How does microfinance enhance entrepreneurial outcomes in emerging economies? The mediating mechanisms of psychological and social capital

Abstract

In this article, a conceptual framework and research propositions are developed to explain how microfinance provision can translate into new venture creation and existing venture growth in an emerging economy context by engendering higher levels of psychological and social capital in clients. In doing this, the extent to which microfinance institutions provide business support and opportunities for social interaction are identified as factors which may strengthen the impact of microfinance provision on psychological and social capital, especially for poor entrepreneurs in resource-constrained settings. The conceptual framework and research propositions developed will be of use to academics in designing an agenda for future empirical research. In addition, they will help policymakers and microfinance providers to better design microfinance initiatives that enhance the well-being of clients and maximise their entrepreneurial outcomes.

Influence of microfinance services on entrepreneurial success of women in Sri Lanka

“…The findings of previous studies are not very specific on the relationship between these two variables. However, most of the authors are of the view that savings would be useful in fulfilling the funding requirements for expansion of existing enterprises and creation of new enterprises (Newman et al, 2014). Further, a few empirical studies conducted in Sri Lanka support this view (Attapattu, 2009;Ranasinghe, 2008;GTZ-ProMis, 2010).…”

Emerging Economies: Muddling Through to Development

“…Basically it is a question of supporting the physical and communication infrastructure with the human and social infrastructure Khanna and Palepu 1999), so that people are capable of making good use of the available infrastructure. It is therefore important to lubricate the physical infrastructure with the social connectivity (networks) for its smooth functioning (Purdy et al 2011;Bentlage et al 2013) and the development of the psychological and social capital of the citizens (Newman et al 2013), the absence of which, along with the problems of low levels of coordination and synchronization, could be a major reason for the infrastructure in emerging economies to remain disjointed and jerky.…”

Microfinance Services: Facilitating Entrepreneurial Success of Poor Women

“…However, there is a dearth of literature as to whether microfinance provision influences the creation of new businesses and growth of existing businesses (Newman et al, 2014). Furthermore, the findings of such empirical studies are inconclusive, and the focus on underlying mechanisms which may explain how microfinance influences entrepreneurial activity, is limited (Newman et al, 2014).…”

“…However, there is a dearth of literature as to whether microfinance provision influences the creation of new businesses and growth of existing businesses (Newman et al, 2014). Furthermore, the findings of such empirical studies are inconclusive, and the focus on underlying mechanisms which may explain how microfinance influences entrepreneurial activity, is limited (Newman et al, 2014). Hence, given the controversy as to whether microfinance services contribute to entrepreneurial activity and limited coverage on underlying mechanisms, management scholars have called for an increased attention on how and why some microfinance clients create successful enterprises while others do not (Ahlstrom et al, 2011;Bruton et al, 2010).…”

“…This has led to the difference of opinion among the researchers about the outcome of microfinance initiatives. Further, compared to the availability of research studies on subjects such as economic development, poverty alleviation and women empowerment, there is a dearth of studies on influence of microfinance services on creation of new businesses and growth of existing businesses (Newman et al, 2014). Even the limited empirical studies conducted by development economists (Banerjee et al, 2010;Crepon et al, 2011;Karlan & Zinman, 2011) the findings are inconclusive and have limited focus on how microfinance services influence entrepreneurial activity.…”