Past studies generally support that innovation based entrepreneurial activities are strong determinants of economic growth and development (van Stel et al. 2005; Wennekers et al., 2005; Wong et al., 2005). Yet, poor people, especially poor women, are excluded from such opportunities. The main reason for the exclusion is that many of these poor people are also excluded from education and formal finance system.
Microfinance as a social innovation held the promise to alleviate poverty by providing small unsecured loans to entrepreneurs and small businesses in poor communities. The possibility for “doing well by doing good” has led to the rapid expansion of microfinance institutions (MFIs) and the Nobel Prize for peace being awarded to Mohammad Yunus and the Grameen Bank in 2006. However, MFIs have faced multi-faceted changes (i.e. high operating costs of serving small loans and self-sustainability) and backlashes (i.e. making profits out of the poor by charging high interest rates) in recent years. Many recent studies question the effectiveness of its poverty alleviation and empowerment promises (Banerjee et al., 2015). In addition, studies also suggest that encouraging poor people to start business do not necessarily lead to economic growth and development (Shane, van Stel, et al. 2005).
At the same time, many poor people do not have other means to participate in the markets. Self-employment through engaging in entrepreneurial activities is probably one of the best means to pull themselves out of poverty. There exists strong evidence that microfinance can self-sustain and help poor people gain upward economic and social mobility (Brau and Woller, 2004). Perhaps, it is the institution, within which microfinance and entrepreneurship activities take place, that constrains and determines the actions and outcomes of these actions (Mair and Marti, 2009).
Building on literature, this study uses a longitudinal data set of 3787 observations from 63 developing countries participated in Global Entrepreneurship Monitor (GEM) National Expert Survey (NES) during 2007-2015 and1238 MFIs in these countries from MIX Market database in the same period to examine how countries’ entrepreneurial ecosystems affect the action and outcome of MFIs regarding women borrowers who are particularly likely to be credit constrained and have less opportunities to engage in income-earning activities.
Reference
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Brau, J.C., and G.M. Woller. (2004). Microfinance: A Comprehensive Review of the Existing Literature. The Journal of Entrepreneurial Finance, 9(1): 1-28.
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