research topics on microfinance

• Open access
• Published: 20 April 2022

Does microfinance foster the development of its clients? A bibliometric analysis and systematic literature review

• João Paulo Coelho Ribeiro 1 ,
• Fábio Duarte   ORCID: orcid.org/0000-0002-4919-0736 2 &
• Ana Paula Matias Gama 3  

Financial Innovation volume  8 , Article number:  34 ( 2022 ) Cite this article

15 Citations

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This paper conducts a scientometric analysis and systematic literature review to identify the trends in microfinance outcomes from the perspective of their recipients, specifically more vulnerable people, while also focusing on the demand side. Applying the keywords “co-occurrence networks” and “citation networks,” we examined 524 studies indexed on the ISI Web of Science database between 2012 and March 2021. The subsequent content analysis of bibliometric-coupled articles concerns the main research topics in this field: the socioeconomic outcomes of microfinance, the dichotomy between social performance and the mission drift of microfinance institutions, and how entrepreneurship and financial innovation, specifically through crowdfunding, mitigate poverty and empower the more vulnerable. The findings reinforce the idea that microfinance constitutes a distinct field of development thinking, and indicate that a more holistic approach should be adopted to boost microfinance outcomes through a better understanding of their beneficiaries. The trends in this field will help policymakers, regulators, and academics to examine the nuts and bolts of microfinance and identify the most relevant areas of intervention.

This study conducts a scientometric analysis and systematic literature review to identify the trends in microfinance outcomes from the perspective of their recipients

A Bibliometric analysis were conducted to examine 524 studies indexed on the ISI Web of Science database between 2012 and March 2021

A content analysis of 11 ABS ranked articles (rank 4 or 4*) were conducted to stablish trends of research

The findings suggest that a holistic approach should be adopted to boost microfinance outcomes through a better understanding of their beneficiaries

Introduction

Microcredit has emerged as an innovative tool for fighting poverty in underdeveloped countries (Mustafa et al. 2018 ). Positive experiences suggest that it constitutes an agile, flexible, and cost-effective financial instrument for entrepreneurship projects that otherwise suffer from bank credit rationing (Stiglitz 1990 ). Combining microcredit, microsavings, and microinsurance, microfinance “can help low-income people reduce risk, improve management, raise productivity, obtain higher returns on investments, increase their incomes, and improve the quality of their lives and those of their dependents” (Robinson 2001 : 9).

The promise of microcredit to eradicate global poverty has proven overly ambitious, as poverty results from a wide number of factors. Nevertheless, at least theoretically, providing poor people with financial resources to start their own businesses can help them increase their income and purchasing power, even if starting and running a successful business is not a simple task. Furthermore, if microcredit loans do not create financial wealth, they should then be classified simply as a “mechanism for transferring resources to the poor” (Khandker 1998 : 7).

The implementation of microfinance and its potential as a tool for fighting social and financial asymmetries is an expanding research topic. However, while microfinance may have grown into a worldwide industry, scholars have expressed doubt about its actual impact on the recipients (e.g., Morduch 1999 ). The lack of true profit-generating potential of financed ventures (Bradley et al. 2012 ), high interest rates (Webb et al. 2013 ), and the lack of management and entrepreneurial skills (Evers and Mehmet 1994 ) raise substantial doubts about the outcomes of microfinance for recipients. Furthermore, the current empirical literature casts doubt on the ability of microfinance to generate multidimensional outcomes such as empowerment, education, health, and nutrition (Khavul et al. 2013 ; Miller et al. 2012 ). Therefore, this study seeks to examine the trends in the outcomes of microfinance for its clients, particularly for more vulnerable people (e.g., women, self-employed, older adults, low-income, and refugees), by focusing on the demand dimension of microfinance. To present the prevailing state of research on microfinance and its benefits for clients, we apply a scientometric analysis, which enables us to trace the anatomy and analyze the knowledge of this research topic. Thus, we address three research goals: identifying the current trends in the outputs of the microfinance literature in terms of dates, journals, authors, affiliated countries, and institutions; examining the most influential studies and themes in this field; and discussing the intellectual structures of the outcomes of microfinance research and the underlying trends.

This approach identified five clusters using keyword analysis and knowledge maps: (1) the socioeconomic outcomes of microfinance, (2) the conflict between social performance and the mission drift of microfinance institutions; (3) group lending, social networks, and social capital; (4) poverty alleviation through entrepreneurial activities and the impact of innovative services, especially crowdfunding; and (5) gender and new thematic frontiers.

Muhammad Yunus argues that poor people possess natural abilities to run businesses, and that their own subsistence reflects the capacities of their survival skills (Yunus 1998 ). However, to set up new businesses, poor entrepreneurs need to find alternative financial resources due to their general exclusion from the traditional banking system because of their lack of collateral (Stiglitz 1990 ), limited property rights (Webb et al. 2013 ), and the high transaction costs incurred by small-scale bank loans (Chliova et al. 2015 ; Ghatak 1999 ; Weiss and Montgomery 2005 ). Ongoing and established relations between lenders and borrowers often generate trust and reduce the risk of credit rationing (Stiglitz 1990 ); however, this inherently does not apply to most potential microcredit beneficiaries, as they lack any credit history (Tang et al. 2017 , 2018 ). Hence, Yunus ( 1994 ) identifies the provision of credit as a key factor for overcoming poverty through innovative approaches to providing credit to the poor as encapsulating a potential solution. Therefore, as microfinance-related articles have been published, literature reviews have appeared on several microfinance-related themes. Table 1 summarizes these studies.

Brau and Woller ( 2004 ) surveyed 350 articles related to microfinance institutions (MFIs) sustainability, products and services, management practices, client targeting, regulations and policies, and impact assessment before calling for further research into microfinance practices as a means of combatting poverty around the world. Based on 71 research papers (peer-reviewed journals, university publications, reports by development organizations, and conference publications) on the performance of MFIs, Roy and Goswami ( 2013 ) propose that microfinance researchers, practitioners, and rating agencies consider other dimensions for assessing MFI performance besides the financial aspect, particularly considering measures for social performance, outreach, and sustainability. García-Pérez et al. ( 2017 ) carried out a systematic literature review of 475 articles on microfinance, resulting in their classification of sustainability research under four perspectives: economic, environmental, social, and governance. They report that the economic and social fields have received the most attention, with authors having researched the interrelationships and considered a broader variety of subjects in those areas than in the environmental or governance fields. Fall et al. ( 2018 ) performed a meta-regression analysis of the performance of 38 MFIs before demonstrating that the mean technical efficiency (MTE) of MFIs has increased over time. However, research estimating social efficiency generated lower MTE levels than that for financial efficiency, which may explain why the African microfinance sector has poor performance. Hermes and Hudon ( 2018 ) also studied MFIs while focusing on the determinants of social and financial performance. From a study including 169 articles, they concluded that the most important determinants of MFI performance addressed by the literature are their own respective characteristics (such as the size, age, and type of organization), their funding sources, the quality of their corporate governance policies, and the characteristics of their external environment (such as the prevailing macroeconomic, institutional, and political conditions). However, they report mixed empirical findings, which may stem from a multidimensional perspective of performance. They suggest that outreach, gender, and rural measures should be adopted to measure the social performance of MFIs more holistically. Akter et al. ( 2021 ) have also recently addressed this dual nature of MFI performance (i.e., spanning the financial and social dimensions). After applying bibliometric data to 1252 Scopus-indexed articles, the authors convey how the hot topic research themes related to microfinance cover poverty alleviation, group lending, and credit scoring, whereas the financial performance aspect has been gaining greater attention from recent research evaluating MFI performance.

Copestake et al. ( 2016 : 290) review three decades of microfinance doctoral research, referring to this as a “distinct field of development thinking,” describing the “mainstream narrative of progressive inclusion of poor people and their livelihoods into a globally integrated and regulated financial system, largely in the private sector but also strategically subsidised by government and aid agencies.” The authors identify a critical counterpoint to this narrative of development thinking by emphasizing the specific negative effects of financial integration on poverty and inequality. By compiling a series of studies, they suggest that the performance of microfinance depends on socio-cultural norms, regulation, and management practices, which might further explain the mixed empirical evidence on the impact of microfinance.

Deploying a scientometric analysis of 1874 papers on microfinance, Gutiérrez-Nieto and Serrano-Cinca ( 2019 ) focus on the most cited 5% in this pool and classify the resulting 94 papers as institutionalist (when more oriented toward MFIs), welfarist (when more oriented toward microfinance clients), and generalist (otherwise). Based on chronological analysis, these authors report that, having previously covered innovations in microcredit practices and their impacts (the first research stage), as well as the peculiarities of MFI (second stage), current research primarily targets certain concerns over MFI mission drift and the role of microfinance in fostering financial inclusion. Somewhat interrelated with Gutiérrez-Nieto and Serrano-Cinca ( 2019 ), Zaby ( 2019 ) sets out an overall picture of the state of the art in the microfinance literature coupled with the main schools of thought. This author adopts science mapping to examine 4,409 Scopus-index articles explicitly related to microfinance (Zaby 2019 : 1), and correspondingly identifies three thematic research clusters: (1) the institutional aspects of microfinance, (2) the application of sophisticated research methods to evaluate the impacts of microfinance, and (3) ground-breaking microfinance literature related more generally to social justice. Nogueira et al. ( 2020 ) also report how MFI performance-related issues represent one of the most commonly approached fields of research. Based on 2168 articles indexed in the Web of Science, these authors point out how financial inclusion and entrepreneurship are hot topics related to microfinance. The authors then conclude in favor of the relevance of studying entrepreneurship in order to better understand the beneficiaries of microfinance.

Duvendack et al. ( 2011 : 2) argue that “no study robustly shows any strong impact of microfinance” on the well-being of its beneficiaries. After analyzing 58 papers, these authors identified cases with both poor methodology and data and concluded that most studies advanced no reliable evidence regarding the impact of microfinance. Van Rooyen et al. ( 2012 ) also focus on the impact of microfinance on poor people in their systematic review of studies conducted in sub-Saharan Africa. They report that microfinance has a modestly positive impact, but also occasionally results in the deterioration of the situations faced by beneficiaries. This framework indicates that academics and practitioners should closely consider the beneficiaries of microfinance rather than the overall performance of MFIs. This research gap prevents us from reaching any conclusions about the value of microfinance, particularly microcredit, as a tool for mitigating poverty and financial and social exclusion, nor regarding whether their multidimensional outcomes extend beyond the creation of wealth.

Only a few studies have hitherto focused on the impact of microfinance on the poor and on their well-being (e.g., Duvendack et al. 2011 ; Van Rooyen et al. 2012 ). This gap led us to combine bibliometric and content analysis to compile current literature and provide a roadmap of trends for future research into the outcomes of microfinance for recipients with a particular demand-side focus.

Therefore, this study makes several contributions to the literature. In particular, the results of the knowledge maps convey how more traditional topics, such as the focus of microfinance institutions, may potentially shift gradually over time and with the move from social to financial performance, increasing the risk of mission drift, and the advantages of group lending for creating social networks to overcome access to capital-related problems still attracts research interest. Furthermore, emerging trends relate to strategies for overcoming poverty and enhancing socioeconomic development. Entrepreneurship is a powerful tool that strengthens the financial and non-financial outcomes of microfinance. In addition, the scope of microfinance outreach is changing due to the emergence of crowdfunding platforms, particularly prosocial platforms (e.g., KIVA: https://www.kiva.org/ ) that boost women empowerment and gender equalities, stimulating the liberalization of financial systems at a global level and potentially prompting a more financially and socially inclusive system.

The structure of this paper is as follows: Sect.  2 sets out the research methodology design, and Sect.  6 details the bibliometric analysis that systematizes the publication trends, the most prolific journals, authors, and affiliated institutions, as well as the most influential studies and subjects in the field. Section  12 provides the content analysis based on bibliometric coupling, and Sect.  18 outlines and discusses the new trends in the microfinance literature, before Sect.  23 presents our conclusions.

Research methodology

Data and research criteria.

This study applies bibliometric and content analytical procedures to the selected papers, focusing on the outcomes of microfinance for their recipients (demand side), based on information collected from the Web of Science (WoS), Footnote 1 a database that “contains thousands of academic publications along with bibliographic information on their authors, affiliations, and citations” (Ferreira et al. 2019 : 186). We limited our research to articles published after 2011, as that was the last year with systematic literature reviews of this field, following the studies by Duvendack et al. ( 2011 ) and Van Rooyen et al. ( 2012 ; see Table 1 ). Our search of the field adopted the keywords (“microfinance*” OR “micro finance” OR “micro-finance*” OR “microcredit*” OR “micro credit*” OR “micro-credit*”) AND NOT (“microbank*” OR “micro bank*” OR “micro-bank*” OR “microfinance institution*” OR “micro finance institution*” OR “micro-finance institution*” OR “mfi*”) AND (“performance*” OR “success*” OR “outreach*” OR “impact*” OR “impacts*”) as entered in the WoS database. We then screened the articles based on titles, keywords, and abstracts to establish a database of 796 articles with the data collected in April 2021 spanning the period between 01:2012 and 03:2021. Footnote 2 Table 2 provides a comprehensive summary of the criteria used to collect the WoS data.

In accordance with our objective of analyzing the literature on the outcomes of microfinance for recipients, the more vulnerable people (demand side), we carried out a screening process of these documents involving the reading of the abstracts and, in case of doubt, we examined the documents in full length, which led to the exclusion of 272 purely institutional articles, that is, those concentrating solely on the financial performance of MFIs (e.g., Gutiérrez-Nieto and Serrano-Cinca, 2019 ). Nevertheless, this screening process did not exclude studies focusing on the social performance of MFIs, as these usually reach out to women, rural, vulnerable, and marginalized populations. This process was undertaken independently by two of the authors before verification by the third author. Thus, the bibliometric analysis examined 524 articles with detailed content analysis and then applied more detailed analysis to 47 of them in keeping with their common linkage to other documents in the network, based on the bibliometric coupling methodology. Furthermore, we undertook an additional context analysis of the most recent articles published between January 2018 and March 2021, ranked by the Association of Business Schools (ABS). This analysis concentrated on 11 articles published in elite journals (ABS 4*) and top journals (ABS 4). These journals generally publish the greatest advances in their respective fields and generate the highest citation impact factors within their field of knowledge. Figure  1 provides a comprehensive summary of the data analysis process.

Data retrieval process

Therefore, this study combines bibliometric analysis and a systematic literature review. Based on quantitative literature analysis, bibliometrics represents a study method from the library and information sciences (Huang and Ho 2011 ) and, according to Sengupta ( 1992 : 76), “is a sort of measuring technique by which interconnected aspects of written communications can be qualified.” Narin et al. ( 1994 : 65) refer to “bibliometrics and, in particular, evaluative bibliometrics,” which “uses counts of publications, patents, and citations to develop science and technology performance indicators.” This type of analysis emerged in order to deal with constantly growing bodies of knowledge and incorporates three major dimensions: measuring a particular scientific activity, its impacts as conveyed by the total number of article citations, and the links among articles (Narin et al. 1994 ), thus tracing the anatomy of the knowledge existing in a research field with regard to a specific topic.

