Dialectic evolution through the social innovation process: from microcredit to microfinance

Abstract

Microfinance is the provision of financial services to the financially excluded, usually the poor. We use literature reviews and descriptive research to present different aspects of the relationship of the microfinancial services to microenterprise. The first thrust in this field had been from microcredit and group lending to encourage business initiatives among the poor. The hope that these services would lift them out of poverty had largely built the brand image of the sector. However, the spread of consumer microcredit and uncontrolled growth of microfinance led to over-lending without adequate checks and balances, leading to over-indebtedness and associated stress, and critique of microcredit. To restore balance, other financial products, such as microequity, microsavings, microinsurance, microguarantees, and microremittances, have been suggested. We place these developments in a social innovation process perspective by showing that microfinance, through its wide range of innovatively distributed products, can be a key factor to foster entrepreneurship.

Overlooked or Ignored – Missing Elements in the Entrepreneurial Finance Policies: A Case of Introducing MUDRA Bank in India

“…So, the question here is whether creating one more structure (i.e., MUDRA bank) will lead to an improvement in the existing situation or not. For a long time, small businesses were dealing with issues relating to high cost of credit, requirements of collateral, limited access to equity, and lack of access to markets (Ashta et al ., ; Chan and Lin, ; Dutta, ). Since there are very few studies on access to credit by small businesses in India, the present research has also taken into consideration the available research on lack of access to finance.…”

Cultural insights of CSI: how do Italian and Iranian firms differ?

“…The concept of social innovation (SI) has been one of the most discussed in the field of innovation for the last years (e.g., Ashta et al 2014) and even getting stronger in the discussion of social development (Rüede and Lurtz 2012). According to Mulgan (2006), SI refers to innovative activities and services that are motivated by the goal of meeting a social need and that are predominantly developed through organizations whose primary purpose is social.…”

An Overview of Microfinance

“…The second critique on larger loan sizes means that the loans are being targeted for the wealthier of the poor rather than the poorest of the poor (Ashta, Couchoro & Musa, 2014). Copestake, Bhalotra & Johnson (2001) found this to be true for PULSE in Zambia.…”

“…Ashta et al (2014) points out that the mission drift critiques usually centre on (a) diversion of microcredit into consumer credit, (b) larger loan sizes and (c) high interest rates. Firstly, critics of microcredit suggest that these funds are increasingly being used by borrowers for consumption rather than for entrepreneurial activities.…”