Unilateral microfinance? The commercial roots of entrepreneurial diversity

Abstract

Formal credit markets in developing countries are less advanced and therefore, obtaining external funding is difficult for entrepreneurs. As such, microfinance can be a viable alternative solution. This study demonstrates the diverse structure of the microfinance sector and the crucial role of commercial microfinance as a growth trigger in Kazakhstan. By drawing on data from six in-depth interviews with key microfinance industry informants and 155 structured interviews with entrepreneurial users of microfinance lending in Kazakhstan, we found that commercial and outreach microfinance organizations (MFOs) have differing capital structures and evaluation criteria and serve different types of entrepreneurs. Although commercial MFOs distance themselves from poor entrepreneurs, their role in supporting entrepreneurship is important as they provide ongoing funding access and, therefore, tackle entrepreneurs’ working capital dilemmas

Microfinance and Small Business Development in a Transitional Economy: Insights from Borrowers’ Relations with Microfinance Organisations in Kazakhstan

“…Understanding this is important for transitional economies where small business development is integral to successfully building a market economy (Bliss & Garratt, 2001;Davis, 2016;Low, 2006). As with other similar economies, the majority of MFO borrowers in Kazakhstan are entrepreneurs in the informal economy who are overlooked by commercial banks, and hitherto have relied on informal moneylenders (Subalova, Al-Dajani, & Bika, 2015). In these contexts, where a large proportion of the workforce are by necessity self-employed, the informal sector plays a vital role in poverty alleviation, economic growth and in fostering the new market economy.…”

Entrepreneurial financial resilience and financial innovation in a turbulent era

“…Entrepreneurship remains a form of human agency to mediate any external shock, and thus it is a central tenet for economic security, growth and recovery, irrespective of the geographical context; with small businesses being critical to economies and their recovery (Storey, 1994;Deakins, 2020). Entrepreneurship is also a critical antecedent of the economic success of the various members not only of the G7 2 and the G20 3 but also the merging BRICS+ group of nations.…”

“…(3) detailed policy-relevant research is clearly needed to investigate further the role of interventions in supporting SMEs to internationalize and, in particular, to enable them to obtain finance and other forms of capital (such as social capital -contacts) and legitimacy to enable this activity to succeed (Nitani and Riding, 2015). ( 4) there is a necessity to distinguish genuinely unique aspects of entrepreneurial finance in SMEs in emerging economies (Demirbaş and Demirbaş, 2015;Peiris et al, 2015;Sandhu et al, 2015;Subalova et al, 2015). Thus we called for more focused empirical research that adopts a contextualized, less Western-centric lens to approach the phenomena being investigated with the opportunity to conduct future research in emerging economies.…”