Our study applied VOSviewer Footnote 3 software version 1.6.8 to analyze the publishing trends and most prolific journals, disciplines, authors, institutions, countries, studies, and subjects. This analysis is mainly derived from the number of published articles, total citations, and occurrences. To complement the analysis of the most influential studies, we performed co-citation analysis to systematize the most fundamental articles published between 1:2012 and 3:2021. Introduced by Small ( 1973 ) and developed by White and Griffith ( 1981 ) and White and McCain ( 1998 ), co-citation analysis is one of the most common bibliometric methods for unveiling similarities among the cited articles (Small 1973 ). By applying this tool via VOSviewer, we were able to highlight the main studies guiding the research over the last decade. The fractional counting methodology was used to analyze the most influential subjects, correcting the number of occurrences of each keyword in accordance with the total number of (key)words used in the title, abstract, or keyword list for the same article (Xu et al. 2018 ). The fractional counting method is more suitable than the full counting method (Narin et al. 1994 ): “When full counting is used to construct a bibliometric network, each link resulting from an action has a full weight of one, which means that the overall weight of an action is equal to the number of links resulting from the action. On the other hand, when fractional counting is used, each link has a fractional weight such that the overall weight of an action equals one” (Perianes-Rodriguez et al. 2016 : 1180). In so doing, the relationship between two keywords becomes closer when articles provide fewer keywords. Thus, Van Eck and Waltman ( 2014 ) recommend the fractional counting method, as this overcomes the potential for bias created by highly cited articles with long reference lists or more keywords, leading to misinterpretations.

Following the bibliometric analysis, we performed a systematic literature review to systematize the state of the art and to determine trends and possible research gaps based on the content analysis of clusters. Detailed content analysis was performed in the cases of bibliographically coupled articles—articles sharing a common link to other documents in the network. Bibliographic coupling establishes relationships between articles based on citation similarities and deems two articles to be bibliographically coupled whenever there is a third article cited by both these articles (Kessler 1963 ). Based on a dataset of 524 articles, we deployed VOSviewer to generate bibliometric maps based on the visualization of similarities technique. Of the 524 published articles in our refined dataset, this software reports that only 47 articles were coupled by the same item of reference, with at least 25 citations.

• Bibliometric analysis

Annual publication trends

Figure  2 illustrates the trends displayed by the 524 WoS-indexed articles in the field of microfinance outcomes (i.e., demand side) since 2012.

Publication trend of 524 published articles, indexed to WoS, between 1:2012 and 3:2021

The figure indicates an upsurge in publications from 27 papers in 2012 to 84 in 2020. Footnote 4 This trend in publications stems from the increasing number of scholars challenging the proposed benefits of microcredit as a salient tool for addressing credit constraints and poverty (e.g., Angelucci et al. 2015 ; Banerjee et al. 2015a ; Bocher et al. 2017 ; Tarozzi et al. 2015 ), especially when based on entrepreneurial activities (e.g., Alvarez and Barney 2014 ). The Nobel Prize awarded to Banarjee, Duflo, and Kremer in 2019 for their work on different strategies to mitigate poverty also justifies the rise in research related to the ability of microfinance/microcredit to generate positive outcomes, such as empowerment and education, beyond mere wealth creation.

Prolific journals and subjects

Table 3 depicts the list of the most prominent journals publishing on issues related to the demand side of microfinance, and hence the microfinance recipients. A total of 252 journals were included in the 524 articles analyzed. The most prolific journals (two of them ex aequo with nine published articles, three with six published articles, and five with five published articles) have published 179 of the articles studied (34.2% of the total). Almost all of these 179 articles appear in ABS-ranked journals, mainly in ABS 3 (according to the ranking published in 2018) by the Chartered Association of Business Schools. Footnote 5 These findings illustrate how research on the microfinance field primarily engages quality journals of business and management. The Journal of Development Studies represents the most productive journal, having published 31 articles, followed closely by World Development with 30 articles. Together, both journals published 11.4% of the articles analyzed.

Figure  3 displays the 10 main fields of journals publishing microfinance research since 2012. The most representative areas are economics , business , and management (which includes business finance), with 379 articles (i.e., 72.32% of the total articles). This figure indicates how the analysis of the outcomes of microfinance (on the demand side) has especially adopted an economic perspective. Despite the prominent position of Development Studies in publishing research on this topic (80 articles), the journal still only represented 15.27% of the total articles. The relevance of microcredit for society as a whole remains only a marginal issue and is scarcely addressed in the literature. More studies from the fields of health, business ethics, sociology, and psychology would be worthwhile to generate a better understanding of the effectiveness of microfinance in promoting the Sustainable Development Goals (SDG) of the United Nations 2030 Agenda, specifically eradicating poverty (SDG 1), promoting health and well-being (SDG 3), gender equality (SDG 5), and reducing inequalities (SDG 10), in addition to the economic objective of decent work and growth (SDG8).

Top 10 subject areas in microfinance (demand side) research in the 524 published articles, indexed to WoS between 1:2012 and 3:2021

Prolific authors, affiliated institutions, and countries

Tables 4 and 5 display the top 10 authors, institutions, and countries publishing on microfinance (demand side) outcomes since 2012 in WoS-indexed journals by number of publications and citations. Abdullah Al Mamum provides the list detailed in Table 4 , with nine published articles. His research mainly targets the effectiveness of microcredit and training programs to combat poverty and promote the sustainable growth of micro-enterprises in rural areas in Malaysia. However, Ester Duflo stands out as the most prolific author based on total citations—412 citations (Table 5 ) with three published articles. Ester Duflo and her research team, Michael Kremer and Abhijit Banarjee, won the Nobel Prize for Economics in 2019 for research on fighting global poverty over the preceding two decades, contributing to transforming development economics into a flourishing field of research. In the field of microfinance, Duflo conducted experimental research in less developed countries to evaluate the impact of training programs on microfinance outreach, especially on health and empowering women. Dean Karlan emerged as the second most prolific author based on both the total number of published articles (Table 4 ) and the total number of citations (Table 5 ), with six published articles (equal to Ariana Szafarz) and 381 citations, 32 more than Johnathan Zinman, with four articles published with Karlan. The expansion of microcredit, the use of loans, and repayment incentives constitute the main topics in the experimental research undertaken by Dean Karlan and Johnathan Zinman. Erica Field and Rohini Pande attained three publications with a total of 179 citations. Based on randomized experiments in India, these authors have been working on the default risk of microborrowers and the repayment requirements that best suit the needs of the poor. Ariana Szafarz represents one of the six authors with over 100 citations divided across six published articles, mainly approaching the topics of social and financial performance, gender, and empowerment. This evidence suggests that, despite the prevalence of articles from the fields of economics, business, and management (as pointed out in Fig.  3 ), the most prolific authors focus on topics within the scope of development studies. Experimental researchers seem to capture the enthusiasm of their target communities, mainly in less developed countries such as Bangladesh, India, Morocco, and Malaysia.

The institution with the most articles published on this aspect of microfinance (Table 4 ) is the University of Groningen (Netherlands) with 11 published articles, followed by the World Bank (United States) with 10, and MIT (United States) and Yale University (United States) with 9 each. MIT is the most prolific institution, based on total citations (968 citations). Yale University and Harvard University (United States) are among the top three with 440 and 300 total citations, respectively. Together, the articles published by members of these institutions received 1,708 citations, accounting for over 57% of the total citations generated by our dataset of WoS-indexed articles. The most prolific institutions all have locations in the United States and are responsible for the highest number of published articles (145) and total citations (2,990).

Citation analysis

Citation analysis is the best method for mapping the influence of a research paper. Citation counts encompass the number of citations that a paper received over a period of time. Thus, a more influential and productive paper is cited most frequently. We use VOSviewer to determine the most influential papers on microfinance outcomes. Table 6 displays the 10 most cited articles locally and globally. The local citations reflect the number of times a paper is cited by others within a sample size of 524 papers, whereas global citations measure the number of times a paper is cited by other works across all databases, including other areas and research fields.

According to global citations (local citations), Banerjee et al. ( 2015b ) are at the top of the list with 295(72) citations, followed by Banerjee et al. ( 2015a ) and Bruton et al. ( 2013 ) with 226(53) and 157(8) citations, respectively. Banerjee et al. ( 2015a , b ) are the most prominent papers paving the way for further research on microfinance outcomes. These studies provide theoretical support for the use of a randomized experimental methodology to measure the causal effects of microcredit on community development, namely on the livelihood of microentrepreneurs.

The number of citations reflects the popularity of a paper. To measure this prestige, we use the total link strength based on the fractional counting method, which indicates the number of times a paper is cited by highly cited papers. Thus, a highly cited paper could not also be a prestige paper. The total link strength is a composite measure that encompasses both popularity and prestige. Table 7 lists the top 15 papers based on the total link strength. The results differed from those of the citation count. When the top 10 papers were compared based on citations (global and local) with the total link strength (co-citations), only 5 papers (Angelucci et al. 2015 ; Attanasio et al. 2015 ; Banerjee et al. 2015a , b ; Crépon et al. 2015 ) are among the top 15 papers based on total strength links (co-citations). Co-citation refers to the number of times two articles are co-cited by an article in the database. The more often articles are co-cited, the greater the link strength (i.e., the more similar the domains under study).

Table 7 shows the studies that mostly guide the research in the last decade, which includes several articles published before 2012. Pitt and Khandker ( 1998 ), with the highest number of co-citations(total link strength) 76(546), is the most influential study in the recent literature. This study provides an evaluation of the group lending program of the Grameen Bank (and similar ones) in Bangladesh, showing that these programs have a significant effect on the well-being of poor households; their effect on education, health, labor supply, and consumption is greater when targeting women. Khandker ( 2005 ) is the third most influential study in this ranking, with 63(411) co-citations (total link strength) in our dataset. This study examines the effects of microfinance on poverty reduction in Bangladesh, at both the individual and aggregate levels, finding that microfinance contributed to poverty reduction, especially for female participants, in line with Pitt and Khandker ( 1998 ), concluding that microfinance boosts local economic growth at the village level. Morduch ( 1999 ) is the fourth most co-cited author in our sample statistics articles with 524 articles and 55(417) total link strengths. The author promotes an evaluation of innovative mechanisms beyond group-lending contracts, raising doubts about the effectiveness of microcredit programs in fighting poverty compared to traditional credit programs. Armendáriz and Morduch ( 2010 ) is the seventh most influential study according to this ranking, with 49(394) co-citations and total link strength.

These authors conducted extensive research on general topics that question the economic problems of microfinance, why such programs are needed, and why financial resources do not flow naturally to the poor. Karlan and Zinman ( 2011 ), with 46(437) co-citations(total link strength), and Karlan and Zinman ( 2010 ) and Stiglitz ( 1990 ), both with 44 co-citations and 325 and 437 total link strengths, respectively, are the ninth and tenth ( ex aequo ) most influential studies. Karlan and Zinman ( 2011 , 2010 ) adopted experimental research methodologies to analyze microcredit programs in the Philippines and South Africa, respectively. Karlan and Zinman ( 2011 ) found that microcredit may serve to increase the ability to cope with risk, strengthen community ties, and increase access to informal credit, but under channels different from those often proposed. The results of Karlan and Zinman ( 2010 ) corroborate the presence of binding liquidity constraints in South Africa and suggest that expanding the credit supply improves welfare. Stiglitz ( 1990 ) also analyzed the success of the Grameen Bank, suggesting that peer monitoring is largely responsible for the financial performance of the microcredit program in Bangladesh. Banerjee et al. ( 2015a ), with 70(605), Crépon et al. ( 2015 ) with 52(517), and Banerjee et al. ( 2015b ) with 51(398), Attanasio et al. ( 2015 ) with 48(517), and Angelucci et al. ( 2015 ) with 43(409) co-citations(total link strength), all published after 2012, also assume a prominent place in this ranking.

Keyword analysis

Table 8 reports the top 15 keywords in the 524 articles selected by the study methodology and published between 1:2012 and 3:2021 that attain at least 20 occurrences. This table’s right column reports the number of links a given keyword obtains with another keyword based on the total link strength. “Microfinance” is the most frequent keyword, with 320 occurrences (281 total link strength), indicating that this word acts as a termed concept in the literature. The words “microcredit,” “impact,” and “poverty” are also three of the most frequently cited words with 199(187), 154(148) and 138(136) occurrences (total link strength), respectively, suggesting that scholars are focusing on microfinance/microcredit outcomes, especially approaching these as tools for development and intervention with the potential to lift people out of poverty. The emerging topics of “gender/women,” “entrepreneurship,” and “empowerment” emphasize how the literature is increasingly evaluating the effects of microfinance/microcredit across various dimensions beyond the financing facet.

Figure 4 displays the most influential subjects based on the keyword occurrence networks. Footnote 6 These keywords are either extracted from the title and abstract of each article or sourced directly from the article keyword lists (Van Eck and Waltman 2014 ). To establish this network, we applied VOSviewer software and the fractional counting method, which considers the number of keywords (key), to explore the most relevant themes in microfinance outcomes. This figure also confirms that “microfinance” is widely interconnected with “microcredit,” “poverty,” and “impact.” These results again corroborate how researchers examine microfinance/microcredit as a tool to eradicate poverty in greater depth, especially through entrepreneurial activities.

Network of keyword occurrences in the 524 articles selected from the study sample, covering the period between1:2012 and 03:2021 according to the fractional counting method

Content analysis

We deploy bibliometric analysis to explore the most relevant documents in this field of research. To identify the most influential publications, we applied VOSviewer to perform bibliometric coupling with a threshold of 25 citations for our analysis, yielding 47 articles out of a total of 524 with at least 25 citations, coupled into five clusters. Figure 5 depicts the knowledge map of the most-cited microfinance articles resulting from the fractional counting method. In a network, these nodes may be aggregated into clusters in which the weighting of edges is higher between the nodes within one cluster than those with another cluster. Thus, the VOSviewer algorithm returned five distinct clusters, with 11 documents in Cluster 1, 10 documents in Cluster 2, 9 documents in Cluster 3, 9 documents in Cluster 4, and 8 documents in Cluster 5. Footnote 7 Table 9 portrays the 48 papers in the five clusters. We subsequently carried out a content analysis with careful examination of the papers in each cluster to determine their common theme.

