This paper aims to investigate how microfinance institutions’ clients in Indonesia conceptualize financial capability. Previous investigations on the concept were mostly in the…
Abstract
Purpose
This paper aims to investigate how microfinance institutions’ clients in Indonesia conceptualize financial capability. Previous investigations on the concept were mostly in the lenses of those in the developed economies.
Design/methodology/approach
A qualitative method was used, in which focus group discussions (FGDs) and interviews were conducted with microfinance institutions’ clients and management in four provinces in Indonesia: DKI Jakarta, DI Yogyakarta, West Nusa Tenggara and South Sulawesi.
Findings
The results exhibit some similarities with those of previous studies that highlight the importance of financial management and financial planning for strategic purposes. However, financial literacies perceived as less important due to the lack of awareness of the concept and its benefits.
Research limitations/implications
This research is only focused on certain groups of the population which implies its limited generalizability. One important implication is for policymakers and scholars to re-examine the value of financial literacy within the context of Indonesia. Although the interviews reveal skepticisms on the instrumental value of financial literacy, robust investigations are further needed.
Originality/value
This study is the first that uses the participatory method to define financial capability as understood by microfinance institutions’ clients in Indonesia.
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Keywords
This study examines whether financial literacy is a relevant factor that determines authority in household financial decision-making, an area that is often viewed as boring…
Abstract
Purpose
This study examines whether financial literacy is a relevant factor that determines authority in household financial decision-making, an area that is often viewed as boring, difficult and full of uncertainties. Cognitive ability and personality traits are also included as additional explanatory variables.
Design/methodology/approach
The logistic regression technique was applied using a sample of more than 2,300 microfinance institutions' clients in three provinces in Indonesia.
Findings
This study finds that financial literacy correlates positively with authority in household financial decision-making only among men. This does not mean that financial literacy is irrelevant for women's agency, since the skill might be important for authorities in other decision-making areas, including those outside households. Meanwhile, the relationship between cognitive ability and household financial decision-making authority is more universal.
Research limitations/implications
This study does not collect information on the levels of financial literacy of other household members and does not capture respondents' perceptions of household financial decision-making.
Social implications
The overall low level of financial literacy calls for the need for more targeted efforts to address this issue by policymakers. Education policy should also be designed to improve cognitive ability, as this ability is important for human agency and well-being.
Originality/value
Household decision-making has received significant attention in the literature. Authority in household decision-making is important because it represents a person's agency and has a profound impact on well-being. To the best of author's knowledge, studies on the importance of skills in household financial decision-making are very limited.
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Rofikoh Rokhim, George Adam Sukoco Sikatan, Arief Wibisono Lubis and Mohammad Irwan Setyawan
This study aims to investigate whether microcredit programme has a positive impact on productive poors. Several areas of investigation include clients’ borrowing behaviour, level…
Abstract
Purpose
This study aims to investigate whether microcredit programme has a positive impact on productive poors. Several areas of investigation include clients’ borrowing behaviour, level of savings and before-and-after psychological well-being comparison.
Design/methodology/approach
A case-study survey of 398 clients of a microcredit programme run by a charity organisation in Jakarta, Indonesia, was conducted in 2012. Descriptive statistics and cross-tabulation analyses were then performed to show the variation of different variables among the respondents and how they correlate with socio-demographic indicators.
Findings
The result shows an indication that microcredit brings positive impact on the clients’ welfare; however, the effect is not linear and there might be an optimum borrowing frequency. Moreover, the output also suggests that age, level of income and level of savings are three important determinant of borrowing behaviour.
Research limitations/implications
Although the result can be justified, it is necessary to be cautious about its generalisability because of limited number of sample and non-randomised sample selection.
Originality/value
Although the microcredit programme examined in this study has been operating since 2010, there is by far no comprehensive study to assess its impact on the welfare of the clients. This study attempts to fill in the gap by providing an analysis on how microcredit programme increases the welfare of the clients. In addition, as part of the continuous improvement programme, the study also identifies a number of factors that might indicate the clients’ borrowing behaviour.
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Rofikoh Rokhim, Arief Wibisono Lubis, Ida Ayu Agung Faradynawati, Winalda Ajaniara Perdana and Andrew Deni Yonathan
The purpose of this study is to simultaneously examine the role of microfinance from the business and social lenses by using the creating shared value (CSV) framework by Porter…
Abstract
Purpose
The purpose of this study is to simultaneously examine the role of microfinance from the business and social lenses by using the creating shared value (CSV) framework by Porter and Kramer (2011) in the context of Indonesia.
Design/methodology/approach
A survey among more than 170,000 borrowers of two specific credit schemes by PT Bank Rakyat Indonesia Tbk., the largest microfinance provider in Indonesia, was conducted to understand the perceptions of borrowers on the benefits of microcredit under the CSV framework.
Findings
The result confirms that, overall, the debtors acknowledged the importance of the loans in various aspects of CSV. The highest levels of importance were recorded in the case of stimulating the increase of business revenue growth, business productivity and fulfilling the needs of consumers. Disaggregating the results based on respondents’ demographic characteristics, it is shown that the findings in both credit schemes have a relatively similar pattern in terms of origin, business sectors and the borrowing purpose from.
Originality/value
There have been limited studies that examine the impact of microfinance from both the business and social perspectives. Most studies only use one of these. Implementing the CSV framework allows the authors to fill in the gap and understand how microfinance provides business and social benefits.
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Imanda Luzari Indomo and Arief Wibisono Lubis
The issue of capital structure among property developers in Indonesia becomes interesting as the government speeds up housing development. Examining which theory prevails…
Abstract
Purpose
The issue of capital structure among property developers in Indonesia becomes interesting as the government speeds up housing development. Examining which theory prevails (trade-off versus pecking order) can be done by looking at several determinants of capital structure. This study aims to argue that examining determinants of capital structure in this context should also incorporate business cycles, as the activities of property developers are cyclical.
Design/methodology/approach
Using a total of 183 observations of listed property developers from 2010 to 2019, this study uses the ordinary least squares regression technique. The focus is on determinants of capital structure, which are profitability, tangibility, firm size, ownership and potential growth. The observations are divided into different business cycles (expansion, peak, trough and decline) based on economic growth rates.
Findings
The results show that the natures of relationships between capital structure (leverage) and its determinants are different during distinct business cycles. For example, profitability has a significant and positive effect on leverage during peak, but the signs are negative during trough and decline. Trade-off theory provides a better explanation of property developers’ capital structure behaviour during peak while pecking order theory is more relevant during trough. It is more difficult to conclude which of these theories is superior in expansion and sideways.
Originality/value
There have been limited studies that focus on corporate finance issues of property developers in Indonesia, and no particular attention has been given to the role of business cycles.