An empirical analysis of Thai village funds and saving groups’ financial performance
-
DOIhttp://dx.doi.org/10.21511/bbs.15(2).2020.14
-
Article InfoVolume 15 2020, Issue #2, pp. 153-166
- 980 Views
-
190 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Microfinance institutions (MFIs) play an important role in enabling poor households to escape poverty. MFIs cannot help borrowers if their own performance is poor. This study evaluates financial performance of Village Funds (VFs) and Saving Groups for Production (SGPs) to determine how well the MFIs are performing financially and how to improve the institutions’ future performances. The study evaluates MFIs’ performance, including MFI characteristics, outreach, productivity, financial structure and financial performance. Data are collected from the annual reports of MFIs between 2014 and 2016. VF and SGP annual reports were collected by the Government Savings Bank between 2014 and 2016. Data are analyzed using descriptive statistics, such as means, to compare the VFs’ and SGPs’ performance. The result shows that SGPs are bigger than VFs in terms of the average number of members and borrowers. However, VFs provide more loans than SGPs to poorer clients. In terms of loan management, SGP staff are more efficient than VF staff. SGPs’ profits are significantly higher than VFs’ profits. In the context of financial structure, SGPs are funded through member deposits, while VFs receive government subsidies. The results indicate that both VFs and SGPs are profitable and financially sustainable.
- Keywords
-
JEL Classification (Paper profile tab)G20, G21, G29
-
References60
-
Tables4
-
Figures0
-
- Table 1. Institutional characteristics, outreach, productivity, and financial performance measurement indicators and ratios
- Table 2. Institutional characteristics, outreach and productivity of Thai VFs and SGPs (mean values from 2014 to 2016)
- Table 3. Comparison of Thai MFIs’ financial structures (mean values from 2014 to 2016)
- Table 4. A comparison of Thai MFIs’ financial performance (mean values from 2014 to 2016)
-
- Agarwal, P. K., & Sinha, S. K. (2010). Financial performance of microfinance institutions of India. Delhi Business Review, 11(2), 37-46.
- Anduanbessa, T. (2009). Statistical analysis of the performance of microfinance institutions: The Ethiopian case. Savings and Development, 33(2), 183-198.
- Argote, L., & Miron-Spektor, E. (2011). Organization learning: From experience to knowledge. Organization Science, 22(5), 1123-1137.
- Arthur, S., Abanis, T., Eliab, B., & Sumil, N. (2013). Financial performance in the selected microfinance institutions in Uganda. International Journal of Engineering Research and Technology, 2(2), 1-11.
- Asian Development Bank (ADB). (2013). Thailand financial inclusion synthesis assessment report. Kingdom of Thailand: Development of a strategic framework for financial inclusion. Asian Development Bank.
- Asian Development Bank (ADB). (2019). Poverty in Thailand.
- Bassem, B. S. (2012). Social and financial performance of microfinance institutions: Is there a trade-off? Journal of Economics and International Finance, 4(4), 92-100.
- Bayai, I., & Ikhide, S. (2016). Financing and financial sustainability of microfinance institutions (MFIs): a conceptual view. Bank and Bank Systems, 11(2), 21-32.
- Bhuiyan, A., Siwar, C., Ismail, A. G., & Talib, B. (2011). Financial sustainability and outreach of MFIs: A comparative study of AIM in Malaysia and RDS of Islamic Bank Bangladesh. Australian Journal of Basic and Applied Sciences, 5(9), 610-619.
- Bird, K., Hattel, K., Sasaki, E., & Attapich, L. (2011). Poverty, income inequality, and microfinance in Thailand. Asian Development Bank.
- Bogan, L. V. (2012). Capital structure and sustainability: An empirical study of microfinance institutions. A Review of Microfinance and Statistic, 94(4), 1045-1058.
- CGAP. (2003). Microfinance Consensus Guidelines: Guiding Principles on Regulation and Supervision of Microfinance. Washington, DC: Consultative Group to Assist the Poor (CGAP).
