Study on Lower Income and Microfinance Programs Finance Essay

The purpose of this section is to describe the methodologies used to collect data and to carry out the quantitative and qualitative analyses. Primary and secondary data will be collected for the project. Primary data will be the main sources of this study because first-hand information is needed to investigate the research questions and achieve research objectives. 3.2 Hypothesis Most of the poor people and lower income people join microfinance program because they can access credit with specified interest rate which is lower than that obtained from the informal money lender.

Thus, they can save money. (https://www.scribd.com/doc/12770568/The-Impact-of-Micro-Finance-on-Household-Welfare-Case-Study-of-a-Savings-Group-in-Lao-PDR#). Therefore, the hypotheses are as below: (i) H0: Participation in microfinance services leads to an increase in household income and personal savings (ii) H1: Microfinance is an effective tool of poverty eradication (iii) H2: Community are well aware of microfinance services. 3.2 Research Data 3.2.1 Primary data According to Kotler& Armstrong (2001 p. 141), primary data refers to information collected for specific purpose at hand. According to Hair et al. (2009 p. 288), primary data can be qualitative or quantitative. Qualitative research focuses on gathering in depth understanding of human behavior and the reasons that lead to such behavior. It includes the archival method, case studies, survey and field experiments. On the other hand, quantitative research is to investigate the fundamental connection between empirical observation and mathematical expression of the project. This includes applying mathematical model, theories or hypotheses to test the data collected. In order to access the impact of microfinance, primary data is important to be collected. There are few ways to collect primary data including telephone interview and personal interview.

Personal interview has been chosen after considering quality of information and response of candidates. Quality of information collected through personal interview tends to be more accurate as connection with respondents can be built during the interview session and any doubt can be cleared immediately. 3.2.2 Secondary data According to Kotler & Armstrong (2001 p. 141), secondary data refers to information that already exists, have been collected in other studies. It could be found through sources such as internet, books, newspapers, and magazines.

Secondary data can usually be obtained more quickly and at lower cost compared to primary data. Although secondary data can be found easily, the data may not be usable or irrelevant. Thus, primary data often need to be carried out to obtain first hand data. In this study, journals and information were obtained through reference books and electronic journal databases such as Google scholar, EBSCO, EMERALD and so on. Besides, banksA¿A½ websites, companyA¿A½s annual reports, government and corporation publications were also used. By collecting secondary data, information and theories of microfinance and also an overview of research done in the past was collected and it enables building a good foundation before starting the field research. 3.3 Research method The research method was personal interview which involves talking and communicating with the people, thereby gathers information needed. Besides, survey questionnaire was also given out Personal interview was chosen as the research method because it is flexible and tends to be more effective compared to other method such as mailing questionnaires and telephone interviewing.

Personal interview enables the interviewer to explain difficult questions and also skip some questions or probe on others depending on the answers and responses the interviewer receives. Besides, personal interview tend to receive higher response rates. Therefore, personal interview was used. 3.4 Research Instrument The research instrument was questionnaire administered in person. In order to obtain more accurate data, questions require both qualitative and quantitative answers were included. The questionnaire was mainly made up of closed ended questions where respondentsA¿A½ answers were limited to possible options given which include yes/no questions, multiple choice questions and scaled questions. Closed ended questions were used as it enables answers to be obtained in a short period of time.

Some respondents might not willing to write a long answer and decide not to take up the survey as they think that it is a waste of time. Therefore, closed-ended question was mainly used in order to avoid being rejected by respondents. Closed-ended questions can be analyzed easily as every answer can be given a number in order to access a statistical interpretation. Apart from that, a few open ended questions were also included so that respondents could express their own opinions and ideas without being constrained by a fixed set of possible responses. Besides, open ended questions could also enable true, insightful and even unexpected suggestions. 3.5 Data Collection 3.5.1 Household survey areas The survey was carried out on the areas of demographic information of households, income and income generating activities like agriculture, livestock and micro enterprises and household income in general, financial services including client information, qualitative data on the impact of participating in the microfinance program and client satisfaction, householdsA¿A½ attitude and awareness of microfinance services and so on. The questionnaire was designed to understand how treatment group and control group think about microfinance and its programs. 3.5.2 Selection of Study Locations Due to limited time frame and budget, geographical coverage will be limited to only 3 districts in Kuala Lumpur which are Segambut, Gombak and Selayang so that the research could be done on time without exceeding the budgeted cost of survey. 3.5.3 Sample Selection It is important to carry out primary data as it is a representative result that can be generalized into a larger population.

Therefore, the right respondents need to be chosen in order to achieve the objective. Thus, the questionnaire was distributed to respondents based on judgmental sampling. According to Hair et. Al (2007), judgmental sampling involves the choice of subjects who are in the best position to provide the information required. Survey was then carried out with households who participate in the microfinance services including current savers as well as current borrowers. Non-clients will also be surveyed so that comparison can be made. Members who experienced benefits from joining the microfinance programs by either obtaining a credit or receiving a dividend are called the treatment group and those who did not take part in any microfinance program but have similar characteristics to those of participants are called the control group, for instance, women who is poor but failed to involve in a self-help group.

