Micro Finance Case Study of UK
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Microfinance refers to the provision of banking services by poverty-concentrated financial institutions recognized as microfinance institutions (MFIs). The key services provided in this concern are loans, savings, pensions and insurance. With its success in developing countries several developed countries have also attracted towards it but confronts lots of issues in regard to its use and management.
In order to successfully complete this study some objectives were determined that help all through the research to link with research questions. First objective is to identify why developed countries have attracted towards microfinance and how it can help the developed countries. Second objective is to investigate whether microfinance programmes work well in developed countries as compare to developing countries. Third objective is to examine up to what extent microfinance is able to resolve the common issues in developed countries such as job training, additional education along with poverty. Forth objective is to evaluate that does microfinance is really a good concept for increasing entrepreneurs in the world. Fifth objective is to analyse the challenges and constraints microfinance facing in developed world.
In order to attain these objectives, the interpretivism and critical both philosophies were used along with the qualitative research approach. This research was completed with the use of both the primary and secondary research methods. As well, the case of UK was used along with face to face and semi structured interview. Data analysis and findings derived on the basis of collected data was also highlighted along with specific recommendations for UK to resolve issues related to the use of microfinance.
According to the research findings of the study, if developed countries make use of effective approach or program, they can significantly resolve issues related to the use of microfinance. An analysis of individuals need and external environment along with the development of understanding can also be very helpful for resolving underlying issues.
CHAPTER 1: INTRODUCTION
1.1. Overview of the Study:
This research is undertaken with a rationale to evaluate the need of microfinance in developed countries by taking a classic example of United Kingdom (UK). The current global financial environment is very risky and unstable due to the continuous changes in social and technological environment. Thus, the focal point of this study is to provide a significant overview on the need of microfinance, mainly in the developed countries such as UK.
Chapter one (introduction) of this dissertation, explores information about the background of research problem, which is need of microfinance in developed countries. Further, research aims and objectives are also discussed in this chapter along with research questions to take a grasp overview of research problem. Under the background section, researcher has explained about the concept and its need and rationale of the problem for developed countries with the example of UK. Additionally, researcher has also explained purpose of the study and scope and limitations of the study.
Chapter two (Literature review) of this study is about text analysis to present a theoretical and conceptual framework about microfinance and its use by different developing and developed countries. Initially, in this chapter the various factors or aspects those attract developed countries towards microfinance are discussed. Afterwards, a detailed literature is presented by analysing different journals, articles, books, company & country reports etc. In this chapter, researcher has also examined the extent and important of microfinance to resolve different issues related to social, economical and organizational conditions due to poverty.
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Microfinance is required to manage poverty in the countries and provide loans and financial stability to poor people. Thus, researcher has also highlighted the advantages of microfinance to increase entrepreneurs in the world. Additionally, in this chapter, researcher has also discussed about various challenges those are faced by developed countries to manage microfinance.
Next, chapter three (research methodology) of this study explains about the methodology and its different aspects that are used by the researcher to collect relevant data and information. In order to understand the problem and its context to collect data, researcher has defined different philosophies, paradigm, research strategies, etc. In this study, researcher has taken interpretivism philosophy along with inductive approach. Researcher has also explained the reason of choosing some specific methods and approaches instead of others. Collection of data has been accomplished through both primary and secondary data collection methods. Researcher has used semi structured interview and text analysis method to collect data. Sampling methods, selection of sample size and its rationalization has also been presented in this chapter. The main aim of this chapter is to provide justification for using a methodology and avoiding others.
Following the chapter three, chapter four (Findings and data analysis) explores presentations of findings and analysis of data. In this, researcher has used a qualitative framework of thematic analysis. This thematic analysis enables the researcher to define different codes and symbols in regard to present data. It also describe about computer assisted qualitative data analysis method to provide codes to different information and present valid and suitable outcomes.
At the next step, conclusion and recommendations are given in the chapter five (Conclusion and Recommendations) of this dissertation. It is the most significant part in which researcher has developed a relationship between each objectives and findings. This chapter summarizes different needs and reasons of increasing demand of microfinance in developed countries. As well, also discusses appropriate recommendation for developed countries in regard to minimizing the impact of different constraints related to microfinance.
1.2. Research and Objectives:
Subsequent are the main objectives of this study on which researcher has focused to explore authenticate and valid outcomes:
To identify why developed countries have attracted towards microfinance and how it can help the developed countries.
To investigate whether microfinance program work well in developed countries as compare to developing countries.
To examine up to what extent microfinance is able to resolve the common issues in developed countries such as job training, additional education along with poverty.
To evaluate is microfinance really a good concept for increasing entrepreneurs in the world.
To analyze the challenges and constraints microfinance facing in developed world.
1.3. Research Questions:
Throughout above discussed objectives, researcher tries to analyse the concept of microfinance and its importance. For attaining research objectives, some specific research questions are designed that are as follows:
Why developed countries have attracted towards microfinance and how microfinance able to help the developed countries?
Have micro enterprise programmers worked as well in the developed countries as in developing countries?
Microfinance is a good choice to reduce poverty but will it be to resolve the common issues of developed countries such as additional education, job training?
