2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Microfinancing: Defeating the Dependence and Measuring Success the Right Way
Thomas P. VanKley, Jacob Wheeler, & Joshua R. Millage
Indiana Wesleyan University
Author Note
Thomas P. VanKley, Department of Business, Indiana Wesleyan University
Jacob Wheeler, PacMoore Products
Joshua R. Millage, TruWaveConsulting, Inc.
Program.
Correspondence concerning this article should be addressed to Thomas P. VanKley, 9531
Beall St., Dyer, IN 46311
Contact: thomasvankley@yahoo.com or shawncarraher@yahoo.com
June 27-28, 2012
Cambridge, UK
1
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Microfinancing: Defeating the Dependence and Measuring Success the Right Way
1. Introduction
In 2010, there were 925 million hungry people in the world. Imagine that, about 13.27%
of the world’s population could not afford enough food to feed their family (World Hunger
Facts; World Population Clock). Many of the developing countries struggle to meet the basic
needs of its people in terms of food, clean water, and disease protection. There needs to be
something done about this. The common answer is to pump money into developing economies
to help stimulate growth or distribute food without charge to these countries (Riddell, 2007).
These options are short term at best and do not really help the people in need. The option that
many investors use is microfinancing loans for these poor people, so that they can start
businesses and generate a profit for themselves. The desired effect for microfinancing is not
meeting the basic needs of individuals, but rather, the economic growth and increased level of
well-being for a country and its citizens. Loans in the hands of determined and entrepreneurial
people can lead to drastic positive changes in families, communities, and nations.
Microfinancing loans is the concept of giving small loans to people who cannot provide
collateral and cannot get a loan elsewhere (Mamun, Wahab, Malarvizhi, & Mariapun, 2011;
Haque & Harbin, 2009). The idea of microfinancing came from a U.S. economics professor, Dr.
Muhammad Yunus (Haque & Harbin, 2009). There is also a method of giving loans in a group
setting, commonly called micro credit (Goldberg, 2005). The group concept is similar to the
concept of group insurance, using a compilation of people to reduce risk. If one person defaults
on a loan, the others have to help make payment or risk not obtaining loans in the future (Mamun
et al., 2011). This makes the investor feel more secure about the risk involved; however, as
Zhang (2008) remarks, the risk is practically the same as it would be for an individual who has
June 27-28, 2012
Cambridge, UK
2
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
microfinanced a loan. Zhang (2008) has published several articles on the social impact of group
financing and has concluded that, for the most part, group financing is a better option than
individual financing.
The goal of the microfinancing is to help communities develop and sustain economic
success and therefore increase the standard of living in that community (Festa, Wilson, &
Neidermeyer, 2010). Microfinancing goes beyond just helping people; it changes how people
live their lives from day to day. The entrepreneurs have ulterior motives. The major motive is
making money and another motive is for research. The following are examples of researchers
using microfinancing to come up with new data: Yaacob’s study in Kelantan, Malaysia; Rafiq’s
study on women and Asadullah’s study on education in Bangladesh; Lucas’ study of economics
in South Africa.
2. Views on Microfinancing
There are a couple of different views held about microfinancing. One view holds that
microfinancing provides an opportunity for poor people to start businesses they would have
otherwise not been able to start. The people who follow this view especially consider the
equality of women an important issue (Rafiq, Abdullah, & Ahmadi, 2007). A different view
holds that although microfinancing is successful in efforts to start businesses, it creates too much
of a dependence on the loaners. Each view should be broken up and looked at in depth to see the
validity of the arguments.
2.1 The Positive View
Considering that microfinancing has grown vastly in popularity, the positive view of
microfinancing is the predominate view. The objective of microfinancing is to create businesses
in areas that would normally not have businesses and to eliminate poverty (Haque & Harbin,
June 27-28, 2012
Cambridge, UK
3
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
2009). Poverty-ridden countries have a great need for development, but have little or no means
to develop (Festa et al., 2010). Entrepreneurs have a unique opportunity to help the developing
countries. The opportunity is, ironically, to promote other entrepreneurs. The idea behind
microfinancing is to give these poor people loans to help start businesses (Haque, 2009; Mamun
et al., 2011).
