Creating Value Beyond Microfinance Through Entrepreneurship Development

This paper highlights the need for microfinance providers and supporters to provide micro and small business owners with basic entrepreneurial training.

Businesses at the bottom of the pyramid depend on making enough daily sales to pay for the products they purchase on credit from wholesalers. Over the course of the loan period, regular repayments become more difficult for merchants and they start falling behind schedule. Recent studies show that:

• Basic entrepreneurship training could lead to improved managerial decisions and higher profits;
• Most financial institutions that provide microfinance services prefer to focus on the infusion of financial capital, and not development of human capital;
• MFIs and savings and credit cooperatives are experiencing mission drift and place little to no emphasis on human development for loan officers (LOs) and clients;
• Institutions tend to rely heavily on LOs who do not have the time or expertise to provide entrepreneurial training.

The paper states that the microfinance sector needs to adhere to its original mission of complementing financial services with non-financial services such as basic entrepreneurial training. They will also have to understand the expected improvement of offering entrepreneurial training.