Document Type

Article

Publication Date

8-19-2013

Publication Title

Thunderbird International Business Review

Volume

55

Issue

5

First Page

545

Last Page

562

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.

Comments

This is the peer reviewed version of the following article: Chakrabarty, S. & Bass, A.E. 2013. Encouraging Entrepreneurship: Microfinance, Knowledge Support, and the Costs of Operating in Institutional Voids. Thunderbird International Business Review. 55(5): 545-562, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1002/tie.21569/abstract. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.