Microfinancing as an inclusive financial paradigm and its viability as a social business enterprise in Australia
Creators: name: Isa, Masud
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350299
subject: Banking, finance and investment not elsewhere classified
classificationCode: 350704
subject: Entrepreneurship

description: The inclusive nature of the Grameen Bank (GB) model and its effectiveness in addressing issues of poverty and financial exclusion in developing countries are widely recognised. However, its efficacy as a strategy in advanced economies remains under-researched. More so, there appears to be no study undertaken exploring the possibility to establish a microfinance social business enterprise in the Australian socioeconomic context. The current circumstances of the Australian economy, and policies being pursued to manage it, have made this research all the more important.<br><br>Australia is regarded as a wealthy country and has experienced about two decades of continuous economic prosperity, spurred by a mining boom (Das, 2013). However, not all Australians have benefited equally from the wealth that has been created. As a so-called welfare economy, Australia has institutionalised a comprehensive safety net programme (SNP) as the principal strategy for supporting the relatively low-income population. With an estimated 20% people below the 60% median poverty line (Dorsch et al., 2016: 11), 17% of adult population (Connolly, 2014b: 5) financially excluded, and about one-third of the total labour force of the country on part-time and casual employment, the need for an alternative strategy to connect the unemployed and underemployed low-income working age Australians to the economic value chain is an imperative. Approximately, one-third of the Federal budget is committed for SNP. Notwithstanding, the gradual slowing down of the economy exacerbated by the fallout from the global financial crisis, the management of the Australian economy has come under increasing scrutiny.<br><br>The global microfinance movement, inspired by the example of GB, motivated the Australian Government to establish a Community Development Finance Pilot in 2009, and a Social Enterprise Development and Investment Fund in 2010, to explore fair and affordable financial services for the financially excluded low-income individuals. A burgeoning of microfinance organisations: not for profit companies (i.e. benevolent or charity entities), unincorporated entities, and credit unions, supported by the Government and corporates, populate the microfinance sector. Despite reported positive social and economic impact, Australian microfinance organisations are found to be financially nonviable over the medium-to-long-term, providing mostly consumer loans as opposed to microenterprise loans for self-employment, and serving only a small number of financially excluded low-income people. The sector is essentially at the crossroads. Against this backdrop, this thesis investigates the replicability of microfinance social business model of GB in Australia.<br><br>Adopting a qualitative paradigm with a constructivist epistemology, this research assumes the theoretical perspective of phenomenology which espouses that the construction of meaning and its effectiveness are the results of individual experiences of a phenomenon. In this instance, microfinance practices in different sociocultural settings are explained from everyday experiences of practitioners, clients and broader stakeholders who are directly and indirectly impacted by microfinance operations.<br><br>This thesis involves three inter-related studies. Study 1 is an evaluation of the suitability of establishing a microfinance social business in Australia. The study is supported by a poverty and inequality mapping and a critical analysis of the existing microfinance market and its nature. Respectively, Studies 2 and 3 are exploratory and explanatory case studies of GB in Bangladesh, and its replication, Grameen America (GA) in the USA. The GA model investigated from the perspective of examining the process of adaptation of the GB paradigm in a developed economy with similar socioeconomic characteristics to that of Australia. Supported by multiple sources of extant literature, all the three studies used primary data obtained through semi-structured interviews of microfinance practitioners and stakeholders. Institutional theory and contingency theory of organisations provide the theoretical lenses through which complexities of society, institutions, and the underlying dynamics of the growth are viewed. These two theories helped to explain the adaptation process of GB replication across different social and economic contexts.<br><br>Study 1 identified a potential market for microfinance social business in Australia. A number of institutional and legal barriers were identified, and an apparent institutional anathema to undertaking social-collateral microfinancing model was investigated and explained. The case studies of GB and GA illustrated socioeconomic and regulatory challenges in their respective countries, and demonstrated the process of adapting and responding to both institutional and noninstitutional factors. The cross-country findings of the three studies highlighted the contextual differences, adaptation strategies, and identified the key attributes necessary for the foundation of a potential microfinance social business model for Australia.<br><br>This thesis has a number of implications for theory, policy, and practice in the implementation of inclusive and socially relevant microfinance social business enterprises in the Australian context. The research contributes to the theoretical understanding of microfinance as a social business from the perspectives of design and delivery system; GB model’s conflict with the precepts condoning the solely profit-driven non-inclusive growth paradigm; distributive justice and equity in lending; and culminates in the development of a conceptual framework of a microfinance social business for consideration and application in different socioeconomic and regulatory environments.