Who Benefits? The Interactional Determinants of Microfinance’s Varied Effects

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

“…Clarity over the intrinsic inter-relationship between the poverty alleviation and small business development at the bottom-of-the-pyramid in Kazakhstan makes room for a policy focus on undersupply of microfinance. The problem in this transitional context is not the commercialisation of microfinance (Hoque et al, 2011): here, for-profit MFOs were important economic agents of development who engage closely and personally with the social worlds of their clients (Beck et al, 2018;Biggart & Delbridge, 2004). Rather the problem is that demand for microfinance outstrips supply across the board: both Foreign MFOs (that service needs for group lending) and Private MFOs (that service needs for individual lending) were constrained in terms of the finance -the former by dwindling donor financing, the latter by resistance to larger commercial MFOs registering as banks, and both by constraints on holding savings.…”

“…In Almaty and Almatinskaya districts, neither Foreign nor Private MFOs promoted or required formalisation, they only required repayment and the extent of microfinance use by clients, and the growth of their enterprises, were delinked from formalisation. Here, all microfinance borrowers exhibited 'shades of grey' (De Castro et al, 2014) combining informal and formal activities (Xheneti et al, 2019) depending on the changing requirements of their everyday entrepreneurial needs (Beck et al, 2018;McKelvie & Wiklund, 2010;Sutter et al, 2017;Welter et al, 2017).…”

“…We have contributed an innovative methodological approach to this endeavour and our rich empirical findings from Almaty and Almatinskaya districts demonstrate that the relationship between microfinance and everyday entrepreneurs in transitional settings needs rethinking. To this end, further research to investigate the realities of microfinance's quotidian operations and its interactions with clients (Beck et al, 2018) is urgently needed in transitional economies.…”

“…Both offer overly dualistic perceptions of the differences amongst MFOs, as commercial or outreach (Hoque, Chishty, & Halloway, 2011;Mcintosh & Wydick, 2005;Morduch, 2000), and borrowers, as poor and 'necessity driven' (Karlan & Zinman, 2012;Newman, Schwarz, & Ahlstrom, 2017;Newman, Schwarz, & Borgia, 2014) or as 'would-be' entrepreneurs who are 'opportunity driven' (Chliova et al, 2015;Shahriar & Garg, 2017;Siwale & Ritchie, 2012). In practice, many MFOs serve both kinds of customers, and the boundaries between them are fuzzy (Khavul, Chavel, & Bruton, 2013) whilst many borrowers' motivations move between, and may straddle, different categories over time as circumstances require or allow (Beck, Aquilera, & Schintz, 2018;Williams, 2008). Current research heeds longstanding calls to move away from asking which borrowers are 'real' entrepreneurs (Gartner, 1988;Ramoglou, Gartner, & Tsang, 2020) to instead investigating how borrowers use microfinance in their 'everyday entrepreneurship' (Welter et al, 2017).…”