Microfinance and Entrepreneurship at the Base of the Pyramid
42 Pages Posted: 12 Jun 2015 Last revised: 22 Aug 2019
Date Written: August 22, 2019
There continues to be substantial debate on whether and how providing inclusive access to finance through microcredit promotes development at the base of the pyramid. We contribute to this literature by examining household-level outcomes associated with different kinds of microfinance loans, and identifying conditions under which these loans achieve the most impact. Defying common expectations, loans funding microenterprises do not exhibit greater impact than those funding traditional livelihood activities, and loans for starting new microenterprises fare particularly poorly. But loan impact improves when multiple members of a microfinance borrower group seek livelihood loans together, and when the provided loans match the exact financial needs of the borrowers. Our findings underscore the need to refine how microfinance is applied as a tool for supporting entrepreneurship-led development.
Keywords: Microenterprise, Access to Finance, Microcredit, Base of the Pyramid (BOP), Emerging Economies, Economic Development
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