Read the working paper
INSEAD Working Paper 2015/41/STR/EPS
Microenterprise loans are commonly considered an effective way of having social impact at the base of the pyramid (BOP). We examine evidence for this in the context of a microfinance company, investigating how economic outcomes associated with loans meant for supporting microenterprises compare with those for other kinds of loans. While loans targeting income generation do in general exhibit better outcomes, these outcomes are at least as good for loans specifically funding traditional means of rural livelihood as for microenterprise loans. Within microenterprise loans, the outcomes are even worse for starting than growing microenterprises, pointing towards lack of complementary resources and skills as a bottleneck. These findings suggest a need to temper the emphasis on funding microenterprises as a preferred way of supporting BOP livelihoods.