The effects on members in the treatment group can be compared with the members in the control group as members in the treatment group could tell how has microfinance changed their lives while members in the control group could tell what would have happened to them if they had participated in any microfinance programs. The target group may include individuals, households or micr-enterprises. 3.5.4 Sample Size Due to the difficulty in getting respondents and limited period of time, the sample size will be limited to 50 clients and 50 non-clients. 4.0 Limitation The biggest concern of the project was the time period.

Generally, research of impact analysis takes more than a year to be done in order to collect sufficient and accurate results as it requires in-depth analysis and complex survey protocol [162]. Due to the time limit given, which was six months, it was not enough to generate sufficient and accurate information and data. Therefore, there was not enough time to conduct better research. The second limitation is that budget constraints. A lot of similar researches have been done in the past by professional bodies. Therefore, appropriate data has been collected in the past. However, it is expensive to obtain the data collected by professional bodies.

Thus, it was not possible to obtain the data due to limited budget. Apart from that, size of the sample was not large enough to represents the population. If the size of respondents was large, more factors could be included in the survey analysis, thereby generate more reliable data. Due to budget constraints and limited time frame, the sample size was only limited to 3 districts in a capital of Malaysia, which was not large enough to represents, the population of Malaysia. Also, it was difficult to identify the treatment group and control group as I had no source to access to them. Moreover, finding valid control group and treatment group are difficult as respondents with the same characteristics and economical environments are hard to find. Therefore, the number of respondents was limited to only 50 persons. In addition, there was selection bias as comparing clients with non-clients will overestimate the impact of microfinance due to inherent differences of microfinance clients compared to non-clients.

Thus, the information generated may not be accurate and reliable. 3.5 Quantitative Data The quantitative analysis will be used to test the hypotheses about the impact on the households. For each of these hypotheses, a quantitative measure (impact variable) will be defined. Cross-section differences are examined and evaluated for statistical significance. First, whether clients have more favorable values of the impact variable than controls will be determined.

Next, analysis of variance (ANOVA) will be performed to see whether this difference is statistically significant. If a relationship passes this test, it indicates possible impact. [103 p.80] 3.3 Research approach In microfinance inpact evaluation, clients receiving microfinance services are compared with a control group of people who are not receiving microfinance services. Thus, The paper adopts the methods used by Coleman (1999) to estimate the effects on household welfare or outcomes by the participation in the microfinance programs. In the study, primary data will be obtained by carrying out survey research. According to Kotler & Armstrong (2001 p. 145), survey research refers to the gathering of primary data by asking people questions about their knowledge, attitudes, preferences and behavior. The advantage of survey research is its flexibility. It can be used to obtain many different kinds of information in many different situations. All the surveys will be carried out face-to-face as surveys carried out face-to-face are deemed to be more reliable compared to other method such as telephone surveys because by carrying out face-to-face surveys, doubt could be clarified immediately, hence, increases accuracy of the surveys. A structured questionnaire will be designed to gather information of various household and socio-economic profiles, occupation, levels and sources of income, expenditures, savings, ownership of assets and resources, receipt of basic services and amenities, participation in microfinance programs, values and perceptions.

Multiple choice questionnaire will be used as the first part of the questionnaire because it is straight forward, thus, enabling quick response from respondents. Respondents will be required to select a single alternative from a list of several choices provided the each questions.

With this kind of survey design, the impact of microfinance programs on household outcomes can be straightforwardly estimated. Quasi-experimental survey design will be used to compare existing clients to non-participating clients. Difference-in-difference (DID) model in KondoA¿A½s study will be used to measure the treatment effect. This will enable us to investigate the impact of the program by studying the difference in outcomes between the two groups. 3.5 Quantitative Data The quantitative analysis will be used to test the hypotheses about the impact on the households. For each of these hypotheses, a quantitative measure (impact variable) will be defined.

Cross-section differences are examined and evaluated for statistical significance. First, whether clients have more favorable values of the impact variable than controls will be determined. Next, analysis of variance (ANOVA) will be performed to see whether this difference is statistically significant. If a relationship passes this test, it indicates possible impact. [103 p.80] Limitations Data on household incomes are known to be less reliable than consumption data obtained from household expenditure surveys, 8 The study will compare the operations of a pawnshop, a lending investor, a marketvendors’ association turned credit cooperative, and two non-governmental organizations involved in the delivery of financial services to the urban informal sector. Observations and conclusions from prior primary studies of professional money lenders and rotating savings and credit associations will be included to provide additional insights into the workings of the urban informal sector. Lastly, a review of existing government credit programmes operating in the three areas will also be made. [163]

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