Entrepreneurs helping entrepreneurs is an intriguing idea. There are different areas to get
involved in an opportunity using this idea. The two major areas are investment and charity.
Investment is strictly entrepreneurs making money and helping others in that process (Goldberg,
2005). Charity goes beyond investment by being people oriented over being profit oriented
(World Vision Micro, 2011).
a. Investors
Investors tend to like a return on investment, which is why they would rather be profit
oriented. These investors must actively seek an institution that provides micro loans to poor
people in developing countries. These are the institutions that use microfinancing to help the
local entrepreneurs, unlike the banks in the areas (Goldberg, 2005). The investor would then put
an initial investment down and work directly with a microfinance organization or MFO to help
achieve a higher rate of return (Mamun et al., 2011). They could also seek out investing without
going through an organization, which is more risky. Some investors research the pros and cons
and have come to the conclusion that microfinancing is not a good investment.
The investors that feel microfinancing is not a good option, critique the methodology by
saying that it creates too much of a dependence on the loaners (Hulme, 2000). In other words,
the poor people are now dependent on the people giving them loans in order to maintain
business. This idea will be examined in detail later in the paper.
June 27-28, 2012
Cambridge, UK
4
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
b. Charity
The charity portion consists of non-for-profit companies like World Vision and Unión
MicroFinanza. These companies approve an entrepreneur and load his or her story on the
website to help seek donations. People looking to donate choose one of these entrepreneurs to
support. The entrepreneur builds a business with the funds from these organizations and repays
the loan. The loan is recycled and put into another entrepreneur with the idea of helping an
entire community grow economically (World Vision Micro). These loans will never see the
hands of the donor again, which is a deterrent to investors, unless the investor is looking for a tax
deductible.
1. The Role of Women in Microfinancing
In the western culture there has been a recent increase in the number of women
entrepreneurs, creating a change in the role of women (Zeidan & Bahrami, 2011). This change
in the role of women puts a unique outlook on microfinancing. A major aspect that is seen in
microfinancing companies is specific attention to the women population and trying to help
develop more women entrepreneurs (Haque & Harbin, 2009). The rights of women in American
society have vastly changed over history. The equality of women is important to most
Americans; this is not so in many developing countries (Banerjee, Cynthia, Esther, & Rachel,
2010). In non-western countries it is sometimes very difficult to surpass the gender barriers, one
of which is “unfavorable attitude towards women holding their own careers” (Zeidan & Bahrami,
2011). The goal of microfinancing companies, to help create more equality among men and
women and to improve women rights (Rafiq et al., 2007), is a tough one to attain.
The rights of women across these underdeveloped countries are continually tested by the
efforts of microfinancers. Unfortunately, the efforts to change the role of women in these
June 27-28, 2012
Cambridge, UK
5
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
societies have not succeeded (Banerjee et al., 2010). Rafiq’s (2007) study of women in
Bangladesh, talks about the likelihood of women controlling the loans from microfinancers. The
likelihood is not probable in most situations; however, this does not stop the microfinancers.
Men have an overarching power over the loans in most situations except the situations in which
women would usually have control for example, “paddy husking, sewing, selling milk, or
chicks” (Hunt & Kasynathan, 2001). Banerjee’s (2010) statistical analysis adds to the credit that
women have had little increase in decision-making or empowerment. The data says that, at least
in the short term, there is no statistical increase in the empowerment of women or in their
decision-making abilities.
2.2 The Negative View
The idea behind the negative view is that dependence is created on the loaner. It is
important to remember that these poor people are vastly undereducated by American standards.
They are not familiar with the business practices found in well developed countries. They are
stuck in a barter economy and are having a difficult time losing that mindset (Hulme, 2000).