Knowledge map of the top articles cited by cluster according to the fractional counting method, based on 524 studies selected between 1:2012 and 3:2021

Cluster 1: socioeconomic outcomes of microfinance

This cluster comprised 11 studies focusing on the impacts of microfinance programs on socioeconomic outcomes with randomized experimental evaluations, questioning the influential role of microcredit on poor households. Banerjee et al. ( 2015b ) report that group lending programs in India increase the take-up of microcredit with a positive impact on small business investment and profits as well as on the expenditure of durable goods, but only over a short period. They also did not encounter any significant effects of group microcredit lending on health, education, or women’s empowerment. Banerjee et al. ( 2015a ), Angelucci et al. ( 2015 ), and Tarozzi et al. ( 2015 ) raised doubts about the transformative impacts of microcredit as a development tool. Angelucci et al. ( 2015 ) and Tarozzi et al. ( 2015 ) provide evidence that the effectiveness of microfinance is modest, with little or no evidence of any effectiveness in promoting micro-entrepreneurship, income, the labor market, consumption, social status, subjective well-being, schooling, or empowerment, despite affording a substantial increase in access to credit. Microcredit increases borrowing, which is mainly used for investment and risk management. However, this increased access to credit leads to only modest increases in female decision making, trust, and business size, with little effect on overcoming debt traps (Angelucci et al., 2015 ).

Crépon et al. ( 2015 ) suggest that the effects of microcredit are mainly derived from borrower characteristics rather than from externalities. Microcredit access leads to a significant rise in investment in the assets applied to self-employment activities and an increase in profits among households with higher abilities to borrow. Ngo and Wahhaj ( 2012 ) also demonstrate how access to microloans can lead to positive outcomes for intra-household decision-making and the welfare of women depending on their starting point conditions. They convey how women only benefit from microcredit when they are able to use the credit to invest in profitable joint activities, and when a large proportion of the household budget goes to the consumption of public goods. Otherwise, women borrowers may experience a decline in welfare.

Bruhn and Love ( 2014 ) document the remarkable effects of microcredit on labor markets and income levels, especially among individuals located in areas with lower pre-existing bank penetration and those with low incomes. Arouri et al. ( 2015 ) also provide evidence that access to microcredit, internal remittances, and social allowances can help households strengthen their resilience to natural disasters. Kaboski and Townsend ( 2012 ) indicate that microcredit lines might increase total short-term credit, consumption, agricultural investment, income growth (from business and labor), and wages, but decrease overall asset growth. Schicks ( 2014 ) provides measures for policymakers to address the over-indebtedness potentially arising from microcredit. Analyzing the loan-related sacrifices that borrowers report, the author identifies how male microborrowers are more likely to be over-indebted than women and that over-indebtedness is lower for borrowers with good levels of debt literacy. Based on a case study of microfinance trials, Allcott ( 2015 ) suggested that default rates may depend on the size of the trial samples. This study of program evaluations based on randomized control trials draws attention to the systematically biased out-of-sample predictions of program evaluations, even after many replications.

Microcredit has been referenced as a relevant tool for addressing credit constraints and promoting entrepreneurial activities. However, empirical studies have returned conflicting results, casting doubt on the strength of microcredit not only in financial outcomes but also in its actual ability to enhance several dimensions of human development. Stressing the research findings that indicate the need to consider the context of microcredit program deployment, we suggest paying particular attention to the development setting, as some studies demonstrate how microcredit programs are more effective in contexts where the credit markets have failed (i.e., poor settings), while others propose that microcredit intervention is boosted by environments with higher levels of social, economic, and institutional development. Research on this domain constitutes a fruitful field of research.

Cluster 2: Social performance or mission drift?

This cluster encompasses 10 studies. The focus of this cluster is access to microfinance, usually addressed in the literature as an indicator of MFI social performance (mission locked-in versus mission drift). Vanroose and D’Espallier ( 2013 ) report that MFIs reach more poor clients and prove more profitable in countries where access to the traditional financial system remains low. The results suggest that MFIs offset market failures in the traditional banking sector and flourish best when the formal financial sector is absent. However, MFIs have also shown remarkable social performance in countries with well-developed financial systems, as this pushes MFIs down the market and makes mission drift less likely. Cornée and Szafarz ( 2014 ) also provide evidence that banks offer advantageous credit terms for social projects. In turn, borrowers are motivated to repay loans, thus reducing the probability of default. Louis et al. ( 2013 ) and Lebovics et al. ( 2016 ) provide evidence that these dimensions of performance, and thus the social and financial aspects, are not mutually exclusive. Over a short time frame, there are positive relationships between social efficiency and financial performance (Lebovics et al. 2016 ; Louis et al. 2013 ). However, D’Espallier et al. ( 2013 ) adduce evidence pointing in the opposite direction and propose that microfinance faces a mission drift with the lack of subsidies, worsening the social performance of MFIs. Dealing with this trade-off has involved the implementation of several strategies, including charging higher interest rates, targeting less poor individuals, or reducing the proportion of female borrowers in order to compensate for public non-subsidization.

Bocher et al. ( 2017 ) demonstrate that individuals owning land and with larger households and/or savings experience a greater probability of getting microcredit. These results may indicate that some MFIs do not target the poorest of the poor. Canales ( 2014 ) examines how MFIs balance the pressures to pursue financial efficiency with the need to remain responsive to local needs. The authors document how MFI branches allowed discretionary diversity and decentralized flexibility through relational embeddedness to cater to local needs tend to achieve better performance. Thus, microcredit committees may yield substantial benefits for organizations and unbackable local individuals, for example, when dealing with missed repayments. Augustine ( 2012 ) proposes that the transparency of MFIs’ corporate governance policies is more important than their orientation, concluding that transparent declarations of their social orientation increase their performance. This may occur because public statements about MFI orientation generate commitments to the target community.

Among these clusters, the studies conducted by Al-Azzam et al. ( 2012 ) and Van Gool et al. ( 2012 ) are somewhat collateral to the main topic of MFI social performance. Van Gool et al. ( 2012 ) analyze whether the credit scoring system adopted in retail banking is appropriate for the microfinance industry, especially with regard to its social concerns, and reported that all the benefits of credit scoring models are commercially related. However, they also suggest that credit scoring may serve social concerns, for instance, by modelling information about indebtedness in order to avoid debt traps. Al-Azzam et al. ( 2012 ) focus on the effects of screening, peer monitoring, group pressure, and social ties on borrowing group repayment behaviors. The authors provide evidence that social ties built on religious attitudes and beliefs improve repayment performance. Thus, this study straddles the frontier with Cluster 3.

The trade-off between MFI outreach and profitability remains controversial. Several studies report that MFI shifts over time from social to financial performance as a result of both the costs of microfinance market contracts and the high fixed costs associated with small loans. Recent studies also reinforce that the national context also has a relevant impact on MFI performance. Consequently, several strategies have emerged to improve profitability, including increasing loan amounts, charging high-interest rates, public subsidization, and gaining efficiency through new technologies. Hence, the trade-off between outreach and sustainability continues to attract the research community studying governance and new organizational strategies, such as legal status, to improve MFI social and financial performance.

Cluster 3: group lending, social networks, and social capital

The third cluster involves nine studies focusing on group lending, social networks, and social capital, and how these relate to credit access and loan repayment. Group lending has the ability to build up social networks outside of the family (Attanasio et al. 2015 ), promoting social interactions that increase repayment rates (de Quidt et al. 2016 ), even in the absence of any collateral (Feigenberg and Pande 2013 ). One concern here is that the grace period might restrict social networks among group members, thus increasing default rates by lowering the effectiveness of informal insurance (Field et al. 2013 ).

Social capital is based on a “pre-existing connection between group members” (Banerjee 2013 : 496). Group members hold better information about each other than the respective MFI; they are therefore not only in a better position to screen and monitor the actions of each group member but also to punish those who default, for example, by withdrawing social capital from them (Banerjee 2013 ). Thus, group meetings increase social capital and networks and reduce the monitoring costs of lenders, which may encourage recourse to formal insurance, reducing the bail-in costs in case of default (de Quidt et al. 2016 ). According to the authors, by also functioning on an individual liability basis, group lending might facilitate increases in repayment rates depending on the social capital and networks developed within those groups. Group lending also displays the ability to increase both borrowing and entrepreneurship, as such an approach reduces the discouragement experienced by some individuals who are uncomfortable with borrowing on an individual basis but are willing to borrow in groups and share the liabilities, especially women with lower levels of education (Attanasio et al. 2015 ).

Wei et al. ( 2016 ) indicate how credit scoring models encapsulating client social networks—their social score—might provide a means of raising access to microcredit as an alternative to group lending. However, Yuan and Xu ( 2015 : 232) drew attention to how poorer households “are limited by social networks and they have no financial means to invest in their social capital to expand their social network.” Donou-Adonsou and Sylwester ( 2016 ) examine the relationships between financial development and poverty reduction, a topic on the frontier with Cluster 1. Gabor and Brooks ( 2017 ) seem to approach the frontier with Cluster 4, as they analyze the growing importance of digital-based programs for fostering financial inclusion in the fintech era.

Group-lending mechanisms are still attracting the attention of scholars. The social cohesion characterizing borrowing groups explains the effectiveness of the screening and monitoring stages that reflect in the repayment rates as well as in the outcomes of loans made for business purposes. Furthermore, this requires a deeper understanding of where group lending contexts generate advantages over individual contracts, for example, in developing countries where social capital often implies investments that poor people are not able to attain.

Cluster 4: poverty alleviation, entrepreneurial activities, and financial service innovations

Cluster 4 includes nine studies that focus on the contribution of entrepreneurial activities and financial service innovations to poverty alleviation. The literature posits that entrepreneurship represents a crucial pathway for alleviating poverty (Bruton et al. 2013 ) arising from socioeconomic and technological growth and development (Zahra and Wright 2016 ), which requires an industrialized approach to offset the multiple market failures prevailing in developing economies (Alvarez et al. 2015 ). This might explain why microcredit generally has stronger socioeconomic impacts (especially for the empowerment of women) in more challenging contexts and when targeting client entrepreneurs (Chliova et al. 2015 ). However, not all entrepreneurial activities lead to sustainable economic growth. For example, self-employment opportunities in sectors requiring low levels of human capital tend to perpetuate abject poverty (Alvarez and Barney 2014 ). Significant economic growth and poverty alleviation depend on the ability to discover and create new business opportunities based on more effective utilization of human capital, property rights, and financial capital (Alvarez and Barney 2014 ; Alvarez et al. 2015 ). In fact, local development (Diniz et al. 2012 ) and entrepreneurial success (Josefy et al. 2017 ) depend on the ability to mobilize resources, including financial capital. However, to be effective, an increase in financial resources requires accompanying financial education.

Formal credit markets and even traditional microfinance sources for encouraging investment, innovation, and launching new ventures may no longer be sufficient to overcome the persistent societal challenges of poor countries (Zahra and Wright 2016 ). According to these authors, peer-to-peer lending and crowdfunding may provide a solution for financial, social, and environmental wealth. “Crowdfunding refers to the practice of raising funds for a venture or project from dispersed funders typically using the Internet as a channel of operation” (Josefy et al. 2017 : 163). The availability of funds for promoting microenterprises is expanding rapidly through crowdfunding platforms, such as Kiva, which provides a greater audience of lenders for microenterprises’ signaling autonomy, competitive aggressiveness, and risk-taking (Moss et al. 2015 ). The success of loan campaigns on crowdfunding platforms also depends on contextual community attributes, such as the cultural values of the target audience that shape the level of interest the projects generate in the crowd (Josefy et al. 2017 ).

Information and communication technology (ICT) seems to be an alternative for supporting financial inclusion and fostering social inclusion (Diniz et al. 2012 ). By examining an ICT-based platform, Berger and Nakata ( 2013 ) analyze the socio-technical characteristics that technological solutions may have to successfully implement financial service innovations in the field of microfinance. According to these authors, these innovations tend to produce better results when they are congruent with the unique surrounding socio-human, regulatory, and market conditions.

The literature references entrepreneurship, particularly in deprived environments, as the only option to earn money due to the absence of any other market participation. In such contexts, microcredit enhances entrepreneurial activities through the issuance of small and unsecured loans. Scholars still raise concerns about the effectiveness of such programs, mainly due to the lack of profits generated by the financed ventures to pay the costs of loans and ensure loan repayment. The lack of management skills is an additional issue pointed out by researchers. Recently, new finance alternatives have emerged, especially crowdfunding, which deploys online platforms to allow entrepreneurs to connect with prospective crowd funders—the crowd—who finance new entrepreneurial ventures by lending small amounts. Empirical studies in this area are still in their infancy, but strengthen the perspective that crowdfunding may democratize entrepreneurial finance, particularly among the more vulnerable, and help break the poverty cycle.

Cluster 5: gender and thematic frontiers

The final cluster included eight studies. This cluster covers the impacts of microcredit targeting the vulnerable, with some articles focusing specifically on women. Thus, in this cluster, we encounter several studies bordering on the frontier with other clusters, such as Cluster 1 (e.g., Duvendack and Palmer-Jones 2012 ; Roodman and Morduch 2014 ), Cluster 3 (e.g., Willy and Holm-Müller 2013 ; Mallick 2013 ; Mendes-Da-Silva et al. 2016 ), and Cluster 4 (Deininger and Liu 2013 ; Barasinska and Schäfer 2014 ; Mendes-Da-Silva et al. 2016 ; Gleasure and Feller 2016 ).

Duvendack and Palmer-Jones ( 2012 ) and Roodman and Morduch ( 2014 ) re-examined previous studies, specifically those developed by Pitt and Khandker ( 1998 ), questioning the evidence they reported after studying Bangladesh microcredit programs. Both studies raise doubts about the microcredit outcomes identified by Pitt and Kandker. However, Duvendack and Palmer-Jones ( 2012 ) corroborate the positive effects of microcredit for vulnerable women. Gleasure and Feller ( 2016 : 110) conducted a meta-triangulation analysis of crowdfunding research. Their results suggest that crowdfunding generates new opportunities and describing how these “present genuinely new ideas and behaviours” and not “simply a migration of established practices into a new domain.” For example, crowdfunding may solve some of the discrimination problems faced by women in traditional credit markets, as the study found no gender effects on the likelihood of receiving funds. Deininger and Liu ( 2013 ) report that a combination of microcredit and self-help group initiatives (including training and capacity-building programs) produces positive pro-poor effects, especially by promoting the empowerment of women and health and improving consumption and income diversification in the short term.

Mallick ( 2013 : 179) examines whether continued support for poor individuals, which includes “management assistance, a subsistence allowance, health care facilities, and support for building social networks,” plays a crucial role in borrowing decisions. The authors indeed conclude that this “big push” affords the extremely poor access to microfinance. This effect is higher for larger households and for households with male heads, and increases with the average levels of education and income in the household. Social capital also plays an important role in borrowing decisions, in keeping with several of the findings systematized in Cluster 3. Mendes-Da-Silva et al. ( 2016 ) also support the notion that entrepreneurs’ social networks might play a central role in funding, especially on crowdfunding platforms. Willy and Holm-Müller ( 2013 ) examined the effects of social influence, social capital, and credit access in the agricultural sector and demonstrated how they represent significantly positive predictors of farm soil conservation.

