Najmul Hoda PhD Thesis Defence Presentation

An Empirical Study on Faith-Based Microfinance as an Alternative Tool of Poverty

AlleviationPhD Viva-voce Presentation

Najmul Hoda

Internal Guide : Prof. Dr. S.L.GuptaExternal Guide : Prof. Dr. Viqar A. Baig

PhD. Viva-voce : N.Hoda, November 24, 2015

Department of ManagementBirla Institute of Technology Mesra

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The Patna Parish Thrift and Credit

Cooperative Limited

Gramin Vikas Vigyan Samiti

Al-Khair Cooperative Credit Society

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Outline 1. Overview

– Problem – Contributions & Publications

2. Need for Study3. Theoretical Underpinning

– Review of Literature and the Conceptual Framework

4. Research Methodology5. Empirical Findings

– Case Studies– Survey Results – Poverty Alleviation and

Client Satisfaction6. Conclusions & Future directions3


“The poor and the poorest have a right to be serviced

AFFORDABLY, APPROPRIATELY AND ACCESSIBLY.”

4PhD. Viva-voce : N.Hoda, November 24, 2015

1. Overview- Problem Statement; Objectives and Scope- Contributions & Publications


Problem Statement

To understand the functioning of the faith-based microfinance and to explore its role as an alternative tool of poverty alleviation.


Study Objectives1. to understand the shortcomings and issues persisting

in the mainstream model of microfinance2. to understand the concept of faith based microfinance

and develop the theoretical framework of the study. 3. to understand the functioning; standard operating

procedures; and the influence of faith on the faith-based microfinance institutions.

4. to evaluate the performance of the faith based microfinance institution in the poverty alleviation with respect to mainstream microfinance

5. to suggest practical and conceptual suggestions regarding the suitability of faith-based microfinance


Scope of the Study and its Relevance to the Management

Discipline

Business involving the poor (Prahalad, 2005)

Requires product innovation Huge size of market – 2 billion Sustainable management –

Operational, Financial and Social


Contributions and Publications (SSRN/Researchgate/Academia)

1. Hoda, N., and Gupta, S.L. (2015). Faith-based Organizations and Microfinance: A Literature Review, Asian Social Science. Vol. 11 No. 9, (Scopus Indexed)

2. Hoda, N., and Gupta, S.L. (2015). Client Satisfaction in Faith-based Microfinance: A Comparison with Mainstream Models of Microfinance, Journal of Economic Cooperation and Development. Vol. 36 No. 2 (Scopus Indexed)

3. Hoda, N., and Gupta, S.L. (2014). Loan Portfolio of Faith-based Microfinance Institution: An Empirical Analysis, Post Modern Openings, Vol 5 No. 1. (Ebsco Indexed)

4. Hoda, N., and Gupta, S L. (2013). Faith Based Model of Microfinance: A Case Study of Al Khair Cooperative Society. Jharkhand Journal of Development Studies, Vol. 11 No. 1. Xavier Institute of Social Service, Ranchi, India

5. Hoda, N. and Gupta, S L. (2010). Faith Based Model of Microfinance: A Case Study of Al Khair Cooperative Society. International Seminar on Islamic Finance in India. IRTI, IDB Jeddah. KSA

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Additional Publications6. Hoda, N. (2012). Co-operative based Microfinance.

Third International Conference on Institutional and Technological Environment for Microfinance. Burgundy School of Business, Groupe ESC Dijon Bourgogne, France

7. Hoda, N. (2012). Co-operatives as the Key to Responsible Microfinance. Microfinance Focus, an internationally recognized platform for online knowledge platform about microfinance and sustainable development.

8. Hoda, N. (2009). Critical Issues in Effective Management of an NGO: A Case Study of Rajasthan Bal Kalyan Samiti. 2nd International Conference on Leadership and its Role in Preparing the Organisation for Unprecendented Change. Institute of Productivity and Management. Ghaziabad

9. Joshi, S., Hoda, N., and Sharma, M. (2011). Faith Based Model of Microfinance: An Alternative Tool of Poverty Alleviation. Conference of Inclusive Growth and Microfinance Access. Banaras Hindu University. India

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2. Need for Study


Embracing death Microcredit has been the bane of many a farmer. Many have been forced to commit suicide. https://parisar.wordpress.com/2012/03/

Anjumans deprive Muslim women of microcreditSwaminathan S Anklesaria Aiyar, Economic Times Bureau Nov 8, 2009, 10.17am IST 12

Microfinance Industry• Approximately 130 million clients

(World Bank 2014)• Outreach – less than 20%• Growing at a CAGR of 16.61% percent

over the period 2012-2016• Approximately 3 billion poor• The highest concentration of

microfinance accounts in the world is in India (188 million accounts representing 18% of the total national population)


3. Theoretical Underpinnings


Literature Review

Extant researches on mainstream microfinance institutions

Conceptual framework of faith-based organizations, development and microfinance




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Indian Context


Issues in Mainstream Microfinance

• Supply-side (Funding; Client needs; Sustainability)

• Demand-side (Product differentiation; Awareness of duties;

• Intermediation-side (Specialized institutions; For profit; Self-regulating)