Khavul (2010) brings some light on these issues by showing one reason for high repayment rates
are borrowers “taking out additional loans to repay their original loans”. Repaying loans with
other loans is a very unethical idea, but these people might not understand that concept. These
borrowers are at a vast disadvantage by being undereducated (Hulme, 2000). Those who receive
loans are not able to fully realize their capabilities with the liquidity given to them. The issue is
not that they do not see the responsibility that they have to maximize their loan, but that they are
not aware of how to maximize their loans. This is why education is so important for developing
countries to invest in, so that its citizens are not tricked into or voluntarily sign-up for loans that
will increase their poverty instead of decreasing it. People within the margin are constantly
June 27-28, 2012
Cambridge, UK
6
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
being overtaken by those with more knowledge and skill than them, but education will help to
lessen the likelihood of people voluntarily choosing to get out of debt through more debt.
Repayment rates are the measurement of success for microfinancing; some are concerned
as to why this measurement is the best. As shown before, the measurement of repayment rates is
skewed by unethical repayments with additional loans. Khavul (2010) suggests that primary
business performances, in coordination with the repayment rates, could help overcome the
measurement issue. It would be a great idea for the statistics to be taken from a sample of the
success of the businesses.
1. Dependence on Microfinancing
There may be an interesting correlation between the intercity poor people in America and
the poor people in developing countries. In both situations there seems to be a unique
commonality of a dependence being created on a necessary program. With the intercity poor
people in the U.S., the government provides different programs such as food stamps,
unemployment benefits, and Section 8 housing. These government programs, many of which
were started by the Roosevelt administration, were used to help alleviate the hardships of a
failing economy. The programs worked successfully to a point; however, there is now a
dependence on these programs. Citizens feel they deserve these benefits and have abused the
programs to reap additional benefits. Section 8 tenets are single parents who are in need of
housing. The government provides these people with money to live in specific housing. Many
people in cities like Chicago are abusing this system by having children and not getting married,
just to get free housing.
Microfinancing maybe heading down the same path as the government programs in the
U.S. Poor people know that there are loans available to them through these microfinancing
June 27-28, 2012
Cambridge, UK
7
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
companies. They obtain these loans with the full intention of making money. The loan becomes
a crutch for these borrowers to rely on. The loan may or may not be realized in growth for the
business, but may actually be used for other uses like perishable goods. The loans provide a
security that has not previously been seen by these people. The relatively small cost of receiving
a loan is extremely enticing to these people because of the higher cost it would be for them to go
through a local loan shark. The loans become a way out of the short-term losses and become a
long-term problem that results in more poverty and higher amounts of indebtedness. If the
business fails, the poor people resort to getting more loans to repay their previous loans and
maintain their newfound standard of living (Khavul, 2010).
The major difference between the poor people of developing countries and the poor of
developed countries is the fact that the poor in the developing countries use most of their
unethically gained money and resources to buy food and other needs (Banerjee et al., 2010). The
poor people of the developed countries use the unethically gained money/resources to buy flat
screen televisions, fancy cars, and other wants. It is important to note that in both situations
there are people that are not taking advantage of the programs and the programs are successfully
fulfilling their needs (Goldberg, 2005). The real question is what can be done to not create
dependence, but still fulfill the need?
2.3 Measurement of Success
As previously mentioned, Khavul (2010) discusses a traditional measurement system of
microfinance success that includes repayment rates. This system does not adequately measure
the effectiveness of loans, due to the fact that loans appear to be paid with more loans. A higher
number of loans does not correlate with success, but with people requiring more loans to pay for
June 27-28, 2012
Cambridge, UK
8
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
their previous loans. Banjerjee (2010) discusses there are three indicators of microfinance
success that will lead to more refined results of the effectiveness of microfinance.
The first indicator of success is an increased level of health. Researchers have found that
individuals who receive loans are met with a giant roadblock to future growth and economic
prosperity: poor heath (Goldberg, 2005). Poor health has kept people from using their micro
loans for the business and has caused them to use them for health related costs. Loaners who do
well and have a growing business are positively related with an increased living standard. This
indicator will allow researchers and field workers to see the effectiveness of the loans through
improved physical livelihoods. A person with a healthy body will be able to produce more at a
higher rate than a person with poor health.