Scholars have identified how entrepreneurship represents one path to the empowerment of women, particularly in developing countries, although empirical evidence indicates a mixed range of outcomes. Some studies stress that microcredits/microfinance endows women with great control over the operations of their ventures and household resources, thus fostering their empowerment. Others argue that microfinance programs do not take into account the cultural and social context of their deployment and thus, in some ways, sustain the existing hierarchy of classes, increasing tensions among household members and providing new forms of dominance over women. Recent research posits that new technologies extending basic financial services have a large effect at a relatively low cost and are susceptible to deepening through knowledge transfers in the form of financial literacy.

Mapping the trends

This section discusses the most recent and influential articles on microfinance topics published in the last three years (2018–3:2021) and ranked on ABS with a classification of 4 or 4*, yielding a total of 11 articles. Footnote 8 As they are more recent, these articles have been cited less often and therefore excluded from the bibliographic coupling analysis carried out in Sect. 4 . We also identified the most relevant emerging topics in the field.

Emerging trends

Table 10 systematizes the scope and main findings of all the articles published in ABS (4 or 4*)-ranked journals in the field of microfinance. Recent studies have promoted new approaches to examining the socioeconomic impacts of microfinance at both the macro (Buera et al. 2021 ; Duflo 2020 ) and micro (Burke et al. 2019 ; Singh et al. 2021 ) levels. The theme of MFI mission drift or mission lock-in is still at the fore in most recent literature (Alon et al. 2020 ), as well as the benefits to the group and joint lending (Attanasio et al. 2019 ), and reputation, social capital, and network (Li and Martin 2019 ). ABS (4 and 4*)-ranked journals have also published papers on somewhat underexplored topics on the frontiers of some clusters, such as alternative programs for promoting social changes (Kim et al. 2019 ), the impact of microcredits on subjective well-being (Bhuiyan and Ivlevs 2019 ), and the roles of cultural institutions (Drori et al. 2018 ) and government regulation (Tantri 2018 ) in the microfinance performance returns.

After analyzing the keywords of the most influential studies published between 1:2018 and 3:2021 (whether or not ABS ranked), Table 11 presents the most recent trends on microfinance literature, with “microfinance,” “microcredit,” “impact,” and “poverty” still representing the keywords with the most occurrences. Comparing Tables 8 with 11 , we observe that roughly half of the occurrences of these keywords relate to articles published since 2018. “Gender/women,” “entrepreneurship,” “performance,” and “empowerment” are trending topics, gaining in importance in the microfinance literature over the last three years.

Entrepreneurship and performance

Microfinance appears as an instrument that promotes access to capital for impoverished individuals otherwise excluded from financial systems and gaining popularity as a means of enhancing entrepreneurial activities (Yunus 1998 ), enabling vulnerable people to engage in market transactions and end subsistence-based livelihoods. Consequently, entrepreneurship among individuals living in poverty settings represents a more important outcome than much traditional entrepreneurship research in developed countries.

However, the empirical literature is inconclusive about the ability of microfinance to enhance the financial standing of vulnerable people (Khavul et al. 2013 ). This ambiguity is strengthened when coupled with other development outcomes, specifically the capabilities of the poor across several facets of human development (e.g., empowerment, education, health). Thus, researchers perceive that a key aspect for continuing scrutiny derives from the effectiveness or otherwise of microfinance, justifying the emergence of an increasing number of papers on this domain. Furthermore, some authors maintain that the context of microfinance deployment, hence the national context and specific features, impact the outcomes of such tools (Crépon et al. 2015 ; Weiss and Montgomery 2005 ), particularly in environments where credit markets have failed. Hence, the performance effect of microfinance is greater in developing countries (Chliova et al. 2015 ). Meanwhile, other authors emphasize the synergetic relationships between institutional and socioeconomic developments as outcomes that microfinance can achieve. However, it remains unclear whether microfinance aligns with supplementary or complementary outcomes.

Our bibliometric analysis demonstrates that when designing programs, microfinance institutions should focus on borrower characteristics instead of standard credit contracts; otherwise, credit only worsens problems of over-indebtedness. To achieve win–win propositions, in addition to credit, microfinance interventions should also involve education and training programs to boost the capabilities of less advantaged citizens to start, maintain, and grow their own ventures. This seems particularly relevant in less developed entrepreneurial ecosystems as well as in regions where the economic development model is based on intensive (low-educated) human capital that is more exposed to persistent poverty traps and anemic economic growth. By achieving successful entrepreneurial outcomes, educated and trained entrepreneurs increase their financial and non-financial outcomes. In sum, our findings shed light on the powerful interwoven effects of knowledge, credit, and entrepreneurship in lifting poor entrepreneurs out of poverty, particularly in deprived settings.

Empowerment and gender

Gender inequalities constitute one of the greatest barriers to human development (Conceição 2019 ), especially in developing countries (Ojong et al. 2021 ). In these countries, women may face additional challenges in obtaining education and a well-paid job, in addition to working an average of three times more often in unpaid and domestic activities than men (UN Women 2020 ). Scholars have emphasized how entrepreneurship provides a pathway to empower women, stressing that microfinance is a reliable tool that leverages its effects primarily through business activities.

The strength of microfinance as a development intervention tool to transform social and economic structures relies on its potential ability to lift people out of poverty (Yunus 1998 ) by running small ventures that generate financial resources to increase entrepreneurs’ financial well-being (Mckernan 2002 ). However, beyond wealth creation, this approach forecasts a capacity for microfinance to boost the livelihood of recipients across several dimensions (Buckley 1997 ; Miller et al. 2012 ). Hence, this places great emphasis on non-financial human development outcomes, specifically women empowerment (Hermes and Lensink 2011 ), which is particularly relevant in poor settings, as the constraints women face regarding market participation constitute a form of dominance and control over women. Women empowerment emerges as a multidimensional concept (Weber and Ahmad 2014 ) that, besides access to credit, also includes income, contribution to household expenditure, health, education, control over resources, participation in community and household decision-making, social mobility and freedom of movement, and self-worth (Kabeer 2001 ; Noponen 2003 ). Therefore, when considering these dimensions, any substantial increase in access to credit certainly does not automatically promote subjective well-being or empowerment (Angelucci et al. 2015 ; Tarozzi et al. 2015 ). Nevertheless, studies suggest that the provision of small loans to women enables them to more effectively mitigate gender barriers by running their own businesses, increasing their mobility outside the household, and achieving the ability to make decisions (Todd 1996 ). In addition, through economic activities, household income increases, improving their standard of living, and consequently enhancing the education of their children and leading them to adopt more preventive health practices (Yunus 1998 ).

The mission to promote the empowerment of women through the provision of small loans also depends on training programs and the ability of MFIs to understand the characteristics of female borrowers (Hunt and Kasynathan 2001 ). Thus, MFIs must design and implement internal policies to mitigate gender biases based on the conditions of female borrowers at the outset. Promoting the participation of women in decision-making processes in higher loan cycles, for example, will spread women’s empowerment (Swain and Wallentin 2009 ) and positively increase the abilities of female borrowers to decide how to use their loans (Weber and Ahmad 2014 ). Hence, recent research suggests a more holistic approach to answering the extent to which microfinance meets sustainable development goals, for example, eradicating poverty, reducing inequalities, and boosting sustainable development.

In fact, the outreach of microfinance itself is changing with the emergence of fintech, namely prosocial crowdfunding platforms. Fintech has had a noteworthy impact on the financial system by reducing operating costs, providing higher quality services, and increasing user satisfaction (Kou et al. 2021 ). In the context of microcredit, prosocial crowdfunding platforms act as socially oriented digital marketplaces, particularly targeting poor settings (Meyskens and Bird 2015 ), where lenders provide credit access to impoverished people underserved by the banking industry, facilitating the liberalization of the financial sector at a global level. In turn, this boosts more inclusive financial and social systems (Dupas and Robinson 2013 ) that generate large effects at relatively low costs.

To be fruitful, the crowdfunding platform design cannot ignore the decision dynamics underlying not only traditional e-commerce platforms but also fintech. Commercial digital platform users base their judgments and decisions on trustworthy reviews. Likewise, we posit that prosocial lenders will increasingly drive digital funding decisions on systematized crowd reviews on borrowers and MFI. Thus, as in many financial applications (see Li et al. 2021 ), detecting clusters of financial and social-environment data (such as borrowers’ social capital and MFIs’ financial and social performance) will be critical for inferring lenders’ behavior and maximizing the performance of crowdfunding platforms and their outcomes. This might constitute a new application case for the so-called data-driven opinion dynamics model (see Zha et al. 2020 ), because financial technologies provide important advantages in processing big data into more meaningful, cheaper, worldwide, and more secure data than conventional methods (Lee and Shin 2018 ).

Thus, we might expect these topics to guide future research, providing a starting point for returning practical implications for policymakers, academics, players in crowdfunding markets, and microentrepreneurs.

Conclusions and implications

Poverty remains a key global challenge. According to the World Bank forecast, the total number in poverty is due to rise for the first time in over two decades, from 119 to 124 million by the end of 2021. In this context, microfinance has emerged as an innovative and sustainable poverty alleviation tool to serve more vulnerable people, particularly in developing countries. However, some scholars have challenged its proposed benefits (e.g., Chliova et al. 2015 ; Morduch 1999 ). Through the application of bibliometric methods, this paper reviews the most recent literature on the trends in the outcomes for microfinance recipients, thus focusing on the demand side. The study examines 524 articles collected from the Web of Science database published between 1:2012 and 3:2021.

Based on keywords, co-occurrences, and links between citations to obtain knowledge maps, the findings demonstrate that in both the theoretical domain and the empirical, research still casts doubt on the capacity of microfinance to generate positive outcomes beyond wealth creation, particularly in terms of empowerment, education, and health (Cluster 1). Further studies in this domain should consider the macro-context when undertaking empirical research; otherwise, policies designed based on such limited evidence may yield unexpected outcomes contrary to the forecast socioeconomic goals. Furthermore, entrepreneurship, through granting small loans (microcredits), represents a precondition for individuals living in poverty starting small businesses and the most efficient strategy for leaving behind subsistence-based lives. However, as lack of management skills may hamper the survival of these businesses, providing finance literacy training has a positive impact on the performance of such small ventures (Cluster 4). Nowadays, the reach of microfinance is changing due to the emergence of crowdfunding, as the crowd of lenders provides prompt credit access to start-ups launched by impoverished microentrepreneurs and empowering women (Cluster 5). This research is still in its infancy, but by sharing risks worldwide, informal lenders can extend credit through small loans, thus democratizing entrepreneurial finance to boost new ventures. The group lending methodology remains an efficient instrument for overcoming the lack of access to financial resources by building up social networks in the community (Cluster 3). Therefore, research in this field should examine how new screening models and credit social models, along with soft information, leverage the financial performance of new ventures and enhance financial inclusion and foster the social inclusion of such individuals. This study also identifies the role of MFIs in addressing market failures in the traditional banking sector, stressing the idea that MFIs gradually shift over time from social performance (outreach to the poor) to financial performance (Cluster 2). Thus, taking into account the recognized role played by microfinance and MFIs in the process of socio-economic transformation, public policy must consider the need to compensate for the market’s financial performance gap in the poorest economies by subsidizing credit activities to avoid mission drift effects. This needs to be accompanied by a transformation of MFI corporate governance policies to ensure transparency in their operations and selection of microfinance recipients. Overall, this study corroborates that microfinance is a distinct field of development thinking that requires a more holistic approach to overcome poverty and boost economic and human development at the global level.

As with any bibliometric analysis, this study has some limitations. As we gathered bibliometric data from the WoS database, we may have missed studies listed only in other databases (e.g., Scopus). Furthermore, some research domains within microfinance and microcredit may rely more on citations than others, which may reduce the scope of the outputs within clusters. Finally, early career researchers may not fare well in citation and co-citation studies even when producing seminal research, which may reduce the impact of their studies as measured using tools deployed to gather bibliometric data.

One of the greatest advantages of the Web of Science database, compared with PubMed, Scopus or Google Scholar, is its timeline coverage in terms of quality research production (Falagas et al., 2008 ). This aggregates research information from five indexed databases: Science Citation Index Expanded (SCI Exp.), Social Sciences Citation Index (SSCI), Arts and Humanities Citation Index (A&HCI), and the index of Chemistry and Current Chemical Reactions (Goodman 2005 ). The SCI Exp. includes articles published since 1900; and with SSCI and A&HCI dating back to 1956 and 1975, respectively (Meho and Yang 2007 ).

We would acknowledge how searches based on a set of keywords include certain limitations (e.g., Costa et al, 2016 ). One way of improving the selection process in a systematic literature review involves adopting a Preferred Reporting Item for Systematic Review and Meta-Analysis – PRISMA (Moher 2009 ).

VOSviewer is a program developed for constructing and viewing bibliometric maps based on the visualization of similarities (VOS) technique (Van Eck and Waltman, 2009 ).

The year 2021 reflects only the publications until March.

https://charteredabs.org/academic-journal-guide-2018-view/ (accessed in April 2021).

The following similar keywords were merged: “programs” and “credit programs” (to “credit programs”); and, “gender” and “women” (to “gender/women”).

VOSviewer software only reports the name of the first author.

Paul et al. ( 2017 ) examine the most influential papers in the last four year. Spasojevic et al. ( 2018 ) also examine the papers ranked as class ABDC. Furthermore, Gutiérrez-Nieto and Serrano-Cinca ( 2019 ) select the top 5% articles for analysis as the excellent highly cited papers.

Abbreviations

Arts and Humanities Citation Index

Association of business schools

Information and communication technology

Microfinance institutions

Mean technical efficiency

Preferred reporting item for systematic review and meta-analysis

Science citation index expanded

Social enterprises

Social Sciences Citation Index

Sustainable development goal

Visualization of similarities

Web of science

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We acknowledge the financial support of Fundação para a Ciência e a Tecnologia (UBI PTDC/EGE/OGE/31246/2017; UIDB/ 04630/2020; UIDB/04728/2020; UIDB/04105/2020).

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Ribeiro, J.P.C., Duarte, F. & Gama, A.P.M. Does microfinance foster the development of its clients? A bibliometric analysis and systematic literature review. Financ Innov 8 , 34 (2022). https://doi.org/10.1186/s40854-022-00340-x

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After the microfinance background, examined in Chapter 1 , and the microfinance issues, illustrated in Chapter 2 , this chapter analyzes the impact of technology on microfinance. Technological instruments include the digital scalability of lending networks, crowdfunding and peer-to-peer lending, or blockchains for data validation.

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Mia ( 2020 ).

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http://www.cgap.org/blog/6-ways-microfinance-institutions-can-adapt-digital-age .

https://www.ifc.org/wps/wcm/connect/67a1ee9e-9f95-4baa-8430-2a101ca77a9e/MFI+Digital+Strategy+Field+Note_8.pdf?MOD=AJPERES .

