Loan Associations in Developing Countries: Research Methodology

Introduction

Loan associations operate on different grounds compared with commercial bank loans. Commercial and savings bank loans and financing options provided by financial service providers are typically focused on funding business ventures. The security for such loans is also devised based on credit history, business performance, and the likelihood of growth potential. However, loan associations and building loans are more concerned with promoting land and building ownership. Residential mortgage lending is one of the most popular forms of loan association activity. Loan associations are generally chartered by the federal or state government. They operate within a centrally focused framework in which savings deposits are collected from customers and utilized for investment in residential mortgage loans. A degree of flexibility and strategic control also rests with customers — both borrowers and depositors — with the most significant control relating to the business goals of the association (Dexter, 2009).

The regular repayment method was adopted using share accumulation and the sinking-fund approach. Members of the association also formed bonds with one another, incurring lower costs. The formation of credit unions and thrift deposit institutions further diversified the forms of association loans. The demutualization of loan societies began in the United States and has since been recognized across Australia, South Africa, Japan, and the United Kingdom, where the conversion of mutual savings institutions, loan associations, and mutual savings banks into stock organizations is observed. Moreover, market forces also influenced loan associations and drove a transformation toward parity with conventional financial institutions (Caprio Jr. & Vittas, 2007). The present state of loan associations is now nearly identical to that of savings banks. Changes in U.S. laws and regulations have enabled loan associations and credit unions to offer services similar to those of their commercial counterparts (Griffin, 2010).

Developing countries face challenges across many areas, including education, healthcare, residential housing, and broader community development. Large and scattered communities living in remote areas are often unaware of long-standing techniques that can help achieve community betterment. Federal and local governments also have minimal resources to fund such initiatives. Therefore, it is necessary to improve government-backed programs to address these challenges. Locally operating mutual loan associations can be explored as options to help eliminate these problems and create stronger local communities in developing countries. The degree to which local, community-based, and government-backed loan associations can be helpful warrants evaluation.

Technology is also an enabler in numerous poverty-elimination initiatives. The use of the internet and mobile phones is helping to create awareness in many communities. Information and communication technology options in different countries should be examined to present viable solutions. Academic and professional literature provides empirical evidence of such initiatives, and a thorough investigation is needed to understand their applicability. The generalizability of existing studies across different contexts is also an important consideration.

Research Problem and Questions

The following research questions are focused on developing clear research objectives. They will also facilitate the development of the research design and methodology, both of which have a significant impact on final study outcomes and applicability.

The envisioned research methodology is developed around a qualitative research design. This design enables the research to draw on existing literature in both academic and professional domains. The methodology is informed by a defined research philosophy that establishes the basis for knowledge development and core assumptions. Available philosophies include positivism, objectivism, realism, and others. The positivist research philosophy has been selected for the envisioned methodology because it provides a means of establishing truth about events through logical observation and qualitative interviewing.

The envisioned approach elaborates the manner in which the research objectives are addressed. The available approaches are deductive and inductive. Deductive research uses a top-down approach in which observations are used to design a survey and then form conclusions. The envisioned method, grounded in the qualitative paradigm, will enable investigation of social behavior through the use of secondary data, surveys, open-ended focus group questions, and interviews. Responses are analyzed using a contextual analysis approach, which helps in understanding the related factors that can influence the overall results.

Envisioned Research Methodology and Design

The envisioned research design also covers data collection, evaluation, and definition of the research population, as well as the methods underlying the actual conduct of research. Two well-understood methods are available: primary and secondary data collection. Although both are valued, the present methodology relies primarily on secondary data collection. Primary data from focus groups will also be collected and incorporated into the work. Data collected from primary sources will be handled in accordance with the ethical constraints of the envisioned methodology.

The envisioned research methodology allows respondents to provide their own views on the research questions, with the majority of views indicating group thinking. This is beneficial for the study in terms of firsthand information and participant perspectives. Open-ended questions asked during focus group meetings provide detailed insight into thoughts and opinions about the research problem. Overviews of questions and minutes from focus group meetings will also be presented in the form of an annex. The annex instrument will be administered and focus group discussions and responses will be analyzed.

Eminent scholars have delineated the steps involved in qualitative research. The research process begins with the development of research questions. In the next stage, the researcher identifies the sample and proceeds to collect relevant information from the targeted sample. Once data collection is complete, the researcher draws inferences that can be incorporated into the existing theoretical context. Finally, these inferences are assembled into a report with concluding remarks (Bryman & Bell, 2007). A similar format has been adopted for the current study, with the researcher using questions and hypotheses to guide data collection. Relevant information was collected and scrutinized against the hypotheses. Theoretical foundations were used to draw inferences and justifications to verify or discard the research hypotheses (Bryman & Bell, 2007).

One of the key aims of identifying the study population is to identify cases that can be included in the research so that results can be generalized. Since sampling procedures involving human subjects are not relevant in this scenario, the population can broadly be identified as comprising literature published from 2006 to 2014 that deals with the role of loan associations in developing countries, the role of technology in raising awareness within underprivileged communities, and the contribution of local community-based loan organizations in various countries. These case studies provide the relative basis for understanding the level of generalizability appropriate across different parts of the world.

The study focuses on prior research, including peer-reviewed journal articles and scholarly work conducted on the subject of local loan associations and state-backed community credit support systems. In order to keep the study focused and confined to defined parameters, the literature is selected from existing research in this domain. Target literature must be precisely defined based on its ability to fulfill inclusion criteria. The primary criterion was that literature must have been published within the preceding eight years, and only peer-reviewed journal articles were shortlisted to minimize any possible bias in sample selection.

Sampling techniques are broadly classified into probability and non-probability sampling. Probability sampling involves the selection of cases that have an identifiable chance of being selected as subjects (Sekaran & Bougie, 2010). Non-probability sampling does not offer the same equal chance of inclusion. Since the current study aims to explore the effective role loan associations can play in remote communities of developing countries — drawing on secondary data from prior literature — the sampling method reflects a non-probability approach. Purposive sampling was used to locate relevant literature that fulfills the study's criteria and provides valid secondary information on the subject. Purposive sampling is appropriate when the researcher aims to draw on literature that meets criteria fixed in advance (Sekaran & Bougie, 2010). Articles published prior to 2006 were excluded to keep the research aligned with recent developments in the field. Selected literature was required to contain all key concepts and theories associated with loan associations.

Conclusion

The current research is expected to provide a detailed analysis of the factors that can increase the formation of loan associations in developing countries. It is also significant in presenting possible remedies for the challenges identified. The research will explore the reasons that are significant in creating an impact on communities through loan associations and will provide a workable framework of recommendations for developing loan associations and optimizing the use of community savings for mutual benefit. The use of technology to increase awareness, improve savings, optimize loan allocations, and enhance the community benefits of loan associations is also discussed. The generalizability of results and recommendations ensures that remote communities in developing countries are included within the scope of the study's findings. The contribution and significance of the research can be evaluated on the basis of its wide-ranging applicability throughout the developing world. There are different types of loan associations and credit communities that hold the potential to improve local communities in developing countries.