An empirical investigation of the interplay between microcredit, institutional context, and entrepreneurial capabilities

Abstract

Understanding under which conditions microcredit is used by new, growing ventures, is becoming increasingly pertinent to scholars. This paper investigates the interplay of the use of microcredit with entrepreneurial capabilities and the moderating role of institutional development in Sub-Saharan Africa. Our findings show that higher constraints to entrepreneurial capabilities is associated with higher use of microcredit. In addition, we find that new, growing ventures use microcredit more where either economic or political institutions are less developed. Our findings suggest the importance of the existence of some type of institutional strength that must be in place to form the basis for microcredit activity. This allows for speculation as to whether microcredit works as the literature currently assumes.

Gender, Microcredit and Poverty Alleviation in a Developing Country: The Case of Women Entrepreneurs in Pakistan

“…The present study identifies a gap in terms of financial literacy, entrepreneurial knowledge and skills (or capabilities : see also Kimmitt & Munoz, ; Kimmitt et al, ) to mitigate the negative impact of HP and FP. Households with larger numbers of children have greater chances of increasing the welfare of women and their family (1–4 children p < .01 and more than 5 children p < .05) through the use of loans from MFIs.…”

“…Interventions to improve access to finance could assist the alleviation of deeply embedded poverty (Hanmer and Klugman, ). Whilst financial exclusion is a challenge for developed economies (irrespective of gender), it is more acute in developing countries where the financial environment and institutions are underdeveloped (see also Kimmitt & Munoz, ; Kimmitt, Scarlata, & Dimov, ), and with challenging economies. The problems are further exacerbated because of illiteracy, inadequate health facilities, underdeveloped financial sectors and poor infrastructure that gives rise to acute poverty.…”

Firms with benefits: A systematic review of responsible entrepreneurship and corporate social responsibility literature

“…Although some literature on responsible entrepreneurs and the interplay with their stakeholders can be found in our corpus (e.g., Muhammad et al, 2016;Newth, 2016;Kimmitt et al, 2016) including literature specifically focusing on livelihoods (Laeis & Lemke, 2016), the CSR literature suggests that much more work in this realm may be undertaken (see Table 6). We hypothesize that particularly research on the interaction between responsible entrepreneurs and NGOs may be of interest as well on (possibly innovative) approaches responsible entrepreneurs undertake to gain a social license to operate.…”

Entrepreneurship and financial inclusion through the lens of instrumental freedoms

“…China) but the political system, governed by minority rule or elitism, offers little or no incentive for innovative entrepreneurial firms (Bradley et al, 2012;Schumpeter 1934). From an entrepreneur's view, Kimmitt et al (2016) identify that under-developed political institutions lead firms to borrow more microcredit and Chliova et al (2015) highlight that women's empowerment is more profound amongst microcredit entrepreneurs where there are greater political freedoms. Thus, the political freedoms associated with a particular context can have distinct manifestations for how entrepreneurs access and use microcredit.…”

“…legal/regulatory) which influences how entrepreneurial finance is channeled to micro-entrepreneurs in developing economies (Eid 2005; Levine, 1998;Shleifer, 1997). However, current efforts reduce institutional explanations to the effects of their individual components; how the legal protection of lending activities and ease of starting a business influences an MFIs willingness to fund start-ups (Shahriar, Schwarz and Newman, 2015); the impact that a country's regulatory environment has on the performance of MFIs in periods of financial crisis (Silva and Chávez, 2015); the willingness of entrepreneurs to borrow from MFIs depending on the strength of political or economic institutions (Kimmitt, Scarlata and Dimov, 2016); or the moderating effect of different aspects of institutions on entrepreneurial outcomes (Chliova et al, 2015). This is problematic because it does not consider institutional elements together, which is central to further understanding how contexts, holistically, constrain or facilitate human agency and how agency and institutional complexity interact with each other Munoz and Kibler, 2016).…”