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In cryptography and computer science, a hash tree or Merkle tree is a tree in which every leaf node is labeled with the hash of a data block and every non-leaf node is labeled with the cryptographic hash of the labels of its child nodes. Hash trees allow efficient and secure verification of the contents of large data structures. A Merkle tree is recursively defined as a binary tree of hash lists where the parent node is the hash of its children, and the leaf nodes are hashes of the original data blocks ( https://en.wikipedia.org/wiki/Merkle_tree ).

https://www.henrylab.net/wp-content/uploads/2017/10/blockchain.pdf .

There are different types of blockchain: some are open and public, and some are private and only accessible to people who are permitted to use them. A public blockchain is an open network. Anyone can download the protocol and read, write, or participate in the network. A public blockchain is distributed and decentralized. Transactions are recorded as blocks and linked together to form a chain. Each new block must be timestamped and validated by all the computers connected to the network, known as nodes, before it is written into the blockchain. All transactions are public, and all nodes are equal. This means a public blockchain is immutable: once verified, data cannot be altered. The best-known public blockchains used for cryptocurrency are Bitcoin and Ethereum: open-source, smart contract blockchains. A private blockchain is an invitation-only network governed by a single entity. Entrants to the network require permission to read, write or audit the blockchain. There can be different levels of access and information can be encrypted to protect commercial confidentiality. Private blockchains allow organizations to employ distributed ledger technology without making data public. But this means they lack a defining feature of blockchains: decentralization. Some critics claim private blockchains are not blockchains at all, but centralized databases that use distributed ledger technology. Private blockchains are faster, more efficient and more cost-effective than public blockchains, which require a lot of time and energy to validate transactions ( https://www.intheblack.com/articles/2018/09/05/difference-between-private-public-blockchain ).

Electronic money transfers made from one person to another through an intermediary, typically referred to as a P2P payment application. P2P payments can be sent and received via mobile device or any home computer with access to the Internet, offering a convenient alternative to traditional payment methods.

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Oracles ( https://www.mycryptopedia.com/blockchain-oracles-explained/ ) provide additional functionality to smart contracts by providing a means for them to communicate outside of a decentralized blockchain network. Blockchain oracles can take on numerous forms, some of those forms include but are not limited to:

• Software oracles;

• Hardware oracles;

• Inbound oracles;

• Outbound oracles;

• Consensus-based oracles.

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Moro-Visconti, R. (2021). The Impact of Technology on Microfinance. In: MicroFinTech. Palgrave Studies in Financial Services Technology. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-80394-0_4

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27 The Past and Future of Innovations in Microfinance

Roy Mersland, Professor in the Department of Economics and Business Administration at University of Agder, Kristiansand, Norway.

R. Øystein Strøm is professor of finance at Oslo and Akershus University College in Oslo, Norway, where he teaches corporate finance and corporate governance. His main research interests are in corporate governance (board structure, network linkages, and CEO compensation issues) and microfinance. His microfinance interests span from the governance of microfinance institutions to lending practices and efficiency. He has published in journals such as Journal of Banking & Finance and World Development.

• Published: 18 September 2012
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The microfinance industry has every sign of an innovation in its take-off phase. The characteristic aspects of the microfinance innovation were developed in the 1970s and 1980s; thirty years later the industry experienced a phenomenal growth rate, and it has diffused to most developing countries in the world. This article looks at microfinance as an entrepreneurial activity in its own right, contributing to the development of small and medium-size firms in developing countries. It traces the innovations in microfinance, for instance, group lending, loans to women, and their financing, and it asks whether the business model implied is sustainable once diffusion has gone far, competition enters, and customers enter higher income levels.

The microfinance industry has every sign of an innovation in its take-off phase. The characteristic aspects of the microfinance innovation were developed in the 1970s and 1980s; thirty years later the industry experienced a phenomenal growth rate, and it has diffused to most developing countries in the world. This chapter looks at microfinance as an entrepreneurial activity in its own right, contributing to the development of small and medium-size firms in developing countries. We trace the innovations in microfinance, for instance, group lending, loans to women, and their financing, and we ask whether the business model implied is sustainable once diffusion has gone far, competition enters, and customers enter higher income levels.

In 1999 Jonathan Morduch wrote, “The promise of microfinance was founded on innovation: new management structures, new contracts, and new attitudes” (1572). He ends his survey calling for a second wave of innovation. In this chapter we provide an update on the microfinance innovation, viewing it as the discovery of a new market of poor people for financial services as well as new ways to address the financing needs in the new market.

A common denominator of microfinance innovations is that they solve asymmetric information and cost problems associated with serving poor customers with little or no collateral. Thus microfinance gives poor people and small businesses access to financial services. Most providers of microfinance have a double objective: to serve the poor and to do so in a financially sustainable way. Choice of market and technology constitute the defining features of microfinance. The market choice is poor people and small businesses in developing countries, often further specified as people in semi-urban and rural districts and women. The technology is small loans of short duration without formal collateral, and often involves a group loan, that is, a loan for which the group members are jointly liable for repayment.

An organizational entity offering financial services to poor people and small businesses in developing countries is commonly called a microfinance institution (MFI). We use the term “microbank” in this chapter, as it connotes the size of the institution (most often small), the type of services provided (banking services), and the size of the loans it is granting (most often small).

“Innovation” is used to mean different things in the literature. Schumpeter (1934) defines innovation as “the commercial application of invention for the first time.” Thus innovation is differentiated from invention (an addition to the stock of knowledge in society) on the one hand and from diffusion (the widespread adaptation of the innovation) on the other. Microfinance has reached the diffusion stage at the time of this writing. From humble beginnings the industry is rapidly changing, and several microbanks, for instance the Nobel Peace Prize winner Grameen Bank has recently downplayed salient features of the original business model, such as the group loan (Dowla and Barua, 2006 ). Others transform into ordinary banks. Thus we ask whether the various original innovative elements of microfinance stand the chance of survival as diffusion of services accelerates.

The chapter is organized as follows. First we give an overview of microfinance, its history, characteristics and diffusion today, and impact. Then we explain what is meant by “innovation” and why innovation was needed in order to offer poor customers financial services. We identify the most important elements of microfinance innovation and review related relevant microfinance literature. Using a simple model for operational expenses and defaults, we consider whether the innovative elements stand a chance of future survival. At the end we share some perspectives for further research.

Introduction to Microfinance

In this section we offer some stylized facts about the microfinance industry, dealing mainly with the industry today and its future prospects. But microfinance is also an active research field where important theoretical and empirical contributions have been made. We build upon this literature in the following. Table 27.1 provides a brief overview of major microfinance research published in reputable peer-reviewed journals.

Some of these contributions will be revisited later in this chapter. The field has progressed too far for an exhaustive review; nevertheless an important observation is the fact that most microfinance research is found in development journals and to some degree economics journals (Mersland, 2009a ). Only to a minor extent has microfinance research penetrated mainstream finance and management journals.

Microfinance Characteristics

The diversity among microbanks is striking. In this section we report on the main characteristics in the data collected by Mersland; we call it the Mersland data for short. In his database, financial and general data for this study were collected from 379 microbanks operating in seventy-three countries. The data have been extracted from rating assessment reports gathered by specialized rating agencies supported by the Rating Fund of the Consultative Group to Assist the Poor (CGAP; www.ratingfund2.org ). At each rating up to six years of data were obtained, and the ratings were performed during the period 2001–2008.

No data set is perfectly representative of the microfinance field. In particular our data set contains relatively few of the megasize microbanks, and it does not cover the virtually endless number of small savings and credit cooperatives. The former are rated by such agencies as Moody's and Standard & Poor's, and the latter are not rated. Nevertheless Mersland (2009a) reports that the microbank characteristics in his data are quite similar to other publicly available data, for example the larger MIX Market ( www.mixmarket.org ). The advantage of the Mersland data is that they are collected by a third party (the rating agencies) and have richer information.

To begin with, microbanks are very differently incorporated. In the Mersland data 29.5 percent of the microbanks are shareholder owned, 51.4 percent are nongovernmental organizations (NGOs), and 15.3 percent are cooperatives. Only 28.5 percent are regulated by banking authorities. Most microbanks extend loans only to their clients; in fact only 37.2 percent accept deposits. This means that intermediation is little developed in the industry and that most microbanks do not have access to relatively stable and low-priced funding. Table 27.2 shows other characteristics of microbanks in our data.

The average loan is U.S.$759, and the median even lower, at U.S.$354, reflecting the “micro” in microfinance. Mersland and Strøm (2010b) even find that the average loan size is maintained. Thus the microbanks stay true to their mission of serving the poor.

The financial numbers mirror the institutional diversity among microbanks shown earlier. It turns out that the median microbank serves fewer than 5,000 borrowers, but the largest has nearly 400,000. The small size of the typical microfinance institution is reflected in the Daley-Harris (2009) Microcredit Summit Report, where 3,166 of the 3,552 microbanks reporting their data serve fewer than 10,000 clients. A few microbanks are big; for example, Compartamos in Mexico surpassed one million clients in 2008. Daley-Harris reports that 88.2 percent of the poorest microcredit clients are served by seventy-six microbanks. When size differences are on such a level, the business reality must be very different for the large and the small microbank.

The equity fraction shows that microbanks in general are well capitalized. The fraction is equity on total assets, of which the loan portfolio constitutes the largest part. We also note that the subsidy fraction, measured as the amount of subsidized debt on total assets, is fairly low, in fact less than 10.0 percent of total assets using the median value. Of the 341 microbanks with data on this variable, 118 (34.6 percent) have no subsidized debt, and 37 (10.9 percent) have more than 90.0 percent of subsidized debt. Thus most of the subsidies are concentrated in the hands of a few microbanks. The picture is similar for donations: 120 (34.3 percent) of 350 microbanks have received no donations, and 42.9 percent have received 10.0 percent or less of their reported equity during their history.

Notes: Mersland sample containing 379 microbanks in 73 countries with observations from 1998 to 2008. Numbers are in nominal USD. Proportions (e.g., ROA) are expressed in percentages.

Notice that the portfolio yield is nearly 40 percent. This proxies the lending rate on average. We also see that operational expenses are 29.0 percent of the portfolio and that 6.6 percent of the portfolio is more than thirty days overdue and at risk. Together operational costs and risk provisions eat up almost the full portfolio yield and leave little to pay for funding costs. Thus even if most microbanks are subsidized through loans or grants, the average annual return on assets (ROA) is low, 0.5 percent in our data. The portfolio yield should also be compared to the yield moneylenders charge, easily reaching 200 percent per annum and above. The high operational costs for the small loans given for a short duration and repaid in regularly scheduled installments explain the high interest rates charged (Jain and Mansuri, 2003 ).

The Diffusion of Microfinance

Until the early 1990s most of the new microfinance initiatives were driven by donor-funded NGOs concentrating on providing credit to entrepreneurial poor people, often women. But from small beginnings the microfinance sector has changed. Microfinance has grown in scope to include all types of financial services, not only credit, and is no longer the preserve of NGOs only. Today micro savings, micro insurance, and systems for money transfer are becoming available for the poor throughout the world. Moreover most international banks are now involved in one way or another in microfinance, and more than one hundred international funds are investing in microbanks (Reille et al., 2009 ).

The growth in microfinance is indisputable. Table 27.3 below shows the (nominal) growth in the total loan portfolio of all microbanks listed on the MIX Market. 1 Close We could have used other figures, such as the number of loans, and the picture would largely be the same.

The development of microfinance has the traits of an industry in its take-off phase, that is, a phase with strong, persistent growth over several years. The strong growth must reflect a response to an underlying demand. This is evidence in itself that microfinance is working, or that it has a positive impact. Poor people are offered the opportunity to store their savings in a safe place and to smooth consumption. Microfinance brings the basic utility of finance (Green et al., 2005 ) to poor people. Thus the sector seems to be rapidly approaching status as a normal business.

The growth persists even in the year of financial crisis, 2008, and picks up its former speed in 2009. The growth is even more impressive when we compare it to Western banks. The sample of Western banks consists of countries with records for all years in the United States and Europe. Even though the years after 2000 saw a rapid expansion of credit instruments outside the banks' balance sheets, the difference is remarkable. Furthermore the number of microbanks in the second rightmost column of Table 27.3 indicates that a consolidation is under way in the industry. In fact the average loan portfolio among the microbanks is more than two times the size of that in 2007. Such consolidation is normal during a crisis, and it shows that the total amount lent to poor people expands even when the number of microbanks contracts.

Note: Loan portfolio is defined as gross loan portfolio in microbanks and as gross loans and deposits in Western banks.

Sources: Mixmarket.org; Bank for International Settlement (BIS).

But in addition to the thousands of microbanks, there are millions of rotating savings and credit associations (ROSCAs), savings and credit cooperatives, and similar types of self-help banking organizations. Most of these operate below any public or donor radar, and estimating their numbers is impossible. Likewise the millions of moneylenders cannot be counted. It is also increasingly difficult to keep track of microfinance initiatives being carried out by regular commercial banks. As several operators of microfinance have proved their success, an increasing number of commercial banks are downscaling and have started offering small loans to lower-end markets. In Ecuador, for example, more than 10 percent of the total loan portfolios held by commercial regulated banks are microcredit (Super Intendancy of Banks, www.superban.gov.ec , accessed October 2009). Furthermore to distinguish between smaller consumer loans and microcredit is a statistical challenge in its own right. In Brazil, for example, several observers note that the limited outreach of microfinance services may be due to the high outreach of consumer loans and credit cards among poor people from ordinary banks. Thus microfinance is expanding both in volume and in kind, and increasingly the boundaries with ordinary banking are blurring.

Thanks to the many savings and credit cooperatives, savings banks, postal banks, and some public banks, as many as 500 million poor people are expected to have a savings account (Christen et al., 2004 ). The Microcredit Summit ( www.microcreditsummit.org ) reports, having reached the milestone of 100 million poor borrowers, and is now projecting 175 million by the end of 2015.

The Impact of Microfinance

We have noted that microfinance has induced a great increase in poor people's access to financial services. In our view, this better access to such a basic utility improves poor people's situation. However, it is notoriously hard to disentangle the effect that financial services have on the general economic growth in an area or at the individual household level. Serious endogeneity problems complicate identification of causal impacts of improved access to credit, and it is often difficult to measure effects during an economically meaningful time span. The debate over microfinance's merits in this regard turns into a methodological debate. Few rigorous impact studies have been undertaken (Morduch, 2000 ).

Levine's (2005) comprehensive survey of the relationship between finance and growth shows beneficial effects in country, regional, and longitudinal comparisons. He reports that a growing body of evidence using different methodologies and data sets finds that financial development, whether it is based on banks or financial markets, has a powerful impact on economic growth. Levine also reports that with higher financial development comes lower income inequality (see also Beck et al., 2004 ). He puts these beneficial effects down to five functions that the financial system provides, such as the reduction of information asymmetries in screening and monitoring borrowers, the pooling of savings and reallocations of funds, and the facilitation of trade and commerce. Microfinance may be seen as a way to extend financial services to formerly unbanked people, thus deepening the financial system in the country by removing the frictions that prevent poorer segments of the society from access to financial services. Providing access to microfinance, and at the same time letting the customers pay for the services, has therefore been seen as a promising tool for poverty alleviation (Morduch, 1999 ).

