An exploration of micro-financing as a way of helping to fund people in developing countries

Abstract

Microfinance started in Bangladesh and parts of Latin America in the mid-1970s to provide small loans and financial products to poor people who cannot access to loan from formal banks because of low credit and higher risk. This thesis means to explore if microfinance is a good way to fund people in developing countries. The relationship between gender and loan size and what factors affect financial sustainability were tested in this thesis by t-test and regression. The results reveal that there was no difference between gender and loan size, which means there was no glass ceiling on loan size between men and women. The findings conclude that the breadth of outreach was not a significant determinant of financial sustainability while the depth of outreach and productivity significantly impact financial sustainability of MFIs (Microfinance Institutions). Moreover, the depth of outreach positively impacts the financial sustainability. So, the MFIs will become more sustainable if more is done on promoting depth of outreach.