The second indicator that would lead to better measuring of microfinance is an increased
level of education. This indicator is a result of the first because education can only occur if the
individuals receiving the loan are healthy enough to attend school and are being met at the lowest
level of Maslow’s hierarchy of needs. Those with more education than their forefathers will be
viewed as more valuable due to their higher level of human capital. The result will be more
thoroughly thought out ideas, an increase in skilled creativity, and an increase in the level of
knowledge. These added factors will help the person receiving the loan, and thus it will
positively increase the potential for the business. Not only will the business do better due to the
increase in education, but the overall economy and society of the community and country will
rise (de Soto, 2000). An educated population will also result in higher efficiency, effectiveness,
and output through higher rates of gross domestic product. Education is a leading factor into a
higher performing society, and is pivotal in developing countries becoming more developed.
June 27-28, 2012
Cambridge, UK
9
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
The third indicator of microfinance success is if the loan borrower accumulates an
increased number of assets. Physical assets do not only represent a certain number of goods a
person owns, but they are key representations into the value of wealth and capital that has been
acquired. An increase in the amounts of physical assets is essential for a person receiving a loan
to use as leverage in the future as an avenue for gaining more liquidity. They are less likely to
require a loan and instead will finance their new piece of plant equipment or another physical
asset. Hernando de Soto (2000) emphasizes this point to reveal the importance of assets that will
be used as a means of increasing wealth. An increase in assets is an easy indicator to measure
microfinance success.
The increase of health, level of education, and number of assets are only possible if the
structure and system they live in allows them to grow (de Soto, 2000). A country with a stable
rule of law will have a much higher chance of financial and economic success if they are able to
govern and maintain governance of its citizens. Lenders of micro loans are only able to grow
and receive the three indicators mentioned if the avenues for growth have been laid by their
government. Countries that desire for more foreign direct investment and capital to pour into
their country will only see actual growth if they pave ways for the capital to flourish in the hands
of their citizens.
Other sources have concluded that the success of a business could also be measured by
household expenditure. In Banerjee’s (2010) study on microfinance they proved that
microfinancing does increase household spending on nondurable products like food. It does not
have any effect on the durable spending; however, there was a reduction in buying “temptation
goods”. They attribute a lot of the spending cuts to helping create a larger initial investment in
the business. Banerjee (2010) puts an emphasis on the fact that this is only short term
June 27-28, 2012
Cambridge, UK
10
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
calculations and is not necessarily evidence of a positive long term impact. Having statistical
evidence, even short term evidence, which uses other measurement indicators than the repayment
rate will be much better at revealing the effectiveness of microfinancing.
2.4 Compilation of Opposing Views
There is a definite case for microfinancing; on the other hand, there is compelling
evidence against microfinancing. Taking the information on both sides, it is obvious that
microfinancing works. To what degree it works is still in question. Taking loans and giving
them to poor people in developing countries is a great way to create connections and
opportunities for those in the developing countries. Promoting entrepreneurship through
relationship building and business training is the next and best step for those receiving the loan
(Karlan & Valdivia, 2011). The sophistication of measurements on the success level of
microfinancing is lacking; however, there are some new measurements that show promise.
2.5 Building the Argument
Entrepreneurship is the capstone for building a successful economy. An economy is
based off of production, consumption, and trade. Producers create products or provide services
to sell to the consumers to either trade or consume. Entrepreneurs take an idea and build a
business off of it. Without entrepreneurs, there would be no businesses to produce products or
provide services. The more entrepreneurs in an economy, the better off the economy could
become. This is a major problem for these developing countries; they do not have enough
successful entrepreneurs (Haque & Harbin, 2009; Karlan & Valdivia, 2011). If microfinancing
does provide adequate support for the poor to create businesses and entrepreneurial ventures,
then the economy would be better off (Haque & Harbin, 2009; Karlan & Valdivia, 2011). The
economies in many areas continue to struggle, ergo this premise is false.