Recently, however, Dichter and Harper (2007) , for example, have questioned whether access to credit actually benefits the poor. Early studies at the micro level have generally been able to trace a positive link between access to credit and economic development at the family level in terms of labor supply, schooling, household expenditure, and assets (e.g., Hulme and Mosley, 1996a ; Pitt and Khandker, 1998 ; Khandker, 2005 ). The Pitt and Khandker and Khandker studies find that the strongest effects are for loans to women and the very poor. Generally in such studies the problem is to establish causality due to omitted variables (which explain the effects), nonrandom samples, self-selection of households, and household attrition (i.e., only successful households continue in the program). Yet more hope resides in the random sampling technique (Coleman, 1999 ; Banerjee et al., 2009 ; Zinman and Karlan, 2009 ; Karlan and Zinman, 2010 ) to allow for identification of impact. Borrowers are randomly granted a loan, and then effects for borrowers and rejects are compared. Care is taken to ensure that loan applicants do not have alternative credit opportunities. In the Banerjee et al. study a microbank in India randomly selected new slum areas in which to establish branches. After fifteen to eighteen months the authors find increased business activities and outcomes in the selected areas. However, the authors find no impact on consumption or health and education. Zinman and Karlan find similar results in a randomly selected sample of microenterprises in the Philippines. Profits rise, but mostly due to reduction in the number of employees. In one microbank in South Africa Karlan and Zinman find that access for marginally creditworthy loan applicants to consumer credit (at a 200 percent annual percentage rate) improves economic self-sufficiency in terms of employment and income, food consumption, and a subjective measure of well-being relative to the control group twelve months after the “treatment.” The loans were profitable. Thus the findings in studies using random samples do not give solid evidence that borrowers benefit from microfinance, but they do not deny such effects.

The debate has turned into a methodology debate arguing for and against different statistical approaches to use in the measuring of impact (Bauchet and Dalal, 2009 ; Rosenberg, 2010 ). In addition, what seems to come out of the debate is a more realistic view on microfinance as an antipoverty tool. More focus on savings and less on credit is another lesson. Giving poor people access to credit is not a panacea in the fight against poverty. To a large extent microfinance should be considered a risk-mitigation tool and a means to smooth consumption rather that an instrument to rapidly increase poor people's income. Perhaps the effects are very difficult to measure at the individual household level because the external effects of easier trading and more productive investments that result from a deeper financial market are more visible at the community level.

The Origins of Microfinance

The microfinance innovation is recent. The Nobel Peace Prize winner Mohammad Yunus, who started issuing small loans to poor women from his own pocket in 1976, is, together with his Grameen Bank in Bangladesh, the best known among the pioneers. Others, however, preceded Yunus, including a student organization in Brazil that later became Accion International ( www.accion.org ) and David Bussau and Al Whittaker, who in 1971 started issuing small loans to generate jobs. Their initiative became Opportunity International ( www.opportunity.org ), today one of the largest international microfinance networks.

Few innovations, if any, come out of nothing. The new microfinance initiatives in the 1970s were a response to the frustrated development resulting from subsidized rural credit in the 1950s and 1960s. Over several years international donors and national governments invested billions of dollars in cheap credit to farmers. The results were disappointing. Corruption flourished, repayment of the loans was low, and the overall development effect was negligible. In fact Hulme and Mosley (1996b) report default rates of 50 percent in state-owned rural financial institutions in the 1980s.

The new innovative microfinance loan contracts aligned poor people's need for access to credit and lenders' need to get loans repaid. In designing the new contract the pioneers borrowed heavily from traditional informal financial systems such as the ROSCAs (Adams and Fitchett, 1992 ). Loans were small, short term, and backed by informal or group collateral. In addition, repayment capacity was normally calculated based on existing income streams and not projected income from new investments. The prime target for microcredit was therefore (and continues to be) entrepreneurial poor people. Reaching the poorest segments, those with no or few entrepreneurial activities, or reaching the wage earners continues to be a major challenge in microfinance (Helms 2006 ).

Providing banking services to poor people has a long history. Moneylenders offering their services to the poor have always been around and continue to be important providers of timely, though often very costly, loans. Moreover for hundreds of years people of modest means have come together to organize savings clubs and small credit schemes, in the literature often referred to as ROSCAs. Household participation above 50 percent is not uncommon in African villages (Bouman, 1995 ). In these schemes the members regularly, often weekly or monthly, pool their savings or contributions and rotate these as grants or loans among members. The groups normally consist of ten to thirty members and are organized by the members, either collectively or by one or a few of those predominantly involved. Despite the outreach of more formal types of microfinance the ROSCAs continue to be popular (Allen, 2006 ). The ROSCAs' dependence on internal funding (savings), grassroots leadership, and an inexpensive operating model making outreach to very remote areas feasible have recently attracted considerable donor attention (Allen, 2006 ; Mersland, 2007 ). In one effort CARE, together with partners, aims to mobilize 30 million Africans into savings and credit groups similar to ROSCAs ( Microfinance Focus , September 18, 2009).

Other banking systems for the poor that developed hundreds of years ago continue to be important banking organizations throughout the world (Hollis and Sweetman, 1998 ). Savings banks, initiated more than two hundred years ago, and the savings and credit cooperatives initiated 150 years ago were organized to help poor people escape poverty (Horne 1947 ; Teck 1968 ). Similar to microfinance today, savings and credit were introduced as a self-help means to avoid poverty and to improve poor people's living conditions (Mersland, 2011 ). Savings banks and savings and credit cooperatives maintain their popularity throughout the world and, along with the ROSCAs, are today the most important providers of savings services for poor families (Christen et al., 2004 ). Microfinance thus is not new in world history; it is an innovation rather than an invention, a rediscovery of features used in earlier schemes.

Innovation in Microfinance

Our view is that the microfinance business is an innovation. But what is an innovation, and are innovations needed to reach out to poor people and small businesses? In this section we first consider innovative contributions, and then look at asymmetric information problems in microfinance.

The Nature of an Innovation

An innovation is the first-time use of an invention for commercial purposes (Schumpeter, 1934 ). Innovation is separated from invention on the one hand and from diffusion on the other. An invention is a new, useful product or process not yet brought into commercial use. “Diffusion” simply means that the innovation is taken up in new places and new applications throughout the economy. From Schumpeter we inherit another useful distinction: between what we may call upsetting and extending innovation. The upsetting innovation is a completely new product or process and often has wide repercussions in the economy as a whole, as happened when the car and the mobile phone were developed, and when coal for machine propulsion was put to use for lack of wood during the Industrial Revolution. 2 Close The extending form of innovation is the product of routine development to improve the upsetting innovation, such as when a more energy-efficient car engine is developed or a pharmaceutical product is improved. Furthermore the Schumpeterian definition is not only about product and process innovation, but also encompasses new organizational processes and the opening of new markets for inputs or outputs. We will keep to this understanding of innovation here, as it seems to be accepted by many authors (Kennedy and Thirlwall, 1972 ; Baumol, 2002 ), although Kline and Rosenberg (1986) point out that the linear projection from invention to innovation to diffusion is a simplification.

Asymmetric Information: Why Microbank Innovations Are Needed

A microbank is also a bank, thus its relationships to customers and owners are fundamentally the same as for ordinary banks. Microfinance offers novel ways to cope with the fundamental problems in the lender-borrower relationship. To better understand the importance of the microbanks' innovations a short review of asymmetric information problems in the lender-borrower relationship is necessary.

The lender-borrower relationship contains several informational problems (Freixas and Rochet, 2008 ). Suppose the bank faces a new borrower. At this initial stage, the bank does not know the borrower's type. Focusing on the extremes, the borrower may be trustworthy or untrustworthy. This is an example of Akerlof's (1970) lemon's problem, that is, the adverse selection or the hidden information problem. If the bank knew in advance, it would supply a loan to the trustworthy and not to the untrustworthy. The bank needs a signal from a third party to screen the good risks from the bad. Now suppose the loan is given. At this interim stage, the bank may be unable, or unwilling due to the high cost of monitoring, to ensure that the borrower exerts full effort to repay the loan. This is the moral hazard , or the hidden action, problem (Holmström, 1979). The problem is usually solved by setting up an incentive structure so that the borrower has an interest in repaying. A third, ex-post stage is introduced if the bank finds it difficult to verify the report quality after the project is terminated. This is called the costly state verification problem (Townsend, 1979 ), and the usual remedy is to set up a contract in advance that specifies no disclosure of the project's success as long as the borrower fulfills his or her obligations, but requires full verification through auditing if not. Thus the three main informational problems that the bank faces may be termed the screening, the repayment, and the auditing problem. As in all banking these are fundamental in microfinance, and we will see how the industry has found innovative solutions.

But the bank itself presents problems with information asymmetries (Barth et al., 2006 ; Morgan, 2002 ). Banks are so-called opaque institutions because it is difficult for outsiders to understand management's risk judgment in individual loan cases. The lack of transparency makes diffuse ownership problematic due to common free-rider behavior, and with a concentrated ownership one cannot be sure if loans are priced fairly or given on “friendly” and even self-serving terms. We argue below that the microbank is an organizational innovation that partly overcomes this “monitoring of the monitor” problem.

We argue that microfinance is a form of upsetting technology. It comes replete with its own revolutionary character, Mohammad Yunus, who received the Nobel Peace Prize in 2006 for his efforts. Its central idea is twofold: “the poor can pay back” and “provision of microfinance can be done in a financially sustainable manner.” Around this idea a business model has been built, and this is what constitutes the innovations we follow in this chapter. The innovations in microfinance may be summarized as follows:

The targeting of poor customers.

The targeting of women.

New lending technologies.

New organizational solutions.

New sources of funding.

Not all of the microbank's characteristics are innovations; for instance, it is hardly an innovation that a bank is unregulated. In this section we are concerned with the microbank's markets for output, loans, the seeming diversity of organizational setups, and its input of capital, and with the microbank's technology in reaching out to its customers.

The New Market: Poor Customers

A new product market belongs to the catalogue of Schumpeter's innovations. This is exactly what microbanks have been doing. The targeting of poor people is generally seen as the microbank's mission, but from a business model perspective it is equally a choice of a new market.

Before microbanks the clients were served, if at all, by local moneylenders and intermittent initiatives from the government. The state banks had hopeless repayment rates, often forgiving the debt out of an “understanding” of the poor customer's plight, perhaps brought about by political pressures. The phenomenon is generally known as the “soft budget constraint” (Kornai et al., 2003 ); that is, the constraint is not absolutely binding but is open to (political) negotiation. On the other hand, the moneylender could achieve repayment because his deep local knowledge allowed him to select the low-risk borrower and to monitor the borrower's efforts to repay. Outside his backyard the moneylender would have few sanctions; thus the local nature of the business precluded scale economics. Generally ordinary banks were not accessible by poor customers. To Akerlof (1970) this is a prime example of markets failing to arise due to informational asymmetry. The microbank arose to give poor people an alternative.

The small loan has been perhaps the most common measure of the microbank's outreach to poor people. Naturally, poor people can ill afford anything but a small loan. Commentators (e.g., Dichter and Harper, 2007 ) have worried about the so-called mission drift in microbanks, that is, their extension of services to better-off customers. Mersland and Strøm (2010b) show that the small loan bias has not disappeared over the years, and it tends to be associated with such outreach measures as those to rural borrowers and female borrowers. Thus the fear of mission drift is exaggerated. A more apt observation is that the microbanks have discovered, developed, and maintained a market for banking services to the poor.

The Targeting of Women

Modern microfinance and women have been intrinsically linked. From its starting point in the 1970s, microfinance has been above all a matter for women. Many initiatives have been celebrated for their ability to reach out to women and enhance their welfare. Even today the gender argument continues to be at the forefront. The objective of the Microcredit Summit Campaign, which plays a central role in the promotion of microfinance, is “to ensure that 175 million of the world's poorest families, especially women , receive credit for self-employment and other financial and business services” ( http://www.microcreditsummit.org ; our emphasis). Among many, Morduch (1999) argues that one of the main reasons for the success of microfinance in the public eye is the targeting of women. In our data women represent 73 percent of microfinance customers on average, 3 Close and 42 percent of microbanks declare a conscious gender bias toward women.

The targeting of women in pro-poor banking initiatives is historically something new. In Europe and North America the first initiatives of the cooperative and mutualist banking movements showed little interest in women. Lemire (2001) finds that the proportion of women in the cooperative movement barely reached 10 percent. With a quarter of female clients, mostly widows and unmarried women, the eighteenth-century Irish funds were an exception, possibly because of their very small loan amounts (Hollis, 2001 ). Similarly the first attempts to provide credit in developing countries through development banks and cooperative movements also showed little interest in women (Fournier and Ouédraogo, 1996 ).

How can we explain this sudden enthusiasm for targeting women customers, and why do many microfinance organizations today still choose to focus on women? Three main arguments are usually put forward in favor of targeting women: (1) gender equality, (2) poverty reduction, and (3) microbank efficiency (Mayoux, 2001 ). With respect to gender equality, microfinance is considered an effective means of promoting women's empowerment. By enabling women to develop or strengthen income-generating activities, microfinance is likely to increase their monetary income, their control over their income, and their bargaining power within the household. These effects are expected to lead to various mutually reinforcing social, psychological, and even political effects: better self-esteem and self-confidence, an improvement in status within the family and the community, better spatial mobility, greater visibility of women in public spaces, and so forth.

As far as poverty reduction is concerned, it is argued that women invest their income to nurture the well-being of their families, whereas this is not always the case for men; a dollar loan to a woman seems to have a greater development impact than a dollar loan to a man (Daley-Harris, 2007 , 165).

In terms of microbank efficiency, a high female repayment rate is often the main argument. Empirical evidence usually confirms that women do indeed repay at a better rate than men (D'Espallier et al., 2011 ). The microbank assumes less risk when lending to women rather than men, and may consequently prefer women. However, financial performance is more than just repayment. D'Espallier et al. (2009) find that microbanks targeting women perform equally well in financial terms compared to microbanks that don't consciously target women. The great emphasis on women in microbanks is therefore probably not so much related to efficiency as to the rising influence of gender lobbies within donor agencies, NGOs, and international social lenders to microbanks monitoring women outreach (Fernando, 2006 ; Mayoux, 1999 ; Weber, 2006 ).

New Lending Technologies

A borrower often obtains a loan by pledging collateral, such as a mortgage on the house. In microfinance this method is often not available, since the individual customer has little or no collateral to offer, and the local environment offers little opportunity to legally enforce repayment. The microfinance industry has developed loan types to meet this problem. The loan may combine characteristics such as a group loan, a small loan, and a loan given on short maturity. The small loan of short duration is the main defining property of the microfinance loan, but the major innovation is the group loan.

