Does microfinance impede sustainable entrepreneurial initiatives among women borrowers? Evidence from rural Bangladesh

Across the world, microfinance (MF) has been recognized as an effective instrument for simultaneous reduction of poverty and long-term growth through creation of entrepreneurship. Available research does suggest that MF experiment in most cases was successful to reduce poverty, especially among poor women. However, evidence-based research on impact of MF initiatives on nature of entrepreneurial activities and on the psychological capital or potential of the entrepreneurs remains under-studied. This paper attempts to bridge the gap and seeks to diagnose the entrepreneurial behaviour of MF users in comparison to a comparative set of non-users in the same socio-economic climate in an emerging economy and the haven of MF, Bangladesh. The outcome variables considered are not just participation in income generating process, but specific qualitative attributes of entrepreneurship, including ability to innovative, bricolage, risk taking, marshalling etc. and also some quantitative indicators in the form of frequency of repeated loans and income generated there from that may offer proxy measures of scaled up and sustainable entrepreneurship. Data exploration posits that transformative entrepreneurship, which indicates sustainability of the venture to usher in prosperity, is rare among MF users. Small loan sizes, quick repayment cycles and repeated loans of MF institutions constrict the borrowers to opt for low-risk ventures, with women borrowers facing additional barriers as their gendered role force them to be less risky and follow traditionally accepted business modes, rather than making big headway. Using propensity score matching technique, the paper finds that easy access to credit through MF initiatives could not inculcate the psychological potential to bear risk and bricolage among the borrowers. Self-employment in micro enterprises, without much innovation and risk taking, has been the characteristics of overall income generating process of the model.