June 27-28, 2012
Cambridge, UK
11
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Premise 1. If entrepreneurs create better economies, then the more entrepreneurs the better
the possible outcome is for the economy.
Premise 2. If microfinancing provides adequate support for the poor to create business and
entrepreneurial ventures, then the economy would be successful.
Conclusion: The economies in many countries are still failing to succeed; ergo one of these
premises is false.
It is more realistic to believe that the first premise is true. The second premise is left to
prove microfinancing works, which has been established as not completely possible at this point
in time. The way to solve the issue of this argument is to add something to the second premise
or to change it completely. The rest of the paper will focus on changing this premise to look
something more like:
Premise 2. If microfinancing, in correlation with teaching entrepreneurial practices and
tactics provides adequate support for the poor to create business and entrepreneurial
ventures, then the economy would be successful.
The problem does not arise from microfinancing, but it comes from the level of
education. Unfortunately the education level of the poor is low and causes the businesses to
struggle (Asadullah, 2008). Lucas’ (2009) study on the honey production in South Africa shows
the productivity of labor is negative. In essence this shows that the labor is not being efficiently
used in the production stages, causing the firms to not be profitable. This study shows
businesses with too many employees, in correlation, with a low amount of technology and
capital. There are also many businesses that have only one employee, the owner. The
businesses that have only one employee also struggle to grow because of a lack of production
that can be put into the product or service (Lucas, 2009). There are many other problems arising
June 27-28, 2012
Cambridge, UK
12
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
with these businesses that are almost all because there is a lack of knowledge among the owners.
This lack of knowledge can be fixed by education from successful entrepreneurs.
3. Applying Microfinancing to Entrepreneurship
When an entrepreneur goes into a developing country to help the poor set up businesses
there are a few steps that need to take place for the businesses to be successful. The first step is
identifying and breaking the cultural barriers. The second step is to help educate the potential
business owners. The third step is to be a mentor or partial owner to continue to make sure the
business successfully develops (Karlan & Valdivia, 2011; Brixiova, 2010).
3.1 Cultural Barriers
An entrepreneur going into a developing country is going to run into some cultural
barriers. Identifying the barriers is easy, but breaking the barriers is not. The first step is to hire
an interpreter to translate for you. Keidan & Amsler (2009), in their study on immigrants
moving to California, talk about the importance of speaking to the immigrants in their own
language to help make them feel more involved in the community. The same goes for the
natives of the developing countries; they are going to receive an outsider better if that person
either speaks the native language or has a way to communicate to them in their native tongue
(McCormick & Gray, 2010). McCormick and Gray (2010) go on to say in their work that
partnering with locals and local organization is a mutually beneficial partnership that helps bring
sustainability to new contracts or business agreements.
After that initial connection is created, it is important to know the non-verbal cues that
could potentially be offensive in cultures. Zhe Wang (2007), a specialist of linguistics and
translation, puts a huge emphasis on the impact that culture plays in non-verbal communication.
Take for example: the okay sign in the U.S. could be considered an insult in some South
June 27-28, 2012
Cambridge, UK
13
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
American cultures. The importance of cultural education cannot be understated for
entrepreneurs going into foreign countries.
3.2 Education Process
The education process can start to take place once a general acceptance of the
entrepreneur occurs in the culture. In Karlan & Valdivia’s (2011) statistical analysis of the
impact of business training on microfinance clients in Peru, there is evidence that basic business
training does lead to an increase in the success of the business. Interestingly enough, the
statistics also show that if the person was already enrolled in the microfinancing program, they
tended to not reap the benefits that the others did. This once again shows that microfinancing by
itself is not enough.
The education process starts with teaching the basics of business practices. Gosenpud
and Vanevenhoven (2011) outline four major things that, from a strategic management
standpoint, can really help microentrepreneurs: external environmental analysis, internal
environment analysis, planning and goal setting, and networking. External environmental
analysis includes market analysis, supply chain awareness, complexity, and relationship
formality. Internal environment analysis includes identifying and transferring already
established competencies and acquiring business skills. Planning and goal setting includes
setting objectives, proper measurements, and growth projections. Networking includes
networking with other entities and associations.