The basic characteristic of the group lending arrangement is, in most cases, that a loan is given to an individual, but then the whole group is responsible for its repayment (Armendáriz and Morduch, 2010 ). This is the joint liability condition of the group loan. The social capital implied by belonging to a group acts as a substitute for collateral (Tirole, 2006 ). For this to work, the community to which the group members belong often needs to be close-knit, as in a village.

Among others, Ghatak and Guinnane (1999) argue that the group loan solves the three banking problems of screening, repayment, and auditing. In the screening process group members are often chosen by self-selection. Ghatak (2000) introduced the term “positive assortative matching” to show that good-risk borrowers tend to team up with other good-risk borrowers. They can do so because they know each other from other social settings. The positive assortative matching is in effect borrower screening carried out on behalf of the bank. The asymmetric information problem is reduced, and at a far lower cost than the microbank could achieve on its own.

In the repayment stage the group loan's advantage is that the joint liability condition leads to an incentive by group members to monitor other members (Stiglitz, 1990 ; Varian, 1990 ). Besley and Coate (1995, 2) expressed this mutual monitoring colorfully: “Under an individual contract, all the borrower has to fear, if he defaults, is the penalties that the bank can impose on him. Under group lending, he may also incur the wrath of other group members. If the group is formed from communities with a high degree of social connectedness, this may constitute a powerful incentive device, since the costs of upsetting other members in the community may be high.” Compared to the bank's own monitoring, this mutual monitoring achieves two things. First, monitoring is improved since other group members are probably in a better position than a loan officer to judge whether a group member is making the necessary effort to meet loan obligations. Second, the members can wield sanctions that are not open to the bank, such as social exclusion, and therefore are better able to discipline group members to repay. Thus monitoring should be more effective in a group loan, and the moral hazard problem consequently lower. This again acts to reduce the microbank's borrower riskiness and costs of monitoring.

Finally, the auditing model of Besley and Coate (1995) says that group members are better able to verify each other's effort to fulfill obligations. Again other members of the loan group are the eyes and ears for the microbank.

Group lending models vary. Often a maximum number of group members is set, for instance the five-member group is the common group size in the classical Grameen Bank system and the original solidarity groups practiced by Accion International affiliates. In other models, for example the Village Bank system practiced by FINCA, groups can have around twenty members with or without subgroups of around five members (Armendáriz and Morduch, 2010 ). Self-selection of members is mandatory in some group schemes, and in others the microbank selects the group members as loan applicants arrive; for instance Karlan (2007) describes such a scheme in FINCA-Peru. However, it seems that regardless of the model, group lending by itself induces members to repay more often than individual lending.

Furthermore other rules are built into the loan contract. The practice of sequential financing and contingent renewal schemes are often part of the agreement. Sequential financing refers to the practice of first giving, say, two members of a group a loan, and then to two more if the first two loans are repaid (Morduch, 1999 ). Contingent renewal is the refusal to lend again to any group member if not all outstanding debt is settled. Contingent renewal is not necessarily a group feature, but may be part of an individual loan contract as well. Bolton and Scharfstein (1990) model a repeated lender-borrower relationship wherein the threat of termination induces the borrower to repay. Thus the bank takes the risk of extending a loan to persons with no previous credit history and no collateral, and then uses the experience from the borrower's repayment record to establish creditworthiness.

The predicted relationship between repayment and social cohesion is largely borne out in empirical studies. From field study data of urban and rural borrowing groups in Guatemala, Wydick (1999) finds that rural groups are much more willing than urban groups to exert social pressure to repay, but finds no effects of social ties, such as same gender or partaking in the same social activities. In contrast, Zeller (1998) and Karlan (2007) find that repayment increases with social cohesion, or what Karlan calls social connectedness. Ahlin and Townsend (2007b) document an inverted U-shaped curve linking social cohesion and repayment: beginning at low social cohesion, the repayment rate increases, but then falls off at high levels of social cohesion, such as between close relatives.

The theoretical case for the superiority of group loans is not settled. Armendáriz de Aghion and Gollier (2000) develop a model wherein group lending has a potential even if matching is random, that is, where positive assortative matching is not required. The clue is that risky borrowers will pay more than safe borrowers in case of default, thus subsidizing the safe borrowers and bringing them into the credit market. Unlike Armendáriz de Aghion and Gollier, Rai and Sjöström (2004) assume that group members may enter into side contracts with other members. They show that these individual contracts between members can replace the joint liability condition for group formation, a point noted by other authors too. These and other alternative theories should give rise to increased attention to individual contracts in microfinance.

The costs of the group loans for both the microbank and its customers seem to be little reflected in the theoretical models or the empirical literature. For the customer the costs include the expected cost of bailing out nonpaying group members and high transaction costs, such as time and travel expenses for meetings. There is also the social cost of acting as a monitor of closely related borrowers, be they relatives or neighbors. The lower repayment rate at the very high level of social cohesion (Ahlin and Townsend, 2007b ) is a reflection of the high social costs the group members are asked to pay.

How common is the group loan in microfinance? In the Mersland data the microbanks are classified as giving only group or individual loans, or a mixture of the two. It turns out that 54.1 percent of the microbanks belong to the mixture category, 26.0 percent to the individual loan, and 19.9 percent to group loan only. Thus individual loans are more important than group loans. This is in contrast to the Ghatak (2000) prediction that group loans would become the prevalent form of loan in both developed and developing countries. In a recent study Mersland and Strøm (2010a) further demonstrate that the cost of upholding group lending often outperforms the benefits. They question the future widespread use of group lending in microfinance.

Now we look at the small loan of short duration , loan types that are equally suited to individual lending. When the loans are small, the bank is able to extend credit to more customers. This fulfills its social mission, but also implies risk diversification. Short-duration loans further reduce the risk that the client will not repay. They also have a second effect: the customer is fairly quickly able to build a credit history and to show that he or she is able to repay the loan obligation. Thus small loans of short duration also contribute to a better repayment record in the same way as the contingent renewal scheme. Thus the first small loans on short duration may be seen as screening devices for the microbanks that help them separate good from bad risks. As loans are renewed, extended, and prolonged, the microbank earns rents on the enduring relationship with the customer (Petersen and Rajan, 1995 ). Finally, step-wise increase in loan amounts is a typical feature, especially in individual lending, and gives the customers an additional incentive to repay their current obligations (Armendáriz and Morduch, 2010 ). These features of the microfinance lending contract are little explored theoretically or empirically. Bayesian updating models could show how the microbank quickly gains knowledge of customers through their repayment record.

Organizational Forms for Better Monitoring

The microbank screens customers for loans and monitors the loan's repayment, but the microbank needs to be monitored as well. Is monitoring a microbank easier than monitoring alternative development banks? In this section we argue that this is the case, and that microfinance has developed organizational innovations to do so.

The microbank grows deep roots in the community it serves. Often the bank is organized from below and has a mutual or nonprofit ownership; that is, the customers have a say in the affairs of the bank. This often means that customers are able to monitor the microbank. They may recognize the bank officials from their local communities, see that they are not overpaid and that the operations are executed in an efficient and fair manner, and they may be addressed in a way that is familiar to their situation. The development of this closeness between bank and customer is probably a precondition for many a microbank to flourish in its community.

This form of banking has its parallel in the early experience in banking to the poor in the North Atlantic countries in the nineteenth and twentieth century. Banking to the poor has generally been dominated by mutual and nonprofit ownership, not by investor ownership (Hansmann 1996 ; Mersland, 2009b ).

This is in contrast to the preceding state-owned banks and development initiatives. These large, distant, and impersonal banks are created to implement government policies. Therefore they need to adapt to customer needs to a lesser extent than microbanks. On the other hand, these banks may have a corporate governance advantage in that a large, dominant owner can internalize costs of monitoring and may therefore have an incentive to take the oversight function seriously. However, the state bank may lack adequate customer knowledge and may be more susceptible to political favoritism and outright self-dealing (Morck et al., 2005 ).

The new microfinance initiatives of the 1970s and 1980s emerged in NGOs concerned with poverty alleviation, seeing banking services to the poor as a part of this mission. These were not organizations set up to manage complex banking operations. Thus ever since the NGO Prodem in Bolivia was transformed into Banco Sol in 1992, it has been argued that an evolutionary organizational process that transforms nongovernmental microbanks into commercial shareholder-owned firms is required (Pischke 1996 ). As a privately owned firm, the microbank can benefit from superior corporate governance; it can perform better since it can provide a larger range of better quality services; and it is more independent of donors. However, few (probably fewer than a hundred) of the thousands of NGOs have transformed into more commercial ownership structures. Mersland (2009b) argues that the overall cost for a microbank to be organized as an NGO may be lower than previously thought since NGOs may be better in reducing costs of asymmetric information between the lender and the borrower and between the depositor and the bank. Mersland and Strøm (2008) find that NGO microbanks actually perform similarly to their more commercial peers. Thus even if NGO microbanks tend to be small, they continue to be the most important ownership form in the microfinance industry, making up 51.4 percent of all microbanks in the Mersland sample.

New Sources of Funding

Further innovations come in funding. There are three main sources of funds for a bank: equity, deposits, and borrowing from credit providers other than depositors. Microfinance may be seen as a better vehicle for channeling funds to poor people than former state-owned development funds or banks. Ever since the pilot schemes in the 1970s microbanks have been able to attract donor capital to a substantial degree. Morduch (2000) claims that for microfinance to reach the poorest segments microbanks need continued subsidies in some form.

Lately the investment in microfinance has become popular. Between 2004 and 2008 the total stock of foreign capital investment in microfinance increased more than six times, to U.S.$6.5 billion (Reille et al., 2009 ). Currently more than one hundred international microfinance investment vehicles invest in MFIs worldwide ( www.mixmarket.org ), offering equity, loans, bonds, collateralized debt obligations or securitization. Thus the microbanks constitute an innovation in sourcing of funds, and therefore play a vital role in mobilizing and allocating international capital for investment purposes in developing countries.

The international element is strong in microbanks. In fact Mersland et al. (2011) report that 38 percent of microbanks are internationally initiated, 41 percent have international commercial debt, 51 percent have international subsidized debt, 24 percent have at least one international member on the board, and 33 percent belong to an international network.

Personalized online lending across borders is a new innovation. Kiva is an online organizational platform for facilitating loans from individual lenders to poor persons and small businesses in developing countries by means of the Internet. As of April 2010 it has made more than U.S.$130 million in loans to close to 340,000 entrepreneurs. Kiva is surely not the last innovative organization to find solutions for enhancing donations and loans.

The Future of Microfinance Innovations

In many instances the success factors at the innovation stage may not become the success factors in later stages. However, the business model, the fixed resources and the routines built into the way of doing business, in short, the microbanks' technology, act as powerful determinants for later development. Changes should be expected as prolongations of current practices rather than as clean breaks from the past. Further development is path-dependent (David, 1975 ; Rosenberg, 1994 ).

Thus a pertinent question to ask is: Is the microfinance business model sustainable, or will the innovations at the inception stage act as brakes on further development? Two developments motivate this question. The first is increased competition, the other higher customer heterogeneity. The monopoly position enjoyed by the first microbanks has been eroded as others follow in their footsteps. McIntosh and Wydick (2005) model how cross-subsidizing poorer customers, for instance in long-term relationships, is undermined by competition. Higher customer heterogeneity may come from the microbanks' success in lifting individuals out of poverty. Paradoxically the microbank's business model may become outdated because of its own success.

Table 27.3 shows that a consolidation is taking place among microbanks. This is an indication of increased competition. Together with higher customer heterogeneity this put strains on the microfinance business model. In both cases, the cost of doing business becomes more important for the microbank's survival (Mersland and Strøm, 2010b). Being cost-efficient is a viable strategy for survival when competition stiffens and budget constraints become “hard.” Therefore an analysis of cost drivers among microbanks is called for. We undertake a simplified analysis here, focusing on the microbank's lending. Accordingly we regress operational costs on variables taken from the microbank's business model. In addition, since the main argument for the innovative aspects was to reduce asymmetric information and secure loan repayment, we test whether the innovative aspects are the factors that still uphold high repayment rates in microbanks.

To discuss these questions systematically, we run a panel data regression based on the Mersland data that extends from 1998 to 2008 and covers 379 microbanks in seventy-three countries. 4 Close The dependent variables are operational costs/loan portfolio and the default rate. The default rate is defined as the portfolio at risk (PaR30), that is, the fraction of the portfolio with more than thirty days in arrears.

The same explanatory variables enter both regressions, since the variables are likely to relate to both operational costs and risk. We first include variables for the microbank's business model. Mersland and Strøm (2010b) find that operational cost per customer is related to such outreach measures as average loan size, the microbank's gender focus, and lending methodology. We use these as proxies for the firm's choice of market and technology. Then the microbank's institutional features, ownership type (shareholder-owned or not—SHF for short), its regulation, and its competition may capture institutional features of the individual bank (Mersland and Strøm, 2008). A third explanation is microbank size. Allen and Rai (1996) and Berger and Humphrey (1997) find scale economics disappear beyond a certain level. Thus this may be of great importance in the generally small microbanks. We also add the Mersland and Strøm (2010b) institutional economywide variables to neutralize country effects. These include risk factors such as inflation and the current account balance, the growth factors GDP per capita (purchasing power parity adjusted) and growth of GDP, and the Heritage Foundation index of economic freedom in the country. The “law and finance” literature (Shleifer and Vishny, 1997 ; La Porta et al., 1998 ) shows that such macroeconomic factors are highly significant. Furthermore we add time and region dummies to further control for exogenous factors that may impact the operational cost to loan portfolio ratio.

The international funding innovation is missing in this list. However, funding should have no association to operational efficiency or risk, according to the Modigliani-Miller theorem. Furthermore Mersland et al. (2011) find that international funding plays no role in the determination of financial performance (e.g., ROA). Consequently this aspect is left out of the regression.

We use the random effects model (Greene, 2008 ) on the panel model, with standard errors adjusted for the individual microbanks, and obtain the results shown in Table 27.4 . Significant results are marked with stars at the 10, 5, and 1 (three stars) percent significance level. The first regression shows that the operational costs to loan portfolio ratio increases with loan methodology (more group loans in portfolio), with shareholder ownership, with inflation, and with economic freedom, but it decreases with a larger average loan, more lending to women, a larger loan portfolio, the microbank's experience, and when the current account increases. A regression with the operational costs to assets ratio as dependent variable and assets as independent variable for microbank size does not substantially alter the results. In comparison, few significant results emerge in the risk regression with PaR30 as dependent variable. Microbanks with a gender bias have a lower risk, and older microbanks are willing to take on more risk than younger.

Note: Data from 379 microbanks in 73 countries from 1998 to 2008.

