Research is the most prominent among the InM activities. The major focus of its research is on microfinance, poverty, and development issues. InM conducts research studies independently and/or jointly with distinguished researchers and institutions from home and abroad. The underlying objective of the research agenda is to get insights into the problems of poverty and development and also to assess the impact of different interventions.
Ongoing Research 2016-17
Financial Inclusion of Vulnerable Segment in Bangladesh
InM has initiated a new project on ‘Financial Inclusion of Vulnerable Segment in Bangladesh’ in October 2016 with financial support from the Japan International Cooperation Agency (JICA). Financial services are recognised as an important target and means of implementation for the Sustainable Development Goals (SDGs) in Bangladesh. For example, equal rights to economic resources is a target of the first SDG to eradicate extreme poverty, while secure access to financial services is a means of implementation of the second SDG to end hunger, achieve food security, improve nutrition and promote sustainable agriculture. The Seventh Five Years Plan of Government of Bangladesh also emphasise the importance of financial inclusion to alleviate poverty. Despite substantial expansion of bank branches and increase in the membership of MFIs and other financial institutions, a significant share of the country’s adult population still remains financially excluded.
In Bangladesh, the financially excluded sections of the population comprise different poor and marginal groups including small and marginal farmers, landless labourers, women, self-employed and informal sector enterprises, urban slum dwellers, street children/working youth, migrants, ethnic minorities and socially excluded groups and people who live in areas that are vulnerable to coastal storms, drought, and sea level rise. One of their greatest needs is improved access to financial services—not just loans, but savings, insurance, payments, pensions, and other products. While there are pockets of large excluded population in the urban areas, the rural areas contain most of the financially excluded population. Significant efforts are therefore needed to build inclusive financial systems in the country.
Beginning with the premise that financial inclusion is both pro-growth and pro-poor, the study will examine the landscape of financial services in Bangladesh and examine the financial inclusion issues under three separate but interrelated areas employing a comprehensive framework : (i) financial inclusion for disaster and climate resilient households and communities; (ii) financial empowerment for vulnerable street and working children/youth; and (iii) developing and Implementing Inclusive Insurance in Bangladesh. In addition to specific coverage, the analysis would address issues such as access and use of financial services, types of financial services and use levels, disparities in access and use of financial services (rural-urban, women-men, rich-poor etc), financial services in lagging sectors and regions (agriculture, MSMEs, lagging districts/regions), barriers to accessing financial services (macro, meso and micro levels), understanding financial exclusion of specific groups and sectors, lessons from international experience, and challenges and opportunities for Bangladesh.
Financial inclusion for disaster and climate resilient households and communities
Bangladesh, being one of the most vulnerable countries to natural disasters and global climate change, faces different individual and catastrophic shocks creating severe impact on the lives and livelihoods of the marginal segment of the population. To cushion the shocks, these households borrow from formal/informal sources, withdraw their savings, or sell productive and other assets. Moreover, availability of even these unfavourable coping mechanisms is inadequate and unreliable especially during times of natural disasters. Thus, a major constraining factor of the current efforts for sustainable poverty reduction and development at the grassroots level is the absence of adequate formal institutional mechanisms of risk mitigation for the poor and low-income households. Various studies conducted by InM show that full use is needed of NGO-MFI ‘social assets’ – trust and community relationships, extensive network of delivery services, culture of experimentation and learning, and expertise in rural development for disaster risk reduction and climate change adaptation.
The study comprises of two major components:
Component 1: Comprehensive stocktaking analysis of MFI and NGO engagements in disaster risk reduction and climate change adaptation. Component 2: Designing action research
The design of the first component has three inter-related activities: (i) intervention stocktaking; (ii) balance sheet and contingency stocktaking; and (iii) spatial analysis. Intervention stocktaking will be based on a compilation of NGO-MFI interventions that are relevant to climate change adaptation and disaster risk reduction. It will review community institutions and households, and analyse how they contribute to climate change adaptation in the study areas along with a review of adaptation planning and support initiatives in the study areas. The balance sheet and contingency stocktaking will assess impact of past extreme weather events on financial health of MFIs, and will assess and present options for MFI preparedness for future climate risks. The spatial analysis will examine how vulnerability to climate change affects the financial performance of MFI branches and how vulnerability to climate change and natural hazards influences the spatial distribution of NGO-MFI services and how this spatial distribution has changed over time.