3.3 Coca-Cola
An interesting and innovative way to teach new entrepreneurs is by using a bottle of
Coca-Cola. In McCormick and Gray’s (2011) article there are 12 basic business lessons that
they say can by taught by nothing more than a bottle of Coke. Considering that Coca-Cola is the
June 27-28, 2012
Cambridge, UK
14
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
largest beverage company in the world and has the product in more than 200 countries, this is the
perfect illustration for almost anywhere in the world (Coca-Cola Company).
There is an ample supply of things that can be taught by this one example. Things like
the four Ps of marketing can be taught: Product, Price, Place, and Promotion. It is amazing how
one relational product can teach entrepreneurs so much about how to run their business. This is
just one of many examples of how to teach entrepreneurs about basic business practices.
3.4 The Results of Educating
The ideal result from educating entrepreneurs in developing countries is more successful
business practices and more financially successful businesses. The hope is that these owners will
teach others how to run businesses and help develop the economy in their villages. Once the
village’s economy starts to succeed, then other villages will start to notice the effects of
entrepreneurial practices (Osman, Asrah, Rashid, & Rajput, 2011). These villages will hopefully
adopt these practices and then the success of the country will start to show. The best possible
end result is a bigger awareness of the effects of entrepreneurial practices and a positive change
in the global economy. In terms of family life, research does show that education is one of the
leading factors for families to get loans. The percentage of children attending school and getting
an education has increased for those who have received loans (Cheston & Reed, 1999).
4. Conclusion
There are incredible crises in the world, the lack of economical growth and low living
standards are simply two of them. Developing countries have not successfully found the solution
to these problems, and have started to turn towards microfinancing. There are two facets to
microfinancing, investing and charity, both of which are useful for creating loans (Goldberg,
2005; World Vision Micro, 2011). While microfinancing is a viable option to help start
June 27-28, 2012
Cambridge, UK
15
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
businesses in low income areas, it is not the bottom line answer. The opposing view of
microfinancing often holds that there is a dependence that is being created by microfinancing.
The dependence is similar to that of the dependence on government programs; however, it is not
quite to the same degree.
The view on the negative effect of dependence has grown through the research done by
organizations like the Acton Institute. Dependence and its role in destroying lives is not new for
governments and non-government organizations, but the biggest factor preventing those
organizations from cutting off free aid or cycling through unsuccessful loans is the unwillingness
to move onto a different system. Even though new systems have not been fully acted upon, the
research on the role of women in microfinancing is indisputable and has been recognized by
everyone. In the short term, the impact of microfinancing has had little or no change on the role
of women in society (Banerjee et al., 2010). This, compiled with other issues, forms the negative
view of microfinancing.
Teaching practical business techniques to potential borrowers before and even during
their repayment increases the effectiveness of microfinancing. This is proven to increase the
success and profitability of the business (Karlan, 2011). The education process can only be
obtained after breaking through cultural barriers and creating a connection with the local
communities (Kahvul, 2010). The education process can take off by following the Coca-Cola
example found in McCormick and Gray’s (2011) study. This process uses a bottle of Coke to
teach entrepreneurial techniques.
Current research has no final conclusion whether or not microfinance has had the positive
impact that so many have hoped. There is no one that desires for it to fail, but there are several
that want to dispel any fantasies created by the loan method. Hulme (2000), in his work,
June 27-28, 2012
Cambridge, UK
16
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
describes how people in poverty have so many trials to face that can easily deter them from
actually repaying or even receiving loans. Hulme’s (2000) research also shows that
microfinance does not truly reach the poorest of the poor, which so many microfinance
institutions claim.
Compared to previous research done on the topic of microfinance, there has
quantitatively not been enough published about the effects of how training along with financing
loans impacts the success of the person or family who receives the loan. There are a plethora of
articles and books about the positive and negative effects of the methodology itself, but not how
value adding factors, like specific financial, business, and trade training, can impact the rate of
loan turnovers and decrease poverty.
