Role of Micro Finance Institutions to Support Micro, Small, and Medium Enterprises: A Comparative Legal Culture Study of Bangladesh, Philippines, China, India and Indonesia
Abstract:
The role of Micro Finance Institutions (MFIs) is to support micro/small businesses to work for people's welfare and provide funds as capital to develop their own businesses. This study aimed to examine the extent to which the legal culture of a country defines the role of MFIs in improving the welfare of micro and small businesses. For this purpose, a comparative study was made between Bangladesh, the Philippines, China, India and Indonesia to understand their respective legal culture and whether the laws and regulations of the country helped in resolving the poverty issues. The study adopted a normative legal research design to analyze descriptively this qualitative research. A comparative approach with a historical analytical design was also adopted with the view to investigate the laws and regulations of each country in the context of MFIs and their contribution to poverty alleviation and community welfare. Both primary and secondary sources were used for data collection. The primary sources included the informants of MFIs and micro and small medium enterprises (MSMEs). It was found that the legal culture of each country was strongly influenced by its local economic wisdom. In Bangladesh, the goal of Grameen bank or MFIs was to make people feel ashamed of begging which was very successful. The Grameen Bank model in Bangladesh was a breakthrough in alleviating poverty as beggars, who were benefitted with micro finances to establish their micro businesses of weaving and embroidery, and selling candies and matches, had to give up begging because they had started a new business and begging was redundant. However, this model was not successful in the Philippines, China, and India due to the government interference while in Indonesia, the Grameen Bank pattern was modified slightly by introducing the Islamic principles of siddiq, amanah, tabligh, and fathonah, which guided the MFIs to synergize with the local economic wisdom, but not all regions in Indonesia met the same success due to the requirement of collateral and high interest rates.
Keyword:
legal culture, micro finance institutions, micro small and medium enterprises, Islamic banking.