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Abstract
The proponents of inclusive financial growth believe that giving relatively larger loans to the non-poor or near-poor entrepreneurs is the response of the microfinance institutions (MFIs) toward the demand of a existing and potential clients. But opponents are more likely to consider response such as mission drift by the MFIs. Therefore, this study attempts to measure the effectiveness of such microenterprise loans on increasing entrepreneurs' incomes and innovation. Our findings support the proponents of giving loans to entrepreneurs. Findings suggest that larger loans increase income, but less innovative business practice might threaten such income. Therefore, we recommend that microenterprise loans associated with proper business skills, information, and technologies be provided by MFIs with careful screening and monitoring to ensure the effective utilization of loan capital.
Acknowledgements
The author would like to thank Jean-Marie ROUSSEAU, Regional Consultant, EU, for his assistance with English expression and technical editing.
Funding
The author would also like to thank Dr Md. Abdul Alim, Senior Scientific Officer and Project Director (Social Science part) for financial support.
Notes
1. Financial inclusion is a multi-dimensional, pro-client concept, encompassing increased access, better products and services, better informed and equipped consumers, and effective use of products and services. Putting this concept into practice requires more than institutional expansion and portfolio growth. Balancing clients' interests and providers' viability, financial inclusion incorporates effective policies, legislation, industry and consumer protection standards, and financial capability (Ledgerwood et al. Citation2013).
2. Shanzhai innovation was motivated to construct a regional advantage, by addressing markets and reinforcing the capacity of the whole local community, and then increasing ‘the number, size and efficiency of companies in a region.' For details see Rousseau (Citation2012)
3. Jugaad is an Indian term widely used by poor people all around the world and related to innovative behavior in order to provide a fast and alternative solution to a technological or a technical problem as an improvised arrangement or work-around, which has to be used because of lack of resources. This Jugaad movement can gather a community of enthusiasts, which is very similar to the micro-credit concept in terms of poor targeted population, as well as a cost-effective way to solve the issues of everyday life. It is commonly used when describing a work-around to get through commercial, logistical, or legal issues. Similarly, Jugaad may refer to an idea from which a person can control his or her budget, or from which they may acquire commodities, low-cost transportation in rural areas, and free (free of charge) access to public services. For details see MPI (Citation2013).