Impact of microfinance on sustainable entrepreneurship development

Figures & data

Figure 1. Development and evolution trends of organizations offering microfinance. Source: Triodos Facet, based on the classification by Farbman and Lessik (Facet 2007).

Table 1. An overview of microenterprise loan products in Bangladesh.

Supplier	Target group	Meeting	Loan size	Repayment	Interest rate	Duration
The Grameen Bank	Successful and fast-moving members		No restriction on the loan size Average loan size is Tk 29,507 (US $ 389.69), maximum loan taken so far is Tk 1.6 million (US $ 23,209)			12–36 months
ASA-Small business loan (SBL)	Men (shop owners, traders) and successful women. Small loan borrowers (‘graduate’ borrowers)	Weekly	1st cycle 15,000–50,000; increased max. of Tk. 5000 every successive loan	Weekly	28.8%	12 months
ASA-Small entrepreneur loan (SEL)	Microentrepreneurs [normally for production-type enterprise] Individual loan	No meeting	1st cycle 30,000; Next cycle: depends on feasibility study but maximum of Tk. 200,000	Monthly	28.8%	Max. 24 months
BRAC PROGOTI	‘Graduates’ of microfinance program, and the non-poor microentrepreneurs. Both men and women clients	No meeting	Loan size: Tk. 50,000–300,000 (now Tk. 50,000–500,000)	Monthly	30%	Max 24 months
ME-PKSF funded NGOs	‘Graduates’ of microcredit programs	Weekly	Tk. 30,000–3,00,000	Monthly	25%	12–24 months
MIDAS Financing Limited, MIDI	MIDI only lends to enterprises having a legal entity (a proprietorship, partnership, or private limited company)	No meeting	Tk. 50,000–500,000 collateral is not required for loans but must be secured by the personal guarantee of the sponsor or a third party		14.5% (declining method)	12–36 months
Commercial banks		No meeting	Tk. 50,000 to 5,00,000. Collateral and or personal guarantees are required		Same as other commercial bank	12–24 months
Leasing companies		No meeting	Tk. 200,000 to 5 million

Source: Authors' compilation based on websites of various MFIs, Alamgir (2009).

Figure 2. Impact of microfinance on sustainable entrepreneurship development.

Table 2. Correlation coefficient.

Variable	Obs.	Mean	Std. Dev.	1	2	3	4	5	6	7	8	9	10	11	12
1	102	61.157	65.934	1.000
2	102	1.422	0.969	0.166	1.000
3	101	9.861	7.609	0.216	−0.353	1.000
4	102	53.600	68.278	0.663	0.202	0.060	1.000
5	102	0.363	0.483	−0.245	−0.128	0.033	−0.466	1.000
6	98	10.806	7.923	0.005	−0.094	0.265	−0.055	0.126	1.000
7	102	7.098	3.597	0.303	−0.043	0.200	0.262	−0.107	−0.254	1.000
8	101	39.158	9.859	0.137	0.006	0.141	0.109	−0.069	0.526	−0.231	1.000
9	102	4.284	1.381	−0.301	−0.016	−0.184	−0.104	0.008	0.280	−0.147	0.191	1.000
10	102	0.353	0.480	0.123	−0.178	0.252	−0.179	0.090	0.266	−0.041	0.137	−0.061	1.000
11	102	3.864	2.883	0.093	0.018	0.026	−0.053	−0.055	0.276	−0.359	0.267	−0.023	0.062	1.000
12	100	1.410	0.570	0.019	−0.077	−0.002	0.064	−0.265	−0.128	0.069	−0.150	0.074	−0.043	−0.069	1.00

Note: 1. Income; 2. Innovation; 3. Competitive Intensity; 4. Loan/1000; 5. Lending group; 6. Business experience; 7. General education; 8. Owner age ; 9. Number of dependents; 10. Agriculture; 11. Membership duration; 12. Multiple loans.

Table 3. Relationship among microenterprise loan, income, and innovation.

Dependent variable	Model 3.1	Model 3.2	Model 3.3	Model 3.4	Model 3.5
	Income	Income	Income	Innovation	Income
Individual control
HHAge	1.343352*	1.325293*	0.5877771	0.0020898	0.5716775
HHDepen	6.046408**	−14.29823**	−8.945235*	−0.0521237	−8.543676*
Industry control
Agriculture	18.26772	22.7872†	27.42407**	−0.136073	28.47237**
Business control
MemDur	3.19957	3.272726	3.655313*	0.00399	3.624574*
MultiLoan	4.324002	5.805839	3.729463	−0.1541406	4.916956
Industry covariates
Competition			0.3255178	−0.0479779**	0.6951379
Business covariates
Loan/1000			0.6557857***	0.0028633	0.6337266***
LendMethod			12.43925	−0.0948427	13.16991
Individual covariates
BusExp			−0.1876734	−0.0948427	−0.2173918
General education			3.398486*	−0.0045934	3.433873*
Innovation		11.80167†			7.70396
Number of obs.	99	99	94	94	94
F(6, 92)	4.59	4.55	12.21	1.98	11.49
Prob > F	0.0004	0.0002	0.0000	0.0454	0.0000
R-squared	0.2304	0.2591	0.5954	0.1928	0.6064
Adj R-squared	0.1802	0.2021	0.5466	0.0956	0.5536
Root MSE	60.47	59.654	43.44	0.93093	43.105

†p < .10.

*p < .05.

**p < .01.

***p < .001.

Figure 3. Impact of microfinance on sustainable entrepreneurship development.

Figure 4. Obstacles and challenges of microentrepreneurs.

Table 4. Obstacles and challenges of microentrepreneurs.

Obstacles	Mean values
Financial
Lack of fund for starting business	0.71
Limited working capital	0.76
Limited capacity for financing fixed assets	0.63
Lack of collateral security	0.62
Entrepreneurial
Lack of entrepreneurial, business management and accounting skill	0.75
Lack of self-confidence	0.58
Lack of production skill	0.19
Lack of knowledge about innovation in production process and product differentiation	0.22
Marketing
Lack of access to marketing-related skill and information	0.45
Greater fluctuations of raw material price	0.48
Lack of supply of input for timely production	0.25
Competition from large units in the production line	0.37
Technical and infrastructural
Lack of appropriate tools and technologies	0.36
Non-availability of modern technologies, E-commerce	0.16
Lack of access to information	0.31
Lack of infrastructure facilities	0.25
Regional
Inadequate incentives provided by the government	0.06
Long and complicated procedures to avail institutional help	0.09
Political influences	0.07
Others (please specify):	0.04

Figure 5. Re-configuration of obstacles and challenges of microentrepreneurs.

Facet, T. 2007. Microfinance in the Netherlands: Uncharted Territory. Opportunities and Challenges. Regulierenring, LB Bunnik, The Netherlands: Triodos Facet Publications.

 Google Scholar

Alamgir, D. A. H. 2009. State of Microfinance in Bangladesh. http://www.inm.org.bd/publication/state_of_micro/Bangladesh.pdf.

 Google Scholar