The experimental design of the action research will provide effective institutional and operational arrangements and intervention packages to build adaptive capacities at household and community levels. The action research will be elaborated to reflect the impacts of climate change on different parts of Bangladesh, e.g. draught-prone areas in the North-West and sea level rise and greater weather extremes in the South-West. The experimental testing of different sets of interventions for different locations will generate scientific knowledge with generalisable conclusions for applications in Bangladesh and other countries with similar environmental conditions. The interventions selected for the action research will be based on the results of the stock-staking and other background studies and the exposure visit of the researchers to selected countries to identify progressive practices.
Financial Empowerment for Vulnerable Street and Working Children/Youth
An important component of Bangladesh’s development agenda is to empower, include and educate all children and youth for a life free from poverty and financial instability. The aim is to ensure that youngsters of today grow up to become confident and responsible adults of tomorrow who believe in themselves and their ability to guide the country’s development towards making the middle income country status a reality for Bangladesh in the near future. In this context, an important challenge is to ensure financial empowerment and inclusion (FEI) for the vulnerable street and working children/youth who are one of the most deprived and disadvantaged segments in Bangladesh society. The vulnerable street and working youth/children mostly come from families with financial hardship, often plagued by poverty and indebtedness. Overall, the vulnerable street children/youth face many barriers to accessing financial services, including restrictions in the legal and regulatory environment, inappropriate and inaccessible products and services, and low financial capabilities. Overcoming these barriers and achieving successful FEI requires a multi-stakeholder approach that engages government (including policymakers, regulators and line ministries), financial service providers, NGOs and other youth stakeholders. The street children/youth need, of course, to be at the centre of the entire process.
The study will explore the current status of FEI of vulnerable street children/youth in Bangladesh along with providing an in-depth assessment of the present Bangladesh Bank initiatives of providing these children with access to bank accounts through participating banks and NGOs. In this context, the study will examine the hypothesis that providing street children with access to banking services can be most effective when the service is provided within a package of complementary services such as financial literacy, communication skills and mentoring. Along with others, the study will address three major research questions: (i) What is the current status in terms of situations, impacts, and issues of existing financial services for street/working children/youth? (ii)What potential services could be explored and improvements incorporated, and issues addressed in future action researches to develop financial packages that meet the demands and needs of different groups of street children/youth? and (iii) What changes are necessary to improve existing services and regulatory frameworks and operational procedures for successful FEI of street children/youth? The study will use primary and secondary data from both supply and demand sides.
Developing and Implementing Inclusive Insurance in Bangladesh
Micro-insurance (MI) is seen as a central way of providing social protection to the poor and vulnerable people especially in disaster prone areas. It is agreed that MI has the potential to emerge as one of the sustainable ways of helping the vulnerable groups in enhancing their capacity to withstand vulnerabilities and shocks which is central to reducing poverty and increasing welfare. MI is a low-cost insurance mechanism that covers life, health, crops, livestock and property of the poor and vulnerable groups. As a matter of fact, MI is now emerging as a central component of climate change adaptation measures in disaster-prone countries like Bangladesh.
In Bangladesh, households recurrently face various types of adverse shocks that can be broadly categorised into two types: idiosyncratic (e.g. death or illness of household head) and covariate (e.g. damage of properties due to flood). In principle, households can cope with these shocks well if they have access to formal insurance mechanisms. As formal insurance industry is still less developed in Bangladesh, poor households often resort to informal mechanisms to cope with these shocks including borrowing from friends and moneylenders, selling productive assets such as livestock, cultivable land and selling other properties. In such circumstances, the poor households are forced to reduce their consumption which threatens their food and nutrition security and constrains their ability to improve their social and economic welfare.
In order to ensure inclusive development of a poor-friendly MI sector in Bangladesh and promote sustainable expansion of on-going and new MI programmes, PKSF plans to establish the ‘Inclusive Insurance Unit’ under its core programme for implementing MI activities. The present research will identify and estimate important parameters for developing inclusive MI products, and design their implementation modalities by the proposed PKSF Inclusive Insurance Unit (PKSF-IIU). This study will specifically focus on two MI products: micro health insurance and property micro-insurance, which have been selected in consultation with PKSF.
Research on Operational Challenges of MFIs in Bangladesh (ROCM-B)
InM has recently launched a new programme, ‘Research on Operational Challenges of MFIs in Bangladesh (ROCM-B)’ to identify and analyse issues surrounding MFI operations in Bangladesh especially relating to microfinance disbursement and management, institutional and operational modalities, and data gathering and dissemination systems. The unique feature of this Programme is its participatory nature since the issues to be analysed are prioritised and the analysis is carried out in close participation and collaboration with interested MFIs. The Programme aims to assist MFIs to gain further excellence and professionalism through exploiting possible avenues for improving their operations and adopting cutting edge technologies.
Under the Programme, the following five researches and related activities have already been initiated in collaboration with partner MFIs.
Why high drop-out rates persist amongst MFI staff in Bangladesh? An empirical study
The study will analyse issues that contribute to high drop-out rates among MFI employees and identify resulting impacts on MFI operations and management. The analysis will be based on primary data and information collected from a sample of about 1,000 drop-out employees from both headquarters and field offices of selected MFIs. Elements such as organisational structure, legal status, management attitude, compensation packages and other aspects governing the decision making process of the drop out employees will be considered for the analysis. Relevant policy implications will be drawn for consideration of MFIs.
Branch expansion: Implications on institutional efficiency of MFIs in Bangladesh
This research seeks to examine the cost effectiveness of MFIs in relation to branch expansion and related decisions and identify the indicators that MFIs consider while deciding on branch expansion. It will also examine the effect of considerations such as location on outreach and service delivery and suggest cost-effective ways of enhancing the outreach in remote areas including the possibility of establishing partnerships of MFIs with mobile phone operators to reach the unbanked low income people. The study will collect both institutional and branch level information from selected MFIs.
Empirical analysis on pricing issues of MFI loans: Are the MFI lending rates too high?
The interest rate charged by MFIsremains a contentious and debated issue despite the fact that the MRA has set a cap of 27 percent on the annual lending rate calculated using the declining balance method. The study will be conducted, in collaboration with participating MFIs, to bring out a clear picture on MFI lending rates including rationales and justifications. The research will identify major determinants of lending rates and spread for MFIs including the nature and source of funds as well as the cost structure relative to size and operation of MFIs to generatepractical recommendations.
Use of technology in MFI operations: Issues and challenges
MFIs in Bangladesh are at different stages of automation of MIS for various reasons including limitations of available software to capture all types of accounting practices, high costs for small MFIs and knowledge gaps regarding suitability of alternative software for specific MFIs. The research will focus on three major aspects: (i) identify the current MIS practice of MFIs, (ii) assess the problems of implementing fully-automated MIS, and (iii) recommend types of accounting software suitable for specific MFIs. This study will also identify supply side issues covering potential software developers and their incentives/disincentives in developing software specifically for MFIs.
Developing case banks: Innovation and good practices of MFIs
Under this programme,successful case studiesof MFIs that use innovative and replicable ideas will be documented, analysed and disseminated. InM will document the cases jointly with the MFIs covering In-depth exploration of unique, special, and interesting features of innovators and the underlying working processes, programmes, and relevant events. The results will be used to bring out the story behind the outcomes by capturing what are the facilitating factors, why it isuseful to highlight the success and replication potential and how the intervention shows ways of overcoming specific challenges and difficulties.