Impact of microfinance on entrepreneurial activty in emerging economies: Panel data from Argentina, Brazil, Colombia & South Africa

Abstract

Since the 1970s, microfinance, or small-size loans offered to poor people to use for startup or working capital so that they might improve their financial circumstances through entrepreneurship, has grown in popularity and availability throughout the world. Across the globe, millions of individuals have borrowed billions of dollars through microfinance institutions. Emerging economies, in particular, view microfinance as a significant economic development tool. However, limited empirical evidence exists to substantiate the impact of microfinance. In this study, we use panel data from Argentina, Brazil, Colombia and South Africa to investigate the effects of microfinance on early and later stage entrepreneurial activity. For early stage entrepreneurial activity, we examine this relationship, overall, as well as by gender. Our study’s results prove interesting. We find that microfinance relates positively to early stage entrepreneurial activity overall and by women. On the contrary, microfinance negatively relates to early stage entrepreneurial activity conducted by men. It also negatively relates to later stage entrepreneurial activity overall. These findings add empirical evidence to the scholarly discourse about microfinance and its impacts.

Publication Title

International Journal of Entrepreneurship

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