عنوان انگلیسی مقاله:

Credit NGOs’ sustainability in rural financial market: a SWOT analysis on DAYBANG

ترجمه عنوان مقاله: پایداری سازمان های غیر دولتی یا (NGO) های اعتباری در بازار مالی روستایی: تجزیه و تحلیل SWOT بر DAYBANG

رشته: مدیریت مالی و حسابداری

سال انتشار: 2012

تعداد صفحات مقاله انگلیسی: 9 صفحه

منبع: Emerald

نوع فایل: pdf

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چکیده مقاله

Purpose: The purpose of this paper is to analyze the sustainability of Credit Non-Governmental Organizations (CNGOs) such as DAYBANG.
Design/methodology/approach: This paper investigates and describes the operating details, through the web, of DAYBANG using SWOT analysis.
Findings: By the means ofSWOTanalysis it is found that clarified information, credit scoring system and the law of large numbers set up by DAYBANG will decrease the asymmetric information influence, which will result in adverse selection and lowering of the transaction cost; while operational risk and moral hazard are the weaknesses to be overcome. SO, ST, WO, WT strategies deserve consideration.
Originality/value: Researches on informal finance have focused on loans between relatives, friends and usurers. Few literatures, however, have studied the Credit NGOs (CNGOs). DAYBANG is a newly emerging CNGO which has resulted in immense public interest because of its Web operating platform. This paper discloses its operational characteristics, using SWOT analysis, which expands the research on informal finance.
Keywords: China, Credit, Loans, Internet, Rural regions, Financial markets, Credit Non Governmental Organizations, Sustainability, Rural financial market, SWOT analysis, DAYBANG
Paper type: Research paper

مقدمه انگلیسی مقاله

It is generally accepted that the informal financial institutions are the key loan providers to farmers in rural China, originating in the incompleted rural financial market, primarily stem from risk-avoided formal financial institutions escaping from rural region in a long time. There are two main forms in the rural financial market that need to be critically assessed. The first is that loans were taken out by individuals such as relatives, neighbors, friends and usurers, who control the risk from poor credit scores farmers by high rate of interest and space-oriented credit. Usury lenders could charge higher interest rates hence make more profits. Relatives and neighbors also have incentives since they can get the respect and advantages from the borrowers.

Actually borrowers would not default subjectively even the objective condition worse because of they know each other between lenders and borrowers. There is no easy means to place a market value on the transaction beyond the accumulation of goodwill, social capital, and reciprocity (Turvey et al., 2010). The second popular informal institutions are Credit Non-Governmental Organizations (CNGOs), which allow farmers who were excluded from formal lenders and former lenders. Generally speaking, CNGOs are set up by charity organizations and individual or programs provided by world bank or other international financial institutions.

CNGOs started its fund injected role from Bangladesh are recognized as a means to help poor farmers get access to the loan. As the Grameen rural banking system, this kind of organization provides loans to poor farmers who are unable to provide collateral and indoctrinated in Grameen social values (Hussain et al., 2001). While a large number of micro-credit NGOs do not survive for long and those who survive do not grow beyond the subsistence level. The low survival rate as well as stagnated growth own to the flawed developmental role of the CNGOs (Hoque, 2004). The financial scheme of NGOs had the problem of mixing social and financial objectives (Shete and Garcia, 2011; ACDI/CEE, 1995).

DAYBANG is a newly emerging CNGO operated as a P2P microfinance in the context of e-commerce context, which is purpose of to help poor farmers access the credit while provides a platform for those kind donors to make loans to farmers. DAYBANG announces farmers’ (borrowers) information collected by their staff on the web site to seek to maximize outreach to the farmers and the investors while remaining financially sustainable. Multi-level interest rate is designed that shows how optimal interest rates depend on information regarding moral hazard and adverse selection problems (Katchova et al., 2006). Actually DAYBANG itself is not a lender which is obvious different with other micro-finance institutions (MFIs) and informal usurers, which focuses on the corporate social responsibility (CSR). By using a strongly organization-centered view, many business and communication scholars regard CSR as a special corporate program that is carried out in order to deal with different stakeholders (Schultz and Wehmeier, 2010; Signitzer and Prexl, 2008). The large and far reaching informal financial usurers have naturally given rise to a wide variety of responses and reflections. The causes, effections and implications have all been extensively debated and many authors have made recommendations as to future policy. However, given the magnitude of the space-oriented informal financial forms a range of literatures can only be welcomed. CNGOs have advocated actions across a spectrum from making loans to farmers to the SMEs, which give us a new view of reassessing our entire research approach to informal financial institutions.

