Impact And Institutional Sustainability Of Ngo-Type MSP In Shaanxi China With Special Reference To Bangladesh

The present study was conducted to examine the outreach and sustainability of Non-governmental Organization (NGO)-type Microfinance Service Providers (MSPs), evaluatewelfare impacts of microcredit program on sustainable livelihood of the poor and assessthe microfinance regulation in China with special reference to Bangladesh. With theseenthusiastic views, six MSPs were chosen for critical evaluation consisting three fromeach country. Xixiang Women Development Association (XWDA), Pucheng WomenSustainable Development Association (PWSDA) and Chunhua Women DevelopmentAssociation (CWDA) were selected from Shaanxi province of China while Grameen Bank(GB), Bangladesh Rural Advancement Committee (BRAC) and Association for SocialAdvancement (ASA) were selected from Bangladesh as peer of them. An in-depthinstitutional investigation was carried out among selected MSPs. Meanwhile, primary datawere collected from microcredit participants and non-participants among three state-designated poor counties of Shaanxi. The study adopted both qualitative and quantitativeapproaches based on research objectives.Findings revealed that the selected MSPs reached poor clients, particularly women livingin isolated and mountainous villages. The collateral free microcredit program that has beenadopted has further broadened the microcredit base and their adoption of small amount ofloans is highly suitable for farming and small business. The decentralized and efficientmanagement skills, lower complexity in loan application and approval system (takes onlya few days), continuous efforts to develop new products and services can serve as a lessonfor formal financial institutions. Meanwhile, microfinance clients particularly womenproven their talents for utilizing loans, maintaining regular repayment, credit disciplineand the sincerity which extended microfinance business scope in a sustainable manner.Accordingly, selected MSPs have accomplished positive trend of annual earnings andother financial performance indicators such as Return on Equity (ROE), Operational Self-sufficiency (OSS) and Financial Self-sufficiency (FSS). The greater value of ROE, OSSand FSS of the selected MSPs definitely indicate their better financial performance, whicheventually lead to achieve sustainability.Using a Difference in Difference (DID) method, results depicted positive impacts onmicrocredit program participants with respect to increased income at4.07per cent, generalexpenditures increased by6.45per cent and savings increased by3.13per cent. Findingsalso confirmed that microcredit participant household asset position increased significantly.Top income quartile participants accumulated more benefits and women received moreaccess to decision-making process. These findings suggest successful and sustainablemicrocredit intervention improves lives and plays an important role in improving ruraleconomy, possibly reducing inequality between rural and urban areas.On the issue of regulation and supervision, formal MSPs were regulated under the bankinglegislation and supervised by central banks in both countries. The regulators paid specialattention to newly established financial entities-Microcredit Companies (MCCs)Village/Township Banks (VTBs), and Lending Companies (LCs) in China consideringtheir business nature. Similarly, in Bangladesh, Grameen Bank perceived comparativelyrelaxed regulation based on its objective to extend microfinance services to the landlessand underserved population. NGO-MSPs were regulated by Microcredit RegulatoryAuthority (MRA) under microcredit regulatory act2006in Bangladesh while China'sNGO-MSPs are still pursuing their legal identity. Thus, present study proposed a separate regulatory framework for NGO-MSPs (reviewing other countries experience) which maylead to sustainable development of NGO-MSPs in China.Study portrayed some successful lessons of the studied MSPs for better understanding ofmicrofinance. Furthermore, the study presented a cross country learning framework wheresixteen points were identified that can be learned by applying various learning modulessuch as diffusion, adaptation, exposure visit, training workshop and replication. Thus,present study contributes to the literature on diverse microfinance approaches, attaininginstitutional sustainability, effectiveness of microfinance program on sustainablelivelihood and forming a distinct microfinance regulation. This kind of cross-countrystudy can help microfinance practitioners and policy makers to gain a better understandingon existing MSPs and leads to further methodological improvement and adoption ofmicrofinance program for sustainable livelihood of the poor particularly women in thestudied countries or elsewhere. However, it is suggested to avoid generalization of presentfindings, there is still require further rigorous research for generalization of such findings.At the end, the study indentified some specific challenges in both countries which shacklemicrofinance sector from further expansion. The benefit of microfinance services lies onfavorable government policy formulation and allowing MSPs reasonable freedom towardsmooth development. Therefore, it is suggested government authorities should takenecessary steps for resolving the existing barriers of the promising microfinance sector inChina and Bangladesh. Furthermore, undertaking of similar research in other areas issuggested for a better understanding of the microfinance sector in China and Bangladesh.