• Regulation-side (NGOs/Informal institutions; Uniformity; Positive environment)


Important References• Adams, D and von Pischke, J. D., 1992. Microenterprise credit

programs: ‘deja vu’, World Development 20, 1463-1470• Armendáriz de Aghion, B. and Morduch, J., 2000, Microfinance

Beyond Group Lending. Economics of Transition, 8: 401–420• Basargekar, P., 2009. Microcredit and a Macro Leap: An Impact

Analysis of Annapurna Mahila Mandal (AMM) - An Urban Microfinance Institution in India The IUP Journal of Financial Economics, Vol. VII, Nos. 3 & 4, pp. 105-120, September & December

• Consultative Group for Assistance of the Poor (CGAP), 2010. Global Implications of the Crisis in Indian Microfinance, Focus Note 67, Washington DC

• Deaton, A., 2006. Measuring poverty. In A. Banerjee, R. Benabou, & D. Mookherjee (Eds.), Understanding poverty (pp. 3–15). Oxford, UK: Oxford University Press

• Dichter T, and Harper, M. (eds), 2007. What's wrong with microfinance? Warwickshire: Practical Action Publishing

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Prize motivation: "for his analysis of consumption, poverty, and welfare”- Focus on India

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2015

Angus Deaton


Faith-based Organizations

“a faith-based organization is any organization that derives inspiration and guidance for its activities from the teachings and principles of the faith or from a particular interpretation or school of thought within that faith”(Clarke and Jennings 2008, p6)


Influence of faith on FBOs

• Organizational Characteristics

1.Mission statement2.Founding3.Affiliation4.Controlling board5.Senior management6.Support7.Personnel religious

practices

• Programme Characteristics

1.Religious environment

2.Program content3.Integration of

religious components4.Expected connection

between religious content and desired outcome


Faiths and Financial Transactions

• Principles of lending• Interest rates• Wealth accumulation• Trade• Charity


List of Faith-based MFIsName Study Faith affiliation Country/ Head Office

Christian Aid Varndell (2005),

Harper et al. (2007)

Christianity UK/Oxford

Muslim Aid Clarke (2008 ) Islam UK/London

SKDRDP Harper , et al. (2007), Ashta (2011),

Shetty (2009)

Jain India/Mangalore

Hand In Hand M-CRIL (2010) Christianity UK/London India/Tamil

Nadu

Akhuwat Harper , et al. (2007) Islam Pakistan/Lahore

COVA Harper, et al. (2007), Kaur (2007) Islam India/Hyderabad

Al Farz Foundation Khaled (2011) Islam Pakistan/Lahore

CAPARV Harper , et al. (2007) Islam India/Imphal

ESAF Harper , et al. (2007) Christianity India/Chennai

Al Khair Cooperative Credit

Society

Khan (2009) Islam India/Patna26PhD. Viva-voce : N.Hoda, November 24, 2015

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Catholic Relief Services Harper , et al. (2007) Islam India/Ranchi

The Holy Cross Social Service

Centre

Harper , et al. (2007) Islam India/Hazaribagh

LEAP Harper , et al. (2007) Christianity Liberia/Monrovia

Village Development Project Bradley (2009) Hinduism India/Jodhpur

Oxfam Bradley (2009) Christianity UK/Oxford

Islamic Relief Worldwide Cordier (2009),

Kirmani and Khan (2008)

Islam UK/London

World Jewish Relief (WJR) Kessler and Arkush (2009) Jewism UK/London

Tearfund Wrigley (2011) Christianity UK/Teddington

Muslim Fund Deoband Khan and Nisar (2004) Islam India/Deoband

United Methodist Committee on Relief

Clarke (2008) Christianity USA/New York

Chinmaya Mission Sidhabari Paul (2012), Paranjape (2005) Hinduism India/Sidhabari

SNDP Minimol and Makesh (2012) Hinduism India/Kerala

4. Research Methodology


AIMS-SEEP Framework Assessing the Impact of Microenterprise

Services (AIMS) - Small Enterprise Education and Promotion (SEEP)

1.the changes that occur in clients’ lives, their enterprises, their families/households, and their communities;

2.the extent to which the identified changes are related to clients’ participation in the microfinance program

Six Design Strategies

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Research Methodology• AIMS-SEEP Framework – Matured Clients only• Two phased study

Phase 1 - Case StudyPhase 2 - Impact Assessment


Phase 1 – Case Study• Selection of FB-MFIs • Data gathering -

organization documents, archival records, interviews, direct observations, participant observation and physical artifacts

• Data analysis (framework)


Phase 2 – Impact Assessment

Poverty Variables A. Social Impact1. Self Confidence2. Social StatusB. Women Empowerment3. Treatment of others4. Awareness of rightsC. Economic Impact5. Household Income6. Business Income7. Household Savings8. Ability to meet emergency

needs

Client Satisfaction1. Reasonability of interest

rate on loan2. Loan procedure3. Loan repayment policy4. Availability of loan5. Discrimination in selection6. Technical Assistance to

clients for business7. Location of the branch or

point of transaction8. Staff support

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Impact Assessment Methodology