Microfinancing is an option, but it seems to have a higher level of positive impact when
coupled with educational techniques to help the success of the entrepreneurial ventures. When
implementing microfinancing, entrepreneurs need to understand that it is not a fix all method, but
it does provide some support to these developing countries (Karlan & Valdivia, 2011; Brixivio,
2010). If successful, there will hopefully be a domino effect into the other villages and countries
around the initial area. Microfinancing, plus hard work and education in entrepreneurship, can
and will help promote growth and increase the standard of living of people around the world.
5. Future Research:
Future research needs to be conducted in the direction of answering this question, “What
system fulfills the needs of the poor without creating unsustainable dependence on the system.”
Current systems are situated to create short term gains, and do not focus on changing the
behavior and empowering entrepreneurs in developing countries. Data needs to be gathered as to
which system is creating positive outcomes for the people it serves.
June 27-28, 2012
Cambridge, UK
17
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
To find out which system is best, research needs to focus on the measurement practices.
Finding and creating a proper measurement system is the foundation to creating and developing a
system that fulfills the needs of entrepreneurs and does not create dependence. This is the
primary focus on any research going forward.
It is the recommendation of the authors of this paper that the following research be
conducted after proper measurement research has taken place, and new systems for deploying
microfinancing are created. Other research should be conducted to find out how education affects
sustainability of entrepreneurial businesses in developing nations. There is also an opportunity to
capture the perception of microfinancing the in eyes of the people that it serves. In our research
we questioned how the family dynamic changed when men were given money to create a
business and provide for their families. They are finding that these loans help empower women,
but nothing has been done to show how it changes the men’s role. Research should be done to
see how children of the funded entrepreneurs view microfinance, and see if it is being accepted
in the same positive light and lenders broadcast.
June 27-28, 2012
Cambridge, UK
18
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
References
Asadullah, M. N. (2008). Sense in sociability? Maternal education, social capital and child
schooling in rural Bangladesh. The European Journal of Development Research, 20 (3),
482-496. Retrieved Oct 2011, from Business Source Complete.
Banjeree, A., Cynthia, K., Esther, and D. , Rachel, G. (2010, Jun 30). The miracle of
microfinance? Evidence from a randomized evaluation. Jameel Poverty Action Lab at
MIT and the Center for Microfinance at IFMR. Retrieved Nov 2011, from Google
Scholar.
Brixiova Zuzana. (2010). Unlocking productive entrepreneurship in Africa’s least developed
countries. African Development Review, 22(3), 440-451.
Cheston, S. , and Reed, L., (1999, June). Measuring transformation: Assessing and improving
the impact of microcredit. Harper, Hill, Horn, Salib, & Walen (Eds.). Paper presented at
microcredit summit meeting of councils, Abidjan, Côte d’Ivoire.
Coca-Cola Company (2010). In 2010 Annual Review. Retrieved Nov. 2011, from
http://www.thecocacolacompany.com/ourcompany/ar/pdf/TCCC_2010_Annual_Review.pdf
Festa, M. M., A., Wilson, and P., Neidermeyer. (2010). Microlending: What business can do to
facilitate community-cased growth. The Journal of Applied Business Research, 26 (6),
11-15. Retrieved Oct 2011, from Business Source Complete.
Goldberg, N. (2005). “Measuring the impact of microfinance: Taking stock of what we know.”
USA: Grameen Foundation USA Publication Series.
Gosenpud, J. and Vanevenhoven, J. (2011, Sep). Using tools from strategic management to help
micro-entrepreneurs in developing countries adapt to a dynamic and changing business
June 27-28, 2012
Cambridge, UK
19
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
environment. Journal of Applied Business Research. 27(5), 1-13. Retrieved Oct 2011,
from Business Source Complete.
Haque, M. A. and Harbin, J. L. (2009). Micro credit: A different approach to traditional banking:
Empowering the poor. Academy of Banking Studies Journal. 8(1), 1-13. Retrieved Oct
2011, from Business Source Complete.
