Growth in de­mand for mi­cro­fi­nance ham­pered by fear of debt

The Sun (Malaysia) - - SUNBIZ -

KUALA LUMPUR: The take-up of mi­cro­cre­dit or mi­croloans in the Greater Kuala Lumpur re­gion has been low and “fear” is the key rea­son why mi­cro en­trepreneurs did not con­sider re­sort­ing to mi­cro­cre­dit for their fi­nanc­ing needs.

A new Asian In­sti­tute of Fi­nance (AIF) study en­ti­tled “Mi­cro­fi­nance in the Greater Kuala Lumpur Re­gion – Out­reach and De­mand” re­vealed that while gen­er­ally the ex­pe­ri­ences of mi­croen­ter­prises with loan ap­pli­ca­tions and the ser­vices pro­vided had not been bad and, they did not par­tic­u­larly dis­trust banks, many avoided tak­ing loans for fear of be­ing in­debted (69.1%) and los­ing their col­lat­er­als (42.2%).

The sur­vey was con­ducted in par­tic­i­pa­tion with a to­tal of 547 mi­croen­ter­prises in se­lected towns and ur­ban ar­eas in the Greater Kuala Lumpur re­gion.

Mi­cro­fi­nance has be­come a cru­cial tool to pro­mote fi­nan­cial in­clu­sion and re­duce poverty in Malaysia. The sus­tain­abil­ity of mi­cro­fi­nance de­pends on the lend­ing in­sti­tu­tions, or Mi­cro­fi­nance In­sti­tu­tions (MFIs), be­ing able to in­crease out­reach and en­gage po­ten­tial bor­row­ers.

AIF CEO Dr Ray­mond Mad­den said poverty out­reach and re­duc­tion is at the core of fi­nan­cial in­clu­sion.

“To en­hance the out­reach of cur­rent mi­cro­fi­nance pro­grammes, MFIs need to re­design mar­ket­ing strate­gies to over­come any con­cerns mi­cro en­trepreneurs might have for the mi­cro­fi­nanc­ing op­tions on of­fer. Also the cur­rent low take up rate for Is­lamic mi­cro­fi­nanc­ing im­plies that there is po­ten­tial to grow this sec­tor,” he said in a state­ment.

MFIs can de­velop var­i­ous strate­gies to en­hance their out­reach to cre­ate greater de­mand for mi­cro­fi­nanc­ing. Most im­por­tantly, they need to al­lay fears of be­ing in­debted among mi­cro en­trepreneurs. A strong knowl­edge of what en­cour­ages mi­cro en­trepreneurs to con­sider mi­cro­fi­nanc­ing pro­grammes should en­able MFIs to im­prove out­reach.

MFIs must choose mul­ti­ple com­mu­ni­ca­tion chan­nels to in­crease aware­ness of mi­cro­fi­nanc­ing and con­sider util­is­ing tech­nol­ogy as a way of en­hanc­ing out­reach. As there is a sig­nif­i­cant in­crease in ac­cess to the in­ter­net, MFIs should be able to use so­cial me­dia to bet­ter mar­ket their prod­ucts and ser­vices.

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