Abstract
Entrepreneurship and entrepreneurship development are crucial for social and economic development. Various studies highlight and reckon this aspect of entrepreneurship development both in developed and developing economies. However, entrepreneurship development though the aim of many developing economies, the growth rate of entrepreneurs is not satisfactory. One of the prominent reasons for this is attributable to financing or lack of financing. Hence, adopting a systematic literature review method the aim of this chapter is to review critically the role of microfinance for entrepreneurship development. Further, the chapter provides solutions and recommendations for proper microfinancing to boost entrepreneurship development.
TopIntroduction
Entrepreneurship and entrepreneurship development is widely regarded as a one of the critical issues to ensure social and economic development and thereby overall national development by all countries and more specifically by emerging countries (Baporikar, 2020a; 2018). With this in mind, the potency of entrepreneurship has not escaped the attention of both scholars and policymakers. Nonetheless, the influence of microfinance on entrepreneurial development has generated a heated scholarly debate. It is generally accepted that both developed and developing countries across the globe are embracing entrepreneurship as the key driver of socio-economic development (Baporikar, 2020a; Baumol & Strom, 2007; Omri & Ayadi-Frikha, 2014; Rahman, Amran, Ahmad, & Taghizadeh, 2015). Furthermore, according to Sussan & Obamuyi (2018), Global Entrepreneurship Monitor (GEM) revealed that countries associated with higher levels of entrepreneurial activity tend to enjoy higher levels of economic growth. In fact, the relentless pursuit for fostering an entrepreneurial spirit among members of the society is the need of the hour when it comes to acceleration of economic growth. More strikingly, it is worth mentioning that the positive contributions of entrepreneurship towards economic growth are well-documented (Baporikar, 2018b). It is in this context that there has been an emerging trend towards the adoption of entrepreneurship worldwide especially in developing countries (Fierro, Noble, Hatem, & Balunywa, 2018; Park, 2017; Rudhumbu, Svotwa, Munyanyiwa, & Mutsau, 2016).
Accordingly, the importance of the concept of entrepreneurship has attracted much attention of researchers, practitioners, and policymakers. With the importance of microfinance in mind, it is deemed appropriate to mention that Muhammad Yunus is widely recognized as the Father of Modern Microfinance because he managed to come up with Grameen Bank aimed at financing the poor (Hinrichsen, 2019). It is salient to observe that the Latin American model of microfinance is not the same as Asian or African models in the sense that microfinance organizations in Latin America are more inclined to operate as private businesses. In the context of Latin American countries, Peru has witnessed an exponential growth of the microfinance sector owing to its favorable conditions for microfinance (Burneo & Lizarzaburu, 2018).
In the case of India, the concept of microfinance was introduced by the National Bank of Agriculture and Rural Development (NABARD) after borrowing the idea from Bangladesh (Grameen Bank) (Kannan & Panneerselvan, 2013). Going forward, many microfinance programs were launched in India such as Group Lending program, SHG-Bank Linkage program and Joint Liability Group (JLG) model. Following the effective implementation of microfinance programs, India witnessed a rapid growth of clients as evidenced by the fact that microfinance institutions served about 35.1 million customers from 2017 to 2018 (Sa-Dhan, 2018). It is imperative to note that there is an increase in the provision of microfinance services to the poor and SMEs in India through alternative approaches (Mohammed & Waheed, 2019). Further, this emerged trend towards entrepreneurship has heightened the strong need for the advancement of our understanding of entrepreneurship in post pandemic in the face of twin problems of an economies becoming fragile and increase in unemployment rate. While there is a noticeable growing knowledge base on the subject of entrepreneurship, it is salient to observe that the contexts in which entrepreneurship takes place in terms of historical, sectoral, national and socio-economic contexts should be taken into account seriously in order to enrich future research work in entrepreneurship (Baporikar, 2018; Stam, 2016; Watson, 2013; Welter & Gartener, 2016). As such, it appears that there is a dire need for more empirical evidence on entrepreneurship as a field from the perspective of developing countries (Baporikar, 2017). It is salient to observe that entrepreneurs ensure value creation through the commercialization of innovative products and services that stimulate new business ventures. This has led to an increase in the number of Small and Medium Enterprises (SMEs) globally. Undoubtedly, the SMEs are playing a crucial role when it comes to the economic development in many countries as they are the seed-bed of innovation and the key pillar of youth employment creation (Baporikar, 2020a; 2019).
Key Terms in this Chapter
Knowledge Development: The development of knowledge includes not only processes of external knowledge procurement (i.e., through cooperative efforts, consultants, new contacts, etc.) or the creation of specific knowledge resources like research and development departments.
Competence: Refers to the capacity of individuals/employees to act in a wide variety of situations. It is their education, skills, experience, energy, and attitudes.
Challenges: Something that by its nature or character serves as a call to make a special effort, a demand to explain, justify, or difficulty in an undertaking that is stimulating to one engaged in it.
Sustainability: Sustainability is the ability or capacity of something to maintain or to sustain itself.
Impact: To affect, the effect of coming into contact with a thing or person; the force exerted by a new idea, concept, technology, or ideology, the impression made by an idea, cultural movement, social group, it is to drive or press (an object) firmly into (another object, thing, etc.) to have an impact or strong effect (on).
Business: Pertains broadly to commercial, financial, and industrial activities.
Development: Means ‘steady progress’ and stresses effective assisting in hastening a process or bringing about the desired end, a significant consequence or event, the act or process of growing, progressing, or developing.