Hulme, D. (2000). Is microdebt good for poor people? A note on the dark side of microfinance.
Small Enterprise Development, 11(1), 26-28.
Hunt, J., and Kasynathan, N. (2001). Pathways to empowerment? Reflections on microfinance
and transformation in gender relations in South Asia. Gender and Development. 9 (1), 4252. Academic Search Complete. Web. 6 Nov. 2011.
Karlan, D. and Valdivia, M. (2011). Teaching entrepreneurship: Impact of business training on
microfinance clients and institutions. Review of Economic and Statistics, 1-44. Retrieved
Nov 2011, from Business Source Complete.
Keidan, G. and Amsler, T. (2009) Engaging California's newcomers. National Civic Review, 5261. Retrieved Oct 2011, from Academic Search Complete.
Khavul, S. (2010). Microfinance: Creating opportunities for the poor? Academy of Management
Perspectives, 58-72. Retrieved Nov 2011, from Business Source Complete.
Lucas, E. C. (2009) The economics of micro-finance funded honey production in South
Africa. International Journal of Business Research, 9(6), 148-53. Retrieved Oct 2011,
from Business Source Complete.
Mamun, A., Al, Wahab, S. A., Malarvizhi, C. A., and Mariapun, S. (2011). Examining the
critical factors affecting the repayment of microcredit provided by Amanah Ikhtiar
June 27-28, 2012
Cambridge, UK
20
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Malaysia. International Business Research, 4(2), 93-102. Retrieved Oct 2011, from
Business Source Complete.
McCormick, B. and Gray, V. (2011) Message in a bottle: Basic business lessons for
entrepreneurs using only a soft drink. Journal of Management Education, 35(2), 282-310.
Mohd, Y. R. (2010). A preliminary study of green micro-entrepreneurs in Kelantan, Malaysia.
International Journal of Business and Management, 5(3), 81-88. Retrieved Oct 2011,
from Business Source Complete.
Osman, M. H. M., Asrah, M. R. B., Rashid M. A., & Rajput, A. (2011). Ethnic entrepreneurship
and interplay of cultural factors in developing countries: A compendium of literature.
Interdisciplanary Journal of Contemporary Research In Business, 3(3), 472-480.
Rafiq, R. B., Abdullah, S. T., and Ahmadi, H. (2007) Microfinance program in developing
countries: An analysis of the impact of micro-credit for the women in
Bangladesh. International Journal of Business Research 7(1), 211-22. Retrieved Oct
2011, from Business Source Complete.
Riddell, R. (2007). “Does foreign aid really work?” Oxford, England: Oxford University Press.
Soto, de S. (2000). “The mystery of capital: why capitalism triumphs in the west and fails
everywhere else”. New York, NY: Basic Books.
In World Hunger Facts. (chap. World Hunger Notes Homepage) Retrieved Oct. 2011, from
http://www.worldhunger.org
In World Population Clock. (chap. Census Bureau Home Page.) Retrieved Nov. 2011, from
http://www.census.gov/population/popclockworld.html
In World Vision Micro - Life Changing Microfinance Loans for the Poor. Retrieved Nov. 2011,
from http://worldvisionmicro.org
June 27-28, 2012
Cambridge, UK
21
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Zeidan, S. and Bahrami, S. (2011) Women entrepreneurship in GCC: A framework to address
challenges and promote participation in a reginal context. International Journal of
Business and Social Science, 2(14), 100-107. Retrieved Oct 2011, from Business Source
Complete.
Zhang, W. (2008). Ex-ante moral hazard and repayment performance under group lending.
Journal of East Asian Studies, 3(6), 145-71. Retrieved Oct 20111, from Business Source
Complete.Wang, Z. (2007) Role of non-verbal communication in professional
interpretation. Stella and Jessica (Eds.). US-China Foreign Language. 5(8), 1618. Retrieved Sept 2011, from Academic Search Complete.
June 27-28, 2012
Cambridge, UK
22