Scaling Social Ventures under Institutional Fragility

Abstract

Inclusive growth, driven by social venture, is the most critical factor in alleviating poverty at the bottom of the pyramid. How do institutional changes influence the growth of social ventures? We develop the concept of institutional fragility to emphasise the mutual conflict and contradictions among multiple dimensions of institutions. The empirical analysis uses the Microfinance Information Exchange dataset to analyse the scaling growth of 3,241 microfinance institutes (MFIs) across 81 countries in the industry emergence period. Our findings reveal that institutional fragility significantly curtails the expansion of social ventures. Additionally, institutional fragility negatively affects the dynamic between the borrowing community and MFIs’ growth, as well as the relationship between a gender-focused approach and MFIs’ growth.

Keywords:

• Institutional fragility
• social venture growth
• microfinance
• poverty alleviation

JEL classifications:

• O17
• G21
• L26

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

Notes

1 Polgreen, L. and Bajaj, V. (2011) Microcredit Pioneer Ousted, Head of Bangladeshi Bank Says, The New York Times, March 2. http://www.nytimes.com/2011/03/03/world/asia/03yunus.html?_r=0

2 See it mission statement http://www.grameen-info.org/index.php?option=com_content&task=view&id=19&Itemid=114

3 Compartamos annual report (2012). http://www.compartamos.com/wps/themes/html/mango/media/CompartamosInformeWeb2012/compartamos%20ingles/pdfs/2011AnnualAndSustainableReport.pdf.

4 Planning Commission, Government of India (2006) Eleventh Five Year Plan (2007–2012): Inclusive Growth http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v1/11th_vol1.pdf.

5 An NBFI is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFIs facilitate bank-related financial services, such as investments, risk pooling, contractual savings, and market brokering.

6 This result is available upon requested.