Microfinance refers to all types of financial intermediation services provided to low-income households and enterprises in both urban and rural areas, including employees in the public and private sectors and the self-employed.
A typical microfinance institution (MFI) has a large number of essentially short-term loans, that are contractually expected to be repaid in a number of installments. Such a loan differs both from that of mainstream commercial banks and the accounts receivable portfolio of industrial corporations. An MFI usually has a loan portfolio that grows rapidly, sometimes with seasonality. MFI loans are stepped up with principal amounts increasing with each cycle. Loans have no collateral so that expected loss given default is the entire amount of unpaid installments.
Delinquency is the situation that occurs when loan payments are past due. A delinquent loan is a loan on which payments are past due. Delinquent payments are loan payments which are past due. In microfinance, default occurs when a borrower cannot or will not pay his or her loan. The MFI no longer expects to receive repayment. The MFI may continue the collection efforts. Usually, a loan is declared in default when the borrower has stopped payment on a loan for more than 2 or 3 due dates. Once a loan is declared in default, the MFI will try to collect collaterals. The effects of delinquency on MFI are:
· Less income, less interest
· Less clients
· Shortening life of MFI
· Increasing expenses
· Restructure
· Bankruptcy
· Decrease sustainability
· Limit the spread
· Image of institution
· Ever-increasing delinquency
Research Method
The researcher will employ both quantitative and qualitative approaches to data gathering. The researcher will make use of a survey and a focus group. A survey gathers data at a particular point in time with the intention of describing the nature of existing conditions can be compared, or determining the relationship that exist between specific events. Survey research according to Hutchinson (2004) can be defined most simply as a means of gathering information, usually through self-report using questionnaires or interviews (p. 285). The attraction of a survey lie in its appeal to generazability or universality within given parameters, its ability to make statements which are supported by large data banks and its ability to establish the degree of confidence which can be placed in a set of findings (Cohen et al., 2000, p. 171). The popularity of survey research is due in large to its utility on countless research situations. Surveys are used for such diverse purposes as needs assessment, program evaluation, attitude measurement, political opinion polling, and policy analysis, as well as for simple descriptions of behaviors, activities, and population characteristics. The scope of surveys can range from large-scale national surveys to smaller surveys confined to a single neighborhood, classroom, or organization. Another strength is its applicability on situations where direct manipulations of variables is either unfeasible to unethical (Hutchinson, 2004, p. 286). Surveys are best suited for descriptive research. Companies undertake surveys to learn about people’s knowledge, beliefs, preferences, and satisfaction, and to measure these magnitudes in the general population (Kotler 2000). An antique shop can use surveys to measure employee attitudes about antiques and what particular pieces are popular among consumers. Aside from face-to-face surveys, on-line interviewing can also be used.
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