Microfinance Spurs Microenterprise Development: An Exploration of the Latent Processes

• Author: Debadutta K. Panda
• DOI: http://doi.org/10.1002/jsc.2084
• Date: 01 September 2016
• Published date: 01 September 2016

RESEARCH ARTICLE

Strat. Change 25: 613–623 (2016)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2084

Copyright © 2016 John Wiley & Sons, Ltd.

Strategic Change: Briengs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2084

Micronance Spurs Microenterprise Development: An

Exploration of the Latent Processes1

Debadutta K. Panda

Institute of Management Technology, Hyderabad, India

Intermediation services, entrepreneurial nance, peer support, personal attributes,

family attributes, and locational attributes led to microenterprise development in

Indian micronance programs.

e root of micronance can be traced back to the Irish Loan Fund in the 1700s

and credit unions in the late 1800s. Micronance was highlighted worldwide after

the Grameen experiments in Bangladesh. ereafter, signicant studies were con-

ducted in South East Asia and Latin America. From 1995 to 2015 there were

hundreds of papers published on group lending and micronance, with a shift

from fundamental research to empirical then action research. One of the greatest

contributions to the research on micronance has been made by the Poverty

Action Lab (J‐PAL) at Massachusetts Institute of Technology.

Micronance interventions in India aimed at the provision of micronance

products and services for small‐scale nancial support to ‘non‐bankables.’ ere

are broadly two formats followed in the provision of micronance in India:

(i) self‐help group (SHG)‐based micronance and (ii) Grameen joint liability

group (JLG)‐based micronance. e SHG format was employed by development

organizations using subsidized capital, while the JLG model was practiced by

for‐prot institutions engaging with private capital. Micronance programs in

India included products like microcredit, microsavings, microinsurance and

pension funds, payment transfers. Micronance services included nancial inter-

mediation, social intermediation, and business development support (Panda,

2009a). e micronance interventions impacted program participants across

various economic, social, and psychological indicators (i.e., income, savings,

expenditure, employment generation and employability creation, literacy develop-

ment, and migration reduction) (Khandker, 2005; Khandker et al., 1998; Panda,

2009b; Panda and Atibudhi, 2010; Pitt and Khandker, 2002). Most impact assess-

ment studies have measured micronance impacts across households as a unit of

analysis (Amin et al., 2003; Panda, 2009b; Park, 2001; Pitt and Khandker, 1996),

1 JEL classication codes: G21, G29, O16.

Enhancement of risk‐taking

ability, coping mechanism,

psychological strength, pro‐

activeness, and networking of

self‐help group members led to

microenterprise development.

Development of microenterprises

was not always the result of one’s

intention, but a conscious

imitation and supporting agencies’

constant persuasion.

Development of microenterprises

is subjected not only to the

willingness but also to the ability

of micronance members.