Profit orientation of microfinance institutions and provision of financial capital to business start-ups
Year: 2015
Type: article
Abstract: This article examines whether the profit orientation of a microfinance institution (MFI) affects its decision to extend loans to business start-ups. Based on information from 198 MFIs in 65 countries, we show that for-profit MFIs are less likely to provide financial capital to business start-ups than their not-for-profit counterparts. This results from the adoption of a dominant ‘commercial’ logic by for-profit MFIs, which motivates them to maximize profit by extending loans to less risky ventures with mature projects. In contrast, a dominant ‘development’ logic motivates not-for-profit MFIs to alleviate poverty through supporting the creation of new ventures. The use of a propensity score matching technique to correct for any potential endogeneity problem provides us with greater confidence that the suggested association is not a spurious correlation.
Institutions: Monash University, University of Nottingham Ningbo China
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2069799790