Encouraging entrepreneurship: Microfinance, knowledge support, and the costs of operating in institutional voids

Subrata Chakrabarty, A. Erin Bass

Research output: Contribution to journalArticlepeer-review

38 Scopus citations

Abstract

This study focuses on the supplemented strategies of microfinance institutions (MFIs), in which the MFI offers nonfinancial services, such as entrepreneurship related knowledge, in addition to financial services to impoverished borrowers at the bottom of the pyramid (BoP). We examine two contextual factors-foreign direct investment (FDI) and loan defaults-to better understand the relationship between providing knowledge support to encourage entrepreneurship and costs of operating at the BoP for MFIs. In contexts where FDI is low and loan defaults are high, providing knowledge support to encourage entrepreneurship aggravates the MFI's costs of operating at the BoP. However, in contexts where FDI is high and loan defaults are low, providing knowledge support to encourage entrepreneurship among impoverished borrowers does not aggravate the MFI's costs of operating at the BoP. Hence, in emerging markets where governments welcome FDI and curb loan defaults, MFIs can viably support entrepreneurship among the poor.

Original languageEnglish (US)
Pages (from-to)545-562
Number of pages18
JournalThunderbird International Business Review
Volume55
Issue number5
DOIs
StatePublished - Sep 2013

ASJC Scopus subject areas

  • Business and International Management
  • Geography, Planning and Development
  • Political Science and International Relations

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