Assessing the Impact of Microfinance on Entrepreneurship in Developing Economies

Abstract

This paper examines the diverse effects microfinance has on entrepreneurship development in the context of developing countries. The study uses a mixed-method approach which includes quantitative checking of business performance metrics alongside qualitative gleaning from beneficiary’s interviews to determine the extent to which microfinance enables businesses to start, grow, and sustain themselves. Significant positive relations were found between entrepreneurial activities and engagement in microfinance, especially where business training was provided. Despite trying to alleviate poverty and economically empower people, microfinance with its high interest rates and limited outreach does pose some challenges. The study highlights the importance of using integrated models of microfinance designed with the objective of developing sustainable entrepreneurship.