- Coleman, B. E. (1999). The impact of group lending in northeast Thailand. Journal of Development Economics, 60(1), 105-141.
- Cozarenco, A., Hudon, M., & Szafarz, A. (2016). What types of microfinance institutions suppy saving products? Economic Letters, 140, 57-59.
- Cull, R., Demirguc-Kunt, A., & Morduch, J. (2007). Financial performance and outreach: a global analysis of leading microbanks. The Economic Journal, 117(517).
- Daher, L., & Le Saout, E. (2015). The determinants of the financial performance of microfinance institutions: Impact of the global financial crisis. Strategic Change, 24(2), 131-148.
- Dissanayake, D. M. N. S. W. (2012). The determinants of microfinance profitability: Evidence from Sri Lankan microfinance institutions. Kelaniya Journal of Management, 1(1), 50-67.
- Duwal, B. R. (2012). Comparative analysis of financial sustainability of Nepalese microfinance institutions. The Economic Journal of Nepal, 35(3).
- Eur-U-Sa, A. (2011). Measuring performance of Bank of Agricultural and Agricultural Cooperative (BAAC), Thailand; Relationships between institutional goals and future trend (Unpublished Masters Thesis). Ritsumeikan Asia Pacific University, Japan.
- Fongthong, S., & Suriya, K. (2014). Determinants of borrowers of the Village and Urban Community Fund in Thailand. CMUJ of Social Sciences and Humanities, 1(1), 21-37.
- Kar, A. K. (2012). Does capital and financing structure have any relevance to the performance of microfinance institutions? International Review of Applied Economics, 26(3), 329-348.
- Kereta, B. B. (2007). Outreach and financial performance analysis of microfinance institutions in Ethiopia. Paper presented at the African Economic Conference, United Nations Conference Centre (UNCC). Addis Ababa, Ethiopia.
- Ledgerwood, J. (1998). Microfinance Handbook an Institutional and Financial Perspective. The World Bank, Washington, D.C.
- Lewis, S., Tambunlertchai, K., Suesuwan, E., Adair, M., & Hickson, R. (2013). Microfinance supply-side assessment report. Asian Development Bank.
- Luxchaigul, N. (2014). The effective of sustainable development of the saving for production groups in northeast of Thailand. Environment Management and Sustainable Development, 3(1), 168-180.
- Mahapatra, M. S., & Dutta, S. (2016). Determinants of sustainability of microfinance sector in India. Journal of Rural Development, 35(3), 507-522.
- Meagher, P. (2013). Microfinance regulation and supervision recommendations report. Asian Development Bank.
- Mersland, R., & Strøm, R. Ø., (2009). Performance and governance in microfinance institutions. Journal of Banking & Finance, 33(4), 662-669.
- Meyer, J. (2019). Outreach and performance of microfinance institutions: the importance of portfolio yield. Applied Economics, 51(27), 2945-2962.
- Meyer, R. L. (2002). Track record of financial institutions in assisting the poor in Asia (ADB research Institute Paper, No. 49).
- Mokhtar, S. H. (2011). Microfinance performance in Malaysia (Unpublished Doctoral Thesis). Lincoln University, Lincoln, New Zealand.
- Muriu, P. (2011). Microfinance Profitability: What explains the low profitability of African microfinances? (Unpublished Doctoral Thesis). Birmingham Business School, University of Birmingham, England.
- Navajas, S., Schreiner, M., Meyer, R. L., Gonzalez-Vega, C., & Rodriguemeza, J. (2000). Microcredit and the poorest of the poor: theory and evidence from Bolivia. World Development, 28(2), 333-346.
- Ngo, T. V. (2012). Capital structure and microfinance performance: A cross-country analysis and case study of Vietnam (Unpublished Doctoral Thesis). University of Birmingham, England.
- Nyamsogoro, G. D. (2010). Financial sustainability of rural microfinance institutions in Tanzania (Unpublished doctoral thesis). University of Greenwich, England.
- Office of the National Economic and Social Development Board (NESDB). (2015). Poverty data.
- Piot-Lepetit, I., & Nzongang, J. (2019). Performance assessment and definition of improvement paths for microfinance institutions: An application to a network of village banks in cameroon. International Transactions in Operational Research, 26(4), 1188-1210.
- Pitt, M. M., & Khandker, S. R. (1998). The impact of group-based credit programs on poor households in Bangladesh: Does the gender of participants matter? Journal of Political Economy, 105(5), 958-996.
- Popova-Nowak, I. V., & Cseh, M. (2015). The meaning of organizational learning: A meta-paradigm perspective. Human Resource Development Review, 14(3), 299-331.
- Quayes, S. (2015). Outreach and performance of microfinance institutions: a panel analysis. Applied Economics, 47(18), 1909-1925.
- Rahman, M. A., & Mazlan, A. R. (2014). Determinants of financial sustainability of microfinance institutions in Bangladesh. International Journal of Economics and Finance, 6(9), 107-116.
- Robinson, M. S. (2001). The Microfinance Revolution: Sustainable Finance for the Poor. Washington, D.C.: The International Bank for Reconstruction and Development/The World Bank.
- Rosenberg, R. (2009). Measuring results of microfinance institutions: Minimum indicators that donors and investors should track. Consultative Group to Assist the Poor, The World Bank.
- Roy, A. (2011). Managing performance of MFIs – A look into their microfinance delivery process and profitability. International Journal for Business, Strategy and Management, 1(1).
- Schäfer, K., & Fukasawa, Y. (2011). Factors determining the operational self-sufficiency among microfinance institutions. Advances in Business Research, 2(1), 172-178.
- Sekabira, H. (2013). Capital structure and its role on performance of microfinance institutions: The Ugandan case. Sustainable Agriculture Research, 2(3), 86-100.
- Setboonsarng, S., & Parpiev, Z. (2008). Microfinance and the millennium development goals in Pakistan: Impact assessment using propensity score matching (ADB Institute Discussion Paper No. 104).
- Shahzad, U. B. (2015). Performance measurement of South Asian microfinance institutions (Unpublished doctoral thesis). Massey University, Palmerston North, New Zealand.
- Shkodra, J. (2019). Financial performance of microfinance institutions in Kosovo. Journal of International Studies, 12(3), 31-37.
- Suwaruchiporn, P. (2016, May). Financial inclusion in Thailand (Presentation).
- Swain, R. B., & Floro, M. (2012). Assessing the effect of microfinance on vulnerability and poverty among low income households. The Journal of Development Studies, 48(5), 605-618.
- Tambunlertchai, K. (2015). Financial inclusion, financial regulation, and financial education in Thailand (ADBI Working Paper No. 537). Tokyo: Asian Development Bank Institute.
- Tanin, T. I., Mobin, M. A., Ng, A., Dewandaru, G., Salim, K., Nkoba, M. A., & Razak, L. A. (2019). How does microfinance prosper? an analysis of environmental, social, and governance context. Sustainable Development, 27(6), 1001-1022.
- The World Bank Group (WBG). (2019). Thailand economic monitor, inequality, opportunity and human capital.
- Warr, P. (2000). Is growth good for the poor? Thailand’s boom and bust. International Journal of Social Economics, 27 (7-10), 862-877.
- Warr, P. (2011). Thailand’s development strategy and growth performance (Working Paper No. 2011/02). World Institute for Development Economics Research.
- Wassie, S. B., Kusakari, H., & Sumimoto, M. (2019). Performance of microfinance institutions in Ethiopia: Integrating financial and social metrics. Social Science, 8(4), 1-13.
- Woldeyes, M. T. (2012). Determinants of operational and financial self-sufficiency: An empirical evidence of Ethiopian microfinance institutions (Unpublished Master’s Thesis). Addis Ababa University, Addis Ababa, Ethiopia.
- Yenesew, A. (2014). Determinants of financial performance: A study on selected micro finance institutions in Ethiopia (Unpublished Master’s Thesis). Jimma University, Ethiopia.
- Zeller, M., & Meyer, R. (2002). The Triangle of Microfinance. Baltimore: The John Hopkins University Press.