Unruly entrepreneurs – investigating value creation by microfinance clients in rural Burundi

Abstract

This study explores the entrepreneurial potential of the rule-breaking practices of microfinance programs' beneficiaries. Using the storyboard methodology, we examine the strategies employed by the poor in Burundi to bypass institutional rules. Based on 66 short interviews conducted in seven rural provinces of Burundi, our exploratory study analyzes the entrepreneurial potential in four instances of rule-evasion: consumption spending, illegitimate investment, loan juggling and loan arrogation. We argue that some of the unruly practices are in fact entrepreneurial, as they create tangible and intangible value for the rural poor at both household and community levels. These include strengthening social ties through gift exchange and ceremonies, which then help poor households to self-insure against shocks through social networks. By analyzing the push and pull factors for unruly behavior, we show that rule-breaking practices are often necessitated by the microfinance industry itself and call for increased flexibility and adaptability of microfinance products.

Banking on cooperation: an evolutionary analysis of microfinance loan repayment behaviour

“…In this case, although one is defaulting on kin within the loan group, it is to help closer kin outside the loan group, consistent with kin selection. For example, Cieslik et al, 2019 report how borrowers in Burundi prioritize benefitting their family and friends over compliance with MFI rules by spending loans in unruly ways (e.g., consumption spending) that negatively affect repayment but may increase the status of their family (e.g., by spending on social events) or deepen close social bonds (e.g., by spending on gifts).…”

Policy implementation deficiencies: Ghana’s microfinance sector failures

“…But their efforts to seek financial sustainability and hence the commercialization motive shifted the primary social focus to a value-creating agenda. This motivates the MFIs to bend the rules thereby operating outside the legal boundaries (Cieslik et al, 2015) resulting in their engagement in illicit activities, collapse and loss of savings or deposits. The need for prudent regulation for MF dispensation has therefore becaome imperative.…”

“…Ghana's GHAMP recognized this as it emphasized the evolving nature of the strategy and spelt the need to create regulation that will address all actors in this market space (GHAMP, 2006). Cieslik et al (2015) however observed that the activities of all social enterprises, such as MFIs, follow the organizational theory, characterized by rule-breaking, as the central component of the entrepreneurial process. From the author's viewpoint, it is evident policy implementation in the MF sector could pose challenges that require extra attention to overcome.…”

“…This linear policy formulation and implementation model is evidenced by the central banks in most countries having overarching supervisory control over the financial institutions, MFIs in particular (May, 2013). A quick link of the environment assertion to the complexity theory indicates that policy formulation is rather seen as a system comprising a network of elements that produce combined effect than the results of its constituents (Katwaroo-Ragbir, 2013;Cieslik et al, 2015). In this regards, policy for MF orientation must involve all stakeholders, essentially the MFIs themselves, through collaboration in developing infrastructure that MFIs can adopt and implement, based on their particular dispositions.…”

Banking on cooperation: An evolutionary analysis of microfinance loan repayment behaviour

“…In this case, although one is defaulting on kin within the loan group, it is to help closer kin outside the loan group, consistent with kin selection. For example, Cieslik et al, (2019) report how borrowers from Burundi are breaking rules of the MFI as a side-effect of deepening existing social bonds and securing the social status of the family.…”