Entrepreneurship and financial inclusion through the lens of instrumental freedoms

Abstract

This paper investigates the interrelated nature of instrumental freedoms and how they combine to engender financial inclusion amongst low income entrepreneurs. Drawing from Sen's capabilities approach, we emphasize a need for understanding the freedoms associated with institutional arrangements and the complex causal processes that lead to financial inclusion amongst micro-entrepreneurs. We perform a Fuzzy Set Qualitative Comparative Analysis of 19 countries in Latin America and the Caribbean. The findings indicate four causal combinations for financial inclusion. Our findings indicate that no single instrumental freedom is necessary for financial inclusion; it does not necessarily depend on the provision of microfinance and that political freedom is an important peripheral condition for inclusion. This allows us to question some of the assumptions about how microfinance operates amidst a set of complex institutional instrumental freedoms.

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.…”

Financial inclusion research around the world: A review

“…Another school of thought argue that financial inclusion can be achieved through other strategies and interventions such as through smartphone-based micro-lending (Bravo et al, 2018), women empowerment (Shetty and Hans, 2018), increased regulations (Chen and Divanbeigi, 2019), foreign bank entry (Leon and Zins, 2019), creating microfinance institutions or banks (Yi et al, 2018), Islamic banking (Naceur et al, 2017), optimal monetary policy (Mehrotra and Yetman, 2014), integrating financial services into post office shops (Pollin and Riva, 2002;Anson et al, 2013), entrepreneurship (Kimmitt and Munoz, 2017), using selfhelp groups (Pati, 2009), agent banking (Diniz et al, 2012), improved consumer protection reforms (Dias and McKee, 2010), building financial capability (Sherraden, 2013), reducing the distance to a bank (Demirgüç-Kunt and Klapper, 2012), access to point-of-sale (POS) and point-of-transaction (POT) devices (Banka, 2014), mobile money (Donovan, 2012), rural branching (Aggarwal and Klapper, 2013), and many more.…”

Computing for social good: Supporting microfinance institutions in Zambia

“…Microfinance entails the delivery of financial services to poor and low‐income households without access to basic financial services for use in their microenterprises or productive purposes (CGAP, ; Chiu, ; Lebovics, Hermes, & Hudon, ; Tomaselli, Timko, & Kozak, ), thereby enabling them to raise their income and living standards. Thus, MFIs of different sizes, types, and legal status provide financial services to the poor that are deemed critical for eradicating poverty (Kimmitt & Munoz, ; Kauffman & Riggins, ). What once started off as microcredit, a simple service offering microloans to the world's unbanked populations and, in particular women, has evolved into microfinance, offering broader services, such as deposits, insurance, money transfers, and payment products (Bruton, Khavul, & Chavez, ; Hermes et al, ; Khavul, ).…”

“…Nevertheless, MFIs are generally known to specialize in providing small or “micro” loans (microcredit) to entrepreneurs, primarily in developing countries (Berger & Nakata, ). Over time, microfinance has spread around the world and adapted to different local contexts, while MFIs have become increasingly more diverse and complex in nature and in the scope of their offerings (Chiu, ; Kimmitt & Munoz, ). These MFIs tend to be entities of different sizes and legal formats (ie, nonprofit nongovernmental organizations [NGOs], for‐profit NGOs, self‐help groups, ROSCAs, credit unions, cooperatives, nonbanking financial institutions, banks, companies, etc) and have highly diverse lending practices (group lending, village banking, and individual lending) (Armendáriz & Morduch, ).…”