 25 Company 9 2.467 NBFC 32 3.519
H R issues
Trust 3 2.533
0.689 74 0.491 A
Society 31 3.019 Section 25 Company 9 2.844 NBFC 32 2.956
Social Issues
Trust 3 3.777
0.002 74 5.46 NA
Society 31 3.451 Section 25 Company 9 2.734 NBFC 32 2.248
External issues
Trust 3 2.903 0.001 74 5.625 NA Society 31 3.066
Microfinance Delivery: Challenges & Innovative Strategies of Microfinance Institutions of Ahmedabad & Gandhinagar City
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Section 25 Company 9 3.987 NBFC 32 3.827
Expansion
Trust
3
3.073
0.113
74
2.059
A Society 31 2.938 Section 25 Company 9 2.993 NBFC 32 2.678
Financial literacy
Trust 3 2.967
0.185 74 1.65 A Society 31 2.997 Section 25 Company 9 3.000 NBFC 32 2.759
Management
Information System
Trust 3 3.033
0.013 74 4.93 NA Society 31 2.971 Section 25 Company 9 2.192
NBFC 32 2.014
Institutional Goals
Trust 3 3.167
0.931 74 0.148 A Society 31 2.903 Section 25 Company 9 2.889 NBFC 32 2.828
Source: Own data calculated using SPSS
It can be inferred that the difference in legal entities has influence upon Financial issues, Operational
Issues, social issues, External issues and Management Information System, as a factor faced by
MFIs, as null hypothesis is fail to accept because p value is less than significance level of 0.05
(Table 6). Further it can be seen that MFIs having legal entity NBFCs and Section 25 Company are
facing more perceived challenge in factor Financial Return; NBFCs are facing more perceived
challenge in factor Operational Issues. MFIs having legal entity Trust and Society are facing more
perceived challenge in factor sustainability. MFIs having legal entity NBFC and Section 25
Company are facing more perceived challenge in case of external factors as factor. The reason could
be the uncertainty prevailing among MFIs due the scams in Andhra Pradesh. Loan procedures have
become even tough. Banks are under scrutiny regarding loan disbursement to MFIs; moreover due
to the entry of more MFIs in market, competition is becoming tough. MFIs having legal entity Trust
and Society are facing more perceived challenge in factor Management Information System.
All other factors i.e. social impact, expansion, financial literacy and institutional goals show
insignificant relationship, as there p value is more than 0.05.
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6.5.2 Hypothesis developed based on objectives of microfinance institutions as factor wise. H21: Difference in objectives of Microfinance Institutions has influence upon financial issues as a
factor faced by MFIs.
H22: Difference in objectives of Microfinance Institutions has influence upon operational Issues as a
factor faced by MFIs.
H23: Difference in objectives of Microfinance Institutions has influence upon social impact as a
factor faced by MFIs.
H24: Difference in objectives of Microfinance Institutions has influence upon sustainability as a
factor faced by MFIs.
H25: Difference in objectives of Microfinance Institutions has influence upon external issues as a
factor faced by MFIs.
H26: Difference in objectives of Microfinance Institutions has influence upon expansion as a factor
faced by MFIs.
H27: Difference in objectives of Microfinance Institutions has influence upon financial literacy as a
factor faced by MFIs.
H28: Difference in objectives of Microfinance Institutions has influence upon management
information system as a factor faced by MFIs.
H29: Difference in objectives of Microfinance Institutions has influence upon institutional goal as a
It can be inferred that the difference in objectives of Microfinance Institutions has influence upon all
factors i.e. Financial Issues, Operational Issues, Human Resource issues, Social issues, External
Factors, Expansion, Financial Literacy, Management Information System and Institutional Goals as
Microfinance Delivery: Challenges & Innovative Strategies of Microfinance Institutions of Ahmedabad & Gandhinagar City
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a factor faced by MFIs, since p value is less than significance level of 0.05, null hypothesis is fail to
be accepted. In other words alternative hypothesis is accepted that, the is difference in objectives of
Microfinance Institutions has influence upon all nine factors faced by MFIs. Based on literature
review, the percentage distribution between outreach and sustainability can be, 0%-100% indicate
focus is only on sustainability, 20%-80% is 20% outreach and 80 % sustainability, 40%-60% is 20%
outreach and 80 % sustainability, 60% - 40% is 60% outreach and 40 % sustainability, 80% - 20% is
80% outreach and 20 % sustainability.
For the factor, Financial Issues, it is observed that the highest mean value (3.396) is for 40%-60%
objective type which indicated that the MFIs should focus more on the 40%-60% combination of
objective, followed by 60%-40% combination of objective. All the factors show significant
relationship, except factor, operational issues and HR issues, as there p value is less than 0.05, the
significance level of 5 per cent. Further it can be stated that MFIs are giving more importance to self
–sufficiency as an objective in factors Financial issues, Operational Issues, H R issues, External
factors, Expansion, Financial literacy and Management Information System, where as in factor
Sustainability, more importance is given to client coverage as an objective (80 percent).
6.5.3 Hypothesis based on available opportunities in providing microfinance H31: There is significant difference in the perceived available opportunities for all types of
businesses among trust as legal entity.
H32: There is significant difference in the perceived available opportunities for all types of
businesses among society as legal entity.
H33: There is significant difference in the perceived available opportunities for all types of
businesses among section 25 company as legal entity.
H34: There is significant difference in the perceived available opportunities for all types of
businesses among NBFC as legal entity.
H35: There is significant difference in the perceived available opportunities for all types of
businesses among legal entity as a whole.
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H36: There is significant difference in the perception of MFIs’ regarding their effectiveness against
poverty among trust as legal entity.
H37: There is significant difference in the perception of MFIs’ regarding their effectiveness against
poverty among society as legal entity.
H38: There is significant difference in the perception of MFIs’ regarding their effectiveness against
poverty among section 25 company as legal entity.
H39: There is significant difference in the perception of MFIs’ regarding their effectiveness against
poverty among NBFC as legal entity.
H310: There is significant difference in the perception of MFIs’ regarding their effectiveness against
poverty among legal entity as a whole.
H311: There is significant difference in the perception of MFIs for promoting economic growth
among trust as legal entity.
H312: There is significant difference in the perception of MFIs for promoting economic growth
among society as legal entity.
H313: There is significant difference in the perception of MFIs for promoting economic growth
among section 25 company as legal entity.
H314: There is significant difference in the perception of MFIs for promoting economic growth
among NBFC as legal entity.
H315: There is significant difference in the perception of MFIs for promoting economic growth
among legal entity as a whole.
H316: There is significant difference in perception about MFI’s being effective in poverty purge
among trust as legal entity.
H317: There is significant difference in perception about MFI’s being effective in poverty purge
among society as legal entity.
H318: There is significant difference in perception about MFI’s being effective in poverty purge
among section 25 company as legal entity.
H319: There is significant difference in perception about MFI’s being effective in poverty purge
among NBFC as legal entity.
H320: There is significant difference in perception about MFI’s being effective in poverty purge
among legal entity as whole.
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H321: There is significant difference in the perception of MFIs’ regarding working in partnership
with commercial banks among trust as legal entity.
H322: There is significant difference in the perception of MFIs’ regarding working in partnership
with commercial banks among society as legal entity.
H323: There is significant difference in the perception of MFIs’ regarding working in partnership
with commercial banks among section 25 company as legal entity.
H324: There is significant difference in the perception of MFIs’ regarding working in partnership
with commercial banks among NBFC as legal entity.
H325: There is significant difference in the perception of MFIs’ regarding working in partnership
with commercial banks among legal entity as whole.