Let us discuss these findings in the light of ongoing changes in the microfinance sector. First, consider the microbanks' business model variables. These are captured in average loan size, gender (bias), and lending methodology. Using the results as a guide for future action, the microbank should lend larger amounts, lend more to women, and lend more to individuals. Thus part of the microbanks' business model is vindicated in terms of operational costs; others are not. Let us look closer at these aspects.

With rising income we should expect borrowers to demand larger loans. Cost considerations also favor larger loans, our simple regression says. Yet Mersland and Strøm (2010b) show that the average (as well as the median) loan has remained at the same level over a ten-year period. A possible interpretation is that the microbank starts out serving the better-off among the poor and grows through penetration into poorer markets. Another possibility is that the customers “graduate” from the microbank to an ordinary bank, and the microbank seeks among the poor for new customers as replacements. A third alternative is that the borrower remains and has a small loan, but now also holds loans with other microbanks and ordinary banks. A report from smartcampaign.org asserts that 20 to 75 percent of microbank clients have multiple loans from several providers. Krishnaswamy (2007) confirms that such multiple borrowing take place in India as well.

Multiple borrowing could be a sign of microbanks holding the loan amount to individual borrowers artificially low. If this is the case, the average loan size is not a measure of the microbank's outreach, but a self-imposed limit on the loan amount, possibly made so as not to ruin the microbank's standing as a provider of loans to poor people. It implies that the microbank does not grow with the customer. It also implies that the microbank's investment in the relationship is lost, thus preventing the bank from earning later-stage rents on a long-standing relationship (Petersen and Rajan, 1995 ). The limit on loan amount may be justified by the microbank's effort to diversify risk, but we believe cost considerations should play a bigger role. First of all, servicing a large loan is not proportionally as expensive as servicing a small loan due to the fixed element in loan provision. Second, the bank needs to compensate the loss of business to a larger customer with an outreach to more customers. This generates costs in risk assessment of new customers, default losses on weak new borrowers, and so on. Third, the customer incurs greater transaction costs when he or she needs to obtain loans from several providers. Thus a prediction is that the microbank will increase the average loan size by differentiating the loan size more between customers. Morduch and Rutherford (2005) predict that microbanks will become more flexible in their lending practice; in particular they will keep their established customers by offering services better tailored to their needs.

The Becker (1971) hypothesis says that statistical discrimination, that is, the choice of individuals on account of a general characteristic such as gender or race, will disappear with greater competition. But from a cost and risk perspective, microbanks should continue preferring women. This may change in the future, when microbanks seek to expand their market in order to achieve scale economies and also to meet competition from other microbanks or ordinary banks in their markets.

Lending Methodology: Group or Individual?

The first regression shows that the microbanks have good economic reasons for gradually preferring individual loans over group loans, as the operational costs ratio becomes lower when more loans are given to individuals. Similarly the second regression does not uphold the claim that group loans are needed in order to secure repayment. Will the group loan withstand pressures from greater competition and greater customer heterogeneity? We think it will not. One reason is that the social capital acting as collateral also contains social liability. Individuals may want to escape the vigilance of their neighbors, even though the microbanks may prefer they do not. Conversely, they may not be willing to be their “neighbor's keeper” (Banerjee et al., 1994 ). Wydick (2001) finds that 80.3 percent of his Guatemalan sample prefers an individual loan. Over time microfinance customers may also have acquired individual items that may be used as collateral, for instance a house. Thus with less poverty the need for social capital as collateral may wither away. When customers have a choice of microbank, they may well prefer the bank that gives individual loans.

Similarly, with increasing customer heterogeneity, the group loan may be difficult to uphold. The relatively large borrower may be unable to induce group members to guarantee the loan. Likewise groups may become unable to attract relatively wealthy people, who may fear their wealth will guarantee repayment of loans to risky projects for other group members (Banerjee et al., 1994 ). Thus for reasons of operational cost, competition, and customer heterogeneity the individual loan is likely to increase its share.

The Microbank's Institutional Situation

The microbank's institutional situation turns out to be of minor importance in the cost regression. The operational costs ratio increases if the microbank is shareholder-owned, and its regulation has no impact on the operational cost ratio. These findings confirm the Mersland and Strøm (2008) study of ownership impact on firm performance. Consideration for costs is not an argument for transforming the microbank into a shareholder-owned bank.

Scale Advantages

Many microfinance aspects touched on earlier are influenced by the size of the business. First, the results confirm the scale economy findings in Allen and Rai (1996) and Berger and Humphrey (1997) . Thus the regression shows a clear scale advantage in microbanks. Given the rapid growth in the sector, microbanks should be able to achieve cost savings in the future. This may enable further lending by means of small loans, thus reaching out to more poor customers. Another implication is that with increasing competition the banks that have achieved scale will have a competitive advantage. In those markets where NGOs cannot easily scale up because of legal regulatory constraints the scale advantage will probably motivate more NGOs in the future to transform into shareholder-owned banks.

In summary, our regression implies that the future of microfinance lies with larger microbanks concentrating more on individual loans and differentiating loan size more between customers. The repayment risks seem to be under control; however, cost concerns need to be taken more seriously in the future.

Morduch (1999) closes his overview of the microfinance field with a call for a “second wave of innovation” if financial sustainability and outreach goals are to be met. In this chapter we see microfinance as an innovation unfolding and becoming an integrated part of the daily lives of millions of people. In the process some early features of the microfinance innovation lose their importance, others gain. Lending methodology is an example. Group loans are retreating, and individual loans have become more common. This step-by-step extension of the original innovation is common to most innovations, and the incremental improvements are often larger than the original innovation (Rosenberg, 1994 ). Rather than a second wave of innovation, microfinance needs to expand further, to diffuse its technology even more. In so doing it needs to pay close attention to operational efficiency, to consolidation into stronger entities, and even to the transition to formal banking operations.

The greatest innovation in microfinance is the discovery of the new market among poor people. The concentration on meeting poor people's demand for financial services is the defining character of microfinance. How this is to be undertaken is a matter of pragmatic adaptation to the local market. But to be able to fulfill the tasks in the longer term, microfinance must manage the transition from idealism to regular business activity. It needs to be profitable so as to lend new amounts the next time a customer applies. It needs to fulfill the microfinance promise of financial sustainability and outreach.

In this regard the microbanks can learn from the historic savings banks that adopted a pragmatic attitude in expanding their missions to serve better-off clients alongside the poor and developed professional banking procedures in order to assure their long-term survival (Hollis and Sweetman, 1998 ; Mersland, 2011 ). We thus welcome more research on how microbanks can expand their missions without losing sight of the poorest. Likewise more research is needed to identify factors driving operational efficiency in microbanks. Finally, it is important to monitor innovations in wireless technologies as these will probably shape the future of microfinance methodologies and cost structures.

www.mixmarket.org is a website connecting demand and supply for microfinance investments as well as a global microfinance information platform.

We may think of this as the difference between a paradigm shift and normal science in Kuhn's (1962) terminology. Christensen (1997) differentiates between disruptive and sustaining technology, which obviously comes close to our usage.

This figure is close to that in earlier literature (see, e.g., Cull et al., 2007 ; Daley-Harris, 2007 ).

The data are further described in Mersland (2009a) and Mersland and Strøm (2010a) .

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The Future of Microfinance

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A major source of financing for the poor and no longer a niche industry

Over the past four decades, microfinance—the provision of loans, savings, and insurance to small businesses and entrepreneurs shut out of traditional capital markets—has grown from a niche service in Bangladesh and a few other countries to a significant global source of financing. Some 200 million people globally now receive support from microfinance institutions, with most of the recipients in the developing world. In the beginning, much of the microfinance industry was managed by non-governmental organizations, but today the majority of these institutions are commercial and regulated by governments, and they provide safe places for the poor to save, as well as offering much-needed capital and other financial services.

Now out of infancy, the microfinance industry faces major challenges, including its ability to deal with mobile banking and other technology and concerns that some markets are now over-saturated with microfinance. How the industry deals with these and other challenges will determine whether it will continue to grow or will be subsumed within the larger global financial sector.

This book is based on the results of a workshop at Lehigh University among thirty-four leaders in the industry. The editors, working with contributions from more than a dozen leading authorities in the field, tell the important story of how microfinance developed, how it has met the needs of hundreds of millions of people, and they address key questions about how it can continue to meet those needs in the future.

Related Books

Ira Lieberman

October 9, 2018

Praise for The Future of Microfinance

“When a reader spots a title such as this book’s, it is easy to assume that the editors, working with contributions from several authorities in the field, will dwell on the virtues of the sector and how the future looks rosy. While the book does point to a good job done, it also tells you unequivocally how the sector has not lived up to its original intent of alleviating poverty.” —K. Bharat Kumar, The Hindu

Ira W. Lieberman was the founding director of the CGAP Secretariat, the de facto secretariat for the microfinance sector globally. He has continued to work on and write about microfinance over the past twenty-five years. He is also author of In Good Times Prepare for Crisis: From the Great Depression to the Great Recession; Sovereign Debt Crises and Their Resolution (Brookings, 2018).

Paul DiLeo is a managing director of Grassroots Capital Management.

Todd A. Watkins is professor of economics and executive director of the Martindale Center for the Study of Private Enterprise at Lehigh University. He is the author of Introduction to Microfinance and co-editor of the book Moving Beyond Storytelling: Emerging Research in Microfinance .

Anna Kanze is a managing director of Grassroots Capital Management.

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Frontiers in microfinance research for small and medium enterprises (SMEs) and microfinance institutions (MFIs): a bibliometric analysis

Francis lwesya.

1 Department of Business Administration and Management, The University of Dodoma, Dodoma, Tanzania

Adam Beni Swebe Mwakalobo

2 Department of Economics and Statistics, The University of Dodoma, Dodoma, Tanzania

Associated Data

This article aims to present current research trends in microfinance for small and medium enterprises (SMEs) and microfinance institutions (MFIs), as microfinance plays an increasingly role in entrepreneurship development and poverty alleviation. The study uses a bibliometric analysis, in this work, we performed citation, bibliographic coupling, and keyword evolution analyses. The results show that research in microfinance for SMEs and microfinance institutions continue to grow. The authors found that recent research in microfinance for SMEs and microfinance institutions has evolved around eight thematic clusters, covering (1) access to and constraints on microcredit for SMEs (2) microfinance and economic empowerment, (3) sustainability of MFIs, (4) creditworthiness, microfinance technology infrastructure and financing patterns, (5) Islamic financial inclusion, (6) credit assessment models for microcredit, (7) microfinance and innovative business models, and (8) gender and equity crowdfunding. Research gaps in each of the thematic clusters are identified. Topics related to COVID-19, Islamic social finance, microfinance institutions, credit scoring models, crowdfunding, and entrepreneurial finance are likely to feature in the domain of microfinance and sustainability of MFIs in future.

Introduction

Finance is widely acknowledged as one of the crucial resources for entrepreneurial development and poverty alleviation in developing countries. Resource-based view theory identifies three categories of important resources, namely (1) physical resources, (2) human resources, and (3) organizational resources [ 1 ]. These resources cover finance, organizational processes, people, and information (knowledge). This represents a synergy of resources that is important to the survival, growth, and development of any organization. However, small and medium enterprises (SMEs) continue to face significant obstacles to fulfilling their potential to grow, innovate, and create jobs due lack of finance and inadequate access to reliable sources of finance [ 2 – 4 ]. As a result, they fail to execute their strategies efficiently, grow, and build sustainable competitive advantages [ 5 ]. This failure is linked to several reasons, including the underdeveloped formal financial sector in many developing countries which is characterized by risk aversion, limited size, and a bias against small businesses, thus making the financial requirements of small businesses not sufficiently addressed by large financial institutions and banks [ 5 , 6 ].

Over the past three decades, there has been widespread recognition of microfinance institutions (MFIs) and an increasing provision of microcredit services in developing countries in all economic sectors. These institutions provide a wide range of services, including loans, savings, insurance, and remittances, to the rural and urban poor through cooperatives, credit unions, specialty banks, commercial banks, and other institutional arrangements [ 7 ]. The previous goals of microfinance institutions have been to meet the financial needs of poor and marginalized members of society, such as women, through an increased outreach of services, and the sustainability of microfinance institutions [ 7 ]. MFIs are believed to be instrumental in poverty reduction initiatives by both governments and non-governmental organizations (NGOs) in developing countries, particularly in tackling social and financial exclusion. As a result, governments and public institutions instituted policies and strategies aimed at addressing the financial problems of the less privileged. This includes formulating microfinance policies, guidelines, and creating a conducive business environment for the creation of microfinance institutions (MFIs). The measures aimed to liberalize financial systems and attract more investment to the sector by lowering entry barriers. However, some of the MFIs still have rigid regulations, bureaucratic tendencies, charge high interest rates, lack sufficient capacity, governance, and transparency and accountability to act as responsible financial intermediaries [ 8 – 11 ]. These challenges raise doubts about the sustainability of microfinance institutions and microfinance services for the development of the SME sector. Therefore, in this article we consider the dynamic change in microfinance research for SMEs and microfinance institutions over the last six (6) years. Bika et al. [ 12 ] reported on the underdevelopment of research on entrepreneurial practices related to microfinance in developing countries. The existing and growing literature tends to focus on the relationship between entrepreneurial growth, microfinance, and institutional formalization [ 12 – 14 ]. Similarly, there exist several reviews and bibliometric works on the topic of microfinance in the literature, e.g., Kaushal et al. [ 15 ], Nisa et al. [ 16 ], and Ribeiro et al. [ 17 ]. However, most of these publications are topic and industry specific. For example, Kaushal et al. [ 15 ] discussed microfinance institutions and the empowerment of women. Nisa et al. [ 16 ] examined the effects of competition on microfinance institutions and Ribeiro et al. [ 17 ] examined whether microfinance promotes the development of its clients. The current research consolidates all studies on microfinance research for SMEs and microfinance institutions and suggests the likely future research direction. The specific goals were:

• To identify the most influential publications, authors, and institutions in microfinance research for SMEs and microfinance institutions
• What are the collaboration networks in microfinance research for SMEs and microfinance institutions?
• To understand the current research themes or topics in microfinance research for SMEs and microfinance institutions.

Methodology

This study adopts bibliometric analysis using tools such as citation, bibliographic coupling, co-authorship, and keyword analysis to answer research questions and objectives [ 18 ]. Bibliographic coupling is used to identify current research trends and future priorities as they are reflected at the frontiers of research. It groups two documents with common references. In contrast to co-citation analysis, bibliographic coupling captures recent contributions, including future research direction [ 19 ]. On the other hand, co-authorship assesses the social ties between researchers, it captures the state of the research collaboration network within a field [ 20 , 21 ]. Similarly, keyword analysis captures the most used words using keyword co-occurrence analysis [ 22 ].

Data extraction process

We used Scopus for the collection of bibliographic data which is a large database covering over 20,000 peