url
30
Jun
2014

THE IMPORTANCE OF MONITORING AND ENTREPRENEURSHIP CONCEPT AS FUTURE DIRECTION OF MICROFINANCE: CONCLUSION

Multiple regression test results for “total micro funds” show that program members of TEKUN (t = 1.663, p<0.1), AIM (t = 3.937, p<0.001) and for overall (t = 2.002, p<0.05, n=395) have positive coefficient values and are significant. These analysis results also prove that the larger is the total accumulated micro funds obtained by program members of TEKUN, AIM and overall (n=395) the higher would be their ability to generate business profits. This is due to the positive and significant coefficient values for the correlation tests and multiple regression test results. Nevertheless, the multiple regression test results failed to prove that the “frequency of micro funds received” affects the ability of program members to generate business profits simply because of the insignificant coefficient values.
The multiple regression results for “training” showed that all the three programs TEKUN, AIM, LZS, with the exception of YBK, and overall respondents have both positive and negative coefficient values and are not significant. The regression test results for this variable prove that the training sessions provided by the program management teams are not effective in promoting participants’ capability in generating higher business income. The multiple regression results also showed that participants of TEKUN, AIM and LZS programs have positive coefficient values but are not significant. However, test results on the overall participants showed (t = 2.812, p<0.001, n=395), indicating that the coefficient values are positive and very significant. These test results stressed that the higher the needs for micro funds and variations in the consumption of micro funds the higher would be the business income generated by all participants because of the positive and highly significant coefficient values. In its totality, the multiple regression analysis indicated that there is no significant relationship between total profits generated with the number of dependents, age of respondents, educational level, frequency of getting microcredit facilities, business location, gender and training gained prior to accepting microcredit funding. The multiple regression results also showed that work and business experience, classification of business involvement, total monthly income before joining the microcredit program, business period, accumulated microcredit received, frequency of monitoring, and the need for microcredit, seemed to affect the monthly profit generated by the microcredit program members.
The findings of this study showed that microcredit programs served by AIM and TEKUN are more effective compared with LZS and YBK programs which provide non-refundable micro funds. This is due to several factors such as the existence of non-sharing liability and contracts as being practiced by AIM and TEKUN and the non-existence of basic entrepreneurial and business trainings or training contents which are less practical to the needs of the poor. This deficiency is further compounded by poor quality monitoring by the program management. In the case of LZS, the responsibility of monitoring the program members is either done by the consultants or left to the appointed private parties. Hence, the monitoring services provided by the consultants are tuned towards commercial perspectives and done purely for the purpose of fulfilling the service specifications as requested by the LZS and also for claim purposes. This approach has failed to meet the objective of enhancing the socio-economic development of the program members. In addition, this approach also leads to a fragile principal-agent linkage, hence increasing “asymmetric” information risk, which is also termed as “adverse selection” and “moral hazard”. In the case of YBK no monitoring on the program members was ever conducted. The findings of this study indicated that members of AIM’s microcredit program had the highest quality of monitoring and this was done through the weekly meetings with the program managers. In similar notion, TEKUN also conducted close monitoring on its program members although of average quality.
Based on these research findings, a more aggressive monitoring is recommended for the program members of LZS and YBK. In this context, the scope of monitoring should not only be limited to the profit-making for the businesses as being stressed by the consultants, but it should also be extended to cover other elements such as counseling, skills training and consultation services on a continuous basis. This approach is expected to be more effective in the long run compared to the current approach that only stressed on increasing business profits which in a way is more of a short term in nature. This is likely to increase the confidence level and competitiveness among the program members although they may have started their businesses much earlier. The recommended approach, if properly conducted, would have positive impacts towards the sustainability and continuity of microcredit enterprises and extension of the business period, thus reduce “asymmetric” information pertaining to “adverse selection” and “moral hazard”.

Multiple regression test results for “total micro funds” show that program members of TEKUN (t = 1.663, p<0.1), AIM (t = 3.937, p<0.001) and for overall (t = 2.002, p<0.05, n=395) have positive coefficient values and are significant. These analysis results also prove that the larger is the total accumulated micro funds obtained by program members of TEKUN, AIM and overall (n=395) the higher would be their ability to generate business profits. This is due to the positive and significant coefficient values for the correlation tests and multiple regression test results. Nevertheless, the multiple regression test results failed to prove that the “frequency of micro funds received” affects the ability of program members to generate business profits simply because of

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Kevin J. Brandon

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