• Purposive sampling – 150 from Mainstream and 50 each from the three FB-MFIs – Total 300

• Data Collection – Use of survey questionnaire, Self-administered and with the help of Daily Collection Agents

• Comparison of two set of MFIs – t-Test


5. Empirical FindingsA. Case Studies

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Institutional Overview

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As of 2012 GRAVIS ACCSL PTCCSL

Deposit (in Rupees) NA 2.1 Crores 93.83 Lakhs

Loan Outstanding (in

Rupees)

2.13 Crores 1.6 Crores 2.48 Crores

Number of

beneficiaries/member

s

16790 5221 1149


Influence of Faith on Organization

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Factors GRAVIS ACCSL PTSCCLMission statement

X X

FoundingAffiliationControlling Board

X

Senior ManagementSupport X X XPersonnel religious practices:


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Factors GRAVIS ACCSL PTSCCL

Religious environment

Program content:

Integration of religious

componentsX X X

Expected connection

between religious

content and desired

outcome

X

Influence of Faith on Programme


5. Empirical FindingsB. Impact Assessment


Gender Distribution

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Gender Mainstream Faith-based

Male 4(2.67%) 52 (35%)

Female 146(97.33%) 97 (65%)

TOTAL 150(100.00%) 149 (100%)


Occupation of respondents

Occupation Mainstream Faith-based

Service 0(0.00%) 21(14%)

Self-employed 150(100%) 119(80%)

Daily wages 0(0.00%) 09(06%)

TOTAL 150(100.00%) 149(100%)40PhD. Viva-voce : N.Hoda, November 24, 2015

Types of self-employment

Type Mainstream Faith-based

Agriculture 7(4.67%) 10(8%)

Small traders 35(23.33%) 60(51%)

Services 21(14.00%) 35(29%)

Manufacturing 87(58.00%) 14(12%)

TOTAL 150(100.00%) 119(100%)41PhD. Viva-voce : N.Hoda, November 24, 2015

Incidence of borrowing from MFI


Average Loan amount


Repayment period


Loan repayment frequency


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Summary of results of hypotheses testing


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A. HYPOTHESES RELATED TO IMPACT OF THE PROGRAMME

Variables Hypothesis Remark

HA1:improvement in self-confidence Rejected Beneficiaries of secular microfinance

report greater impact on this variable.

HA2:improvement in status Rejected Beneficiaries of faith based microfinance

report greater impact on this variable.

HA3:treatment to women Accepted No significant difference found.

HA4: awareness of women’s rights Accepted No significant difference found.

HA5: improvement in monthly income Accepted No significant difference found.

HA6: improvement in business income Accepted No significant difference found.

HA7:improvement in household savings

Rejected Beneficiaries of secular microfinance report greater impact on this variable.

HA8:improvement in ability to meet emergency needs

Accepted No significant difference found.

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B. HYPOTHESES RELATED TO CLIENT SATISFACTIONVariables Hypothes

isRemark

HB1: reasonability of interest rate

Accepted Beneficiaries of secular microfinance report greater impact on this variable.

HB2: loan procedure Accepted Beneficiaries of faith based microfinance report greater impact on this variable.

HB3: repayment policy Rejected No significant difference found.HB4: timely availability of loan

Rejected No significant difference found.

HB5: discrimination among borrowers

Rejected No significant difference found.

HB6: technical assistance for business improvement

Accepted No significant difference found.

HB7: location of the branch or place of transaction.

Accepted Beneficiaries of secular microfinance report greater impact on this variable.

HB8: staff support Rejected No significant difference found.

6. Conclusions & Future directions

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Myths broken• Also a microfinance model – share

the same principles and products• No discrimination• Not for women only• No one-size-fits-all product


Value Addition by FB-MFIs

• Savings facility• Customized products• Interest rates• Over-indebtedness• Cultural issues• Grass-root organizations• Empowerment• Impact of faith


Future directions• An Appraisal of Financial Sustainability of Faith-based

microfinance institutions; • Role of faith in the Social Capital Formation by Faith-

based microfinance; • Mainstreaming Faith-based Microfinance: Performance

Evaluation; • An Assessment of the Common Virtues of Mainstream

and Faith-based Microfinance and the Value Addition in the Process of Poverty Alleviation.

• Religious Social Capital as a Substitute of Physical Collateral in Microfinance.

• Impact Assessment of Faith-based Microfinance institutions

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Acknowledgements

AcknowledgmentsPhD. Viva-voce : N.Hoda, November 24, 2015

• My Guides – Dr S. L. Gupta and Dr Viqar A. Baig

• Dr Munish Makkad, Director, BIT Noida• Dr Meenakshi Pradeep, Dr Arun Mittal and all

in the BIT Noida centre• Smt Shashi Tyagi, Chairman, GRAVIS• Mr Arshad Ajmal, Founder President, Al-Khair• Mr Francis Joseph, President, Patna Parish

Credit Cooperative• All the Daily Collection Agents

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?QuestionsPhD. Viva-voce : N.Hoda, November 24, 2015

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THANK YOU !

Najmul Hoda PhD Thesis Defence Presentation

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