CNGOs make rural financial market completely. As formal rural financial institutions such as ABC, RCCs and PSBC in China would always avoid to provide loan to poor farmers, which are characterized by high costs and lower interest rates (Shete and Garcia, 2011; Hoff and Stiglitz, 1990), and are often inadequate in supply (Shete and Garcia, 2011; Chaudhuri and Gupta, 1996). Thus, a number of MFIs have been emerging to fill in the gap. However, there is adverse selection because only borrowers know whether their project is of high or low quality but the MFIs do not. The MFIs are competitive, risk neutral, and they offer loan contracts specifying the amount to be repaid only if a borrower’s project makes a profit (Batabyal and Beladi, 2010).

Microfinance has innovated approaches beyond the traditional financial intermediary role, in which building human capacity through social intermediation and designing group-based lending programmes are proven to be among the effective risks in relation to providing credit to the rural poor, the special purpose vehicle (SPV) is identified to hold the MFIs (Dusuki, 2008).

The rate of GB’s loan repayment is 98 percent, which makes GB-type micro credit systems functioning not only in Bangladesh but also in 50 countries across Asia, Europe, Africa, Oceania, and in the USA (Hussain et al., 2001). Can CNGOs function in the period of web?
The general CNGOs literatures do not address adequately, if at all, the role of CNGOs to help farmers to access to finance. In addition, while a number of specific studies do explore the characteristics of informal finance especially in the fund flow between farmers and their relatives, friends and usurers, we would highlight the function of CNGOs operated on the basis of web.

This paper seeks to draw out the main strengthens of CNGOs such as DAIBANG which operated on the web platform compared to other informal financial institutions and then place them in the context of rural financial market and consider what conclusions can be drawn both for future policy on the rural financial market development and conduct of future academic research related to these issues.

نتیجه گیری انگلیسی مقاله

The rural economic development of a developing country like China depends much upon the success of rural finance. In China, though the rural finance is gradually reform and increasing the service, many farmers households due to some constraints cannot get access to the finance service in the rural financial market. Lack of efficient and reliable management, collateral-free loan, formal finance is gradually escaping from rural financial market, though the governmental policy strengthen the support for farmers financial service. Informal finance such as CNGOs as the main part of MFIs are found to be the one of the most important rural financial institutions. However, CNGOs’ sustainability is in doubt. Internal control mechanisms are critical for the success of MFIs (Hartarska, 2009) which is the same as CNGOs. Based on the SWOT, a set of strategies should be come up (Table V).

SO strategy
Asymmetric information constraints farmers to access the loan. To overcome the unfavorable situation, the clarified information by internet and on-the-spot investigation deserves to continue to be consideration. Each investor should be made aware of the project’s economic opportunities around the lending programme and possible risks resulted from the default of farmers.

ST strategy
To overcome the operational risk, business will be widened and expanded as traditional corporate management. DAYBANG is required to provide a sizable financial service to the farmers so that the entrepreneurs of DAYBANG could be more knowledgeable and capable of running the business smoothly, efficiently and effectively (Islam, 2009).

WO strategy
The success of loan is measured using default rate of farmers households. The loan after-monitoring is not only relied on the staff in DAYBANG, but also the public of all investors. The public information of loan projects should be dynamic to display the operating process of farmers to avoid the moral hazard.
WT strategy
Both operational risk and moral hazard constraint the development of DAYBANG. The major institutional constraint reflects formal and informal institutions (Atherton and Smallbone, 2010). Business expanding and financial innovation offer an alternative perspective and enhancement of managers’ personal perceptions (Aranda and Arellano, 2009) of business priorities is also important to overcome the weaknesses and threats.

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