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31 July 2021
Journal of Sustainable Finance & Investment
Special Issue Editor(s)
Laval University, Canada
Abdullah Al Mamun,
USCI University, Malaysia
Md. Tareq bin Hossain,
Thammasat University, Thailand
Md. Aminul Islam,
Universiti Malaysia Perlis, Malaysia
Sustainability of Micro-Finance Programs and Institutions in the era of COVID-19
Micro-finance has contributed to the socio-economic development of many developing countries and created millions of micro-entrepreneurs. There are plenty of studies that demonstrated the effectiveness of microcredit programs on poverty alleviation. Group-based loans to clients from the poorest section of the society without collateral were a formidable innovation in banking with the poor and contributing to their socio-economic upliftment. An overwhelming female client base, their extra-ordinary repayment rate of more than 98% of borrowed money, and empowerment of women have been applauded by international donor agencies, UN institutions, policymakers, and researchers (Weber & Ahmed, 2014; Khanam et al., 2018; Al-Mamun, 2018). The award of the Nobel peace prize to Grameen bank and its founder, Professor Muhammad Yunus, has further cemented microcredit programs' acknowledgment in fighting poverty alleviation.
Most of the micro-credit programs were operating with donor and subsidized funds. Global economic volatility and the changing priority of international lenders have contributed to a diminishing trend of donor and/or subsidized funding for Micro-credit programs. Once based in rural areas, micro-finance activities are increasingly expanded to urban areas in developing countries (Mohiuddin et al., 2020). Covid-19 will have numerous repercussions on donor funding and micro-entrepreneurial ventures. The adverse effects will have a negative impact on the repayment rate of micro-entrepreneurs and will increase the non-perming loan (NPL) risk of micro-finance institutions. Financial sustainability will be at risk for both the micro-finance institutions as well as micro-entrepreneurs. There is also a growing debate on micro-finance programs’ effectiveness, forced repayment during the crisis as well as exorbitant interest rates. There are also questions about the survival vs. growth (i.e., economic prosperity) of micro-entrepreneurs. Some authors consider that micro-financing can help collateral-less borrowers borrow money and survive and go through a cycle of indebtedness (Vogelgesang, 2003; Brickell, Picchioni, Natarajan, Guermond, Parsons, Zanello, & Bateman, 2020). Some others consider micro-finance programs to bring micro-entrepreneurs out of poverty and build sustainable capital and investment resources. It can increase their income and transform them into the more affluent category of small traders/ entrepreneurs’ where they create income-generating activities for themselves and others and create a virtuous cycle.
From an institutional point of view, most micro-credit programs had started by non-government and philanthropic organizations, and institutional void played a vital role in their growth at the early stage of their development (Mohiuddin et al., 2014). In many countries, the government has gradually developed a formal institutional framework for micro-finance programs and institutions. Many new microfinance institutions are also called social banks with both social and economic performance goals (Weber and Remer, 2011). In the new world of microfinance programs and microfinance institutions, they are funded increasingly by commercially borrowed money, which can hinder their outreach objectives and the sustainability of these institutions (Lopatta et al. 2017; Parvin et al. 2020). Therefore, it is vital for policymakers, development specialists, and other stakeholders of micro-finance institutions to understand the current state of these programs and institutions and their sustainability in the coming years or decades. The current special issue invites researchers to explore the various challenges mentioned above that micro-finance programs and institutions are facing and likely to hinders their growth how they can overcome these challenges and address those issues effectively for sustainable financing for disadvantaged micro-entrepreneurs and make their organizations sustainable both from the financial and social points of view.
Some topics of concern are listed but not limited to:
-Micro-credit programs and sustainability of livelihood of its clients
-Micro-finance programs and natural disasters
-Risk Management and Sustainable microfinance
-Sustainable microfinance and microfinance institutions
-Institutionalized microfinance program and sustainability
-Depth of outreach and financial Sustainability of MFIs.
-Capital structure and Financial Sustainability of MFIs.
-Stakeholders' inclusion in Governance and Sustainability of MFIs.
-Public policy, regulations, and Sustainability of MFIs
-Trade-offs between outreach and financial sustainability
-Paradigm shift: From credit delivery to sustainable financial intermediation
-Economic performance and Sustainability of MFIs
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