Is microfinance really a good concept of increasing entrepreneurs in the world?
What are the challenges micro finance is facing in developed world?
1.4. Research Background:
Microfinance is one of the imperative tools for the growth in developing countries, which is known as the small amount of loan for poor people and entrepreneurs to manage their business effectively. This concept was given by Mohammed Yunus in 1970 in Bangladesh. The notion of microfinance is to help poor and needy people to minimize poverty and raise their income level. In developing countries, due to low income and poverty, it is very critical for people to access big amount of loans and credit given by different financial institutions. In the words of Meyer and Nagaranjan (2006), it is difficult for the developed countries to manage microfinance activities in comparison to developing countries due to various reasons, such as high income in developed countries, low level of poverty, high competition, tiny market for microfinance activities, etc.
Initially, it was considered that NGO’s were interested in microfinance activities but due to the profitable returns and increasing growth of small entrepreneurs, governments have also shown its interest to minimize poverty and manage high returns. Additionally, financial institutions and commercial banks have has also started to provide loans in small amount. Kyereboah-Coleman (2007) asserted that microfinance provide different facilities of loan to poor people, thus it is really difficult to manage these facilities in developed countries, where MNC’s are operating successfully, competition is very high and lots of industrial requirements with a big capital.
According to Knight and Hossain (2009), developed countries are seeking for the implementation of microfinance activities, such as loans and credit to help microenterprises and promote small businesses. This in turn, encourages overall national industries towards becoming more able to operate in present competitive and industrial environment. However, several obstacles are there in regard to the development of microfinance in developed countries such as UK. A poorly designed welfare system and inadequate incentives for the graduates is an obstacle for the development of microfinance system in developed countries because highly educated or graduates have high expectation. They always prefer white collar job with high inceptive as pr their qualification and welfare system of Microfinance does not provide high incentives to these people.
It has been also identified through different research studies that in developed countries due to the changes in social and economical environment, people prefer self employment. Therefore, microfinance programs have become popular in developed countries also but environmental changes and different needs of consumers in developed countries create obstacles for effective implementation of these programs.
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It is due to the fact that in developing countries, both male and female can do any kind of small job and start any kind of business, whereas in developed countries, it is not possible for people to do any kind of small job due to their social and corporate standard (Armendariz and Morduch 2010). In developing countries demand for small scale enterprise promote programs of microfinance because women are ready to husk rice, refill and sell ball pens, remove dirt and rock from rice and wheat, stitch clothes, etc. On the other hand, in developed countries it is not possible for women to start small scale enterprise because of small market and high tax return. In order to deal with suppliers and local customers, women in US and UK need has to meet with more codes and policies. Thus, it can be believed that starting a small scale enterprise in developed country with the help of microfinance programs is very difficult.
Apart from this, chances of development of a small business are very low in developed countries such as UK, USA, EU, etc. in comparison to developing countries like India, China, etc. Entrepreneurs in UK and other developed countries has to follow many procedures and pay high tax to start a business, thus, it is really difficult to implement microfinance activities in developed countries.
In this study, the research background is linked with challenges and obstacles faced by developed countries to implement microfinance. Although developed countries can also increase per capita income of people by providing high opportunities of employment with good remuneration, but the challenge is the high level of risk due to low level of financial literacy. Development of commercial model is actually not real for the developed countries to manage activities of microfinance, thus this research concentrates on the issue that whether microfinance programs work well in developed countries as compare to developing countries. The main focus of
this study is to offer a justification about the need of microfinance in developed countries and how these countries can manage different challenges for economical growth.
1.5. Purpose Statement:
The main purpose of this research is to examine, where microfinance is standing in this developed world and what are the challenges faced by microfinance in order to grow itself in developed countries. By means of this study, researcher wants to contribute towards a sufficient and adequate piece of literature about microfinance and its significance in the wide range of database, so that along with developing countries, developed countries can also utilize the benefits of microfinance and manage it effectively. This research would help the business firms and developed countries, to understand the theoretical framework of microfinance and its challenges.
Unfortunately, due to technical development, higher education, development in social standard, etc. have become some obstacles of developed countries to organize microfinance in well effective way. Thus, the rationale of this study is to identify the imperative role of microfinance in developed world, so that developed countries like UK can utilize its benefits.
1.6. The Research Problem:
In order to overcome the situation of poverty and manage income level and well being of poor people, micro-financial activities have their own significance. The concept of microfinance is limited with the context, which is applied only for poor people who are below poverty line and who have not any belongings for their living and earnings. Often, this concept is implemented in underdeveloped countries because of low educational standard, lower income level, technical and job training challenges, etc. On the next hand, several researchers have been analyzed a plethora of challenges and problems related to the concept of microfinance in developed countries.
Due to the high economy and good income level, it is considered that there is no need of implementing principles of microfinance in developed countries. According to Srnec and Svobodová (2009) that due to the differences in social and economic environment, need of microfinance in developing and developed countries is quite different. It is really critical to identify the need of microfinance in developed countries due to the well established system and high competition. Many researchers are concerned with the issue of microfinance and its need in the developed country to provide new opportunities to entrepreneurs. The research problem of this study is associated with the income level and social and financial condition of individuals in different countries.
In comparison to Indian and Chinese people, income level of British and American people is high. Thus, entrepreneurs have ignored the need and importance of microfinance in developed countries like UK. This aspect of finance and economy has been acknowledged an ample amount of studies and researches to understand its significance mainly in developed countries. On the flip side of coin, unpredictable environment and lack of suitable factors that applies on microfinance create challenges and restrictions for the developed countries to manage microfinance in an effective way. However, it has been affirmed that microfinance is fruitful for both developing and developed countries, but still, it is a divisive issue that how developed countries can manage microfinance in to resolve common issue like job training, additional education along with poverty.
1.7. Scope and Limitations of the Study:
The main notion of this dissertation is to investigate whether microfinance programs work well in developed countries as compare to developing countries. This research also explores that how developed countries can manage common issues like, education, job training and poverty. The scope of this dissertation is associated with different factors such as economic and social environment, globalization, per capita income of individuals in both developed and developing countries, conventional and modern approach of offering loans to poor people, commercialization of financial institution, small and big entrepreneurs, urban and rural people, etc.
It has been also analyzed that microfinance is an important activity, for developed countries to maintain high income status an effective growth of country and its people. As there are numerous problems and challenges to implement microfinance in developed countries, this study has scope for countries to find out appropriate strategies to face the challenges of microfinance activities. This study is also beneficial for the society and poor people, as it provides a correct direction to the developed countries to manage job training, educational and development programs, poverty, low living standards, etc. Additionally, to improve the practices of multinational corporations and promote small business in the country to provide employment for poor and uneducated people are also related to this dissertation.
Finally, this research involves a substantial case study of UK, in order to understand the significance and need of microfinance in developed country, thus it has a scope for entrepreneurs in UK to implement microfinance programs effectively to manage poverty effectively.
There are several research methods to conduct the research in an effective way, but every research method has its own limitations (Goddard and Melville 2004). Authentication and reliability is one of the major limitations associated with primary and secondary data collection method. Some of the major limitations of this research study are as follow.
Time Constraints: Time is a valuable and most important factor to conduct a research. In order to conduct a wide and significant study, researcher has time limitation, which creates problem for the researcher to collect wide range of articles and other data for evaluation. Additionally, collection of data through interview is time consuming process. Due to the time limitations, researcher has selected a small sample size; this might create discrepancy in the reliability of outcomes (Bradley 2007). For the data analysis and presentation researcher has used computer assisted qualitative data analysis (CAQDAS) system. This also need time to maintain accuracy of the research outcomes.
Cost Constraint: In order to conduct a research, it is essential for the researcher to have enough money and access to different libraries and scholarly articles for article analysis, to target a large sample size, to collect different sources of data such as video devices, audio devices, etc. (Cohen, Manion and Morrison 2007). In order to develop an authentic report, it is necessary to take guidance of highly experienced and qualified people. Due to limited budget, researcher does not have access to high number of secondary data such as academic articles. Apart from this, researcher has to give high concentration to collected responses from limited number of participants due to cost limitation (Easterby-Smith et al. 2006).
Access Constraints: In order to collect data, researcher has used both primary and secondary data collection methods. As researcher has used limited number of articles, there might chance of ignoring important information, which is contained in other articles (Cooper and Schindler 2006). Apart from this, as researcher has taken limited number of participants for interview. It might be possible that participants have not shown their interest and provide vague responses or researcher has become biased. Limitation of time and cost eventually affect the evaluation process of data and information, which impact accountability of the study.
1.8. Ethical Consideration:
In order to organize this research study, it is imperative to follow ethical consideration. Without concerning ethical rules and regulation, it is not feasible to accomplish the objectives of the study. In a research study, ethics are known as the code of conduct, which comprises values and laws to maintain integrity of the study. In this study, researcher has identified various ethical concerns and also defined different set of ethics to maintain the accountability of the study. These ethical issues are related to the implementation of suitable action to maintain validity and credibility of the study.
The main ethical issue is related to plagiarism. In this concern, researcher has provided valid references for secondary data to avoid conflicts and shows that the work is original. All the articles used by the researcher for assessment framework are referenced in a list at the end of study. Additionally, researcher has also conducted primary data through interview process. The main concern of participants is associated with the privacy of their personal and professional information. Researcher has assured them that this research would not harm their personal and professional status. Researcher has also followed all the guidelines and rule provided by University.
This chapter of introduction has provided detail information about the construction of this study and a consistent set of thoughts and ideas about the issue related to microfinance. Additionally, this chapter also highlight objectives, aims, questions and a background of the research problem. Researcher has also explored details of research problem with scope and limitations, so that the aims and objectives can be achieved in effective way.
Summarily, the main idea about the microfinance in developed and developing countries and its role and need has also discussed by the researcher under this chapter. Researcher has provided a brief discussion that what problems and challenges are faced by developed countries to manage the programs of microfinance. Researcher has also explored appropriate information with adequate format and special terms to increase the impact of study on reader’s mind.
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