Alternative strategies of for-profit, not-for-profit and state-owned Nepalese microfinance institutions for poverty alleviation and women empowerment

Abstract

Microfinance is the provision of financial services to disadvantaged people and the financially excluded, often with a social mission of poverty alleviation and women empowerment. There are many different forms of microfinance institutions (MFIs): for-profit, not-for-profit and state-owned, all of which use different strategies to improve socio-economic status of their clients. The objective of this paper is to examine the alternative strategies of MFIs in Nepal. Primary data was collected through structured questionnaires from 240 women clients of three MFIs. Parametric and non-parametric tests, and exploratory factor analysis have been applied for analysis. The results show that MFIs have different segmentation strategies for their clients, focusing on income levels, total consumption and the number of children. Surprisingly, it was found that the private MFI was reaching poorer people than other MFIs. Our results show that MFIs look at total consumption expenditure rather than total income. Private MFIs target different activities for giving loans compared to government-owned MFIs. The communication strategy of the MFIs is different since the clients of government-owned MFI are better educated and are more likely to read the newspaper. The exploratory factor analysis shows that respondents perceived poverty alleviation and empowerment. The most influencing factors are related to an increase in consumption expenditure, followed by an increase in capital expenditure.

Keywords:

• Microfinance institutions
• segmenting
• strategy
• targeting
• creating shared value

Jel classification:

• G21
• L25
• L31
• L32
• O53
• P36

Acknowledgments

We are thankful to all the participants of three different MFIs (Government-owned MFI, Private MFIs, and Non-government MFIs) of Kaski District, Nepal. We also acknowledge Professor Claudio Zara, Bocconi University, Italy, for providing valuable input.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Data will be available on request to corresponding authors.

Additional information

Funding

The authors received no funding for this work.

Notes on contributors

Bharat Ram Dhungana

Bharat Ram Dhungana is an Associate Professor at the School of Business, Pokhara University, Nepal. He has more than two decades of teaching and research experience in the field of management. He has published a dozen of peer-reviewed research papers in national and international journals and authored many books. He has presented several papers at national and international conferences.

Ramkrishna Chapagain

Ramkrishna Chapagain is a Lecturer at School of Business, Pokhara University, Nepal. He is currently doing his PhD from University of Delhi, Delhi School of Economics. He has published some papers on national and international Journals and participated in many international conferences.

Arvind Ashta

Arvind Ashta is a professor of finance at the Burgundy School of Business, Université Bourgogne Franche-Comté in Dijon, France and member of the research center CEREN, EA 7477 and the research associations RRI, CERMi, PRME Anti-poverty Working Group. He is also associated with the European Microfinance Platform. He has published extensively in international journals, authored, and edited books on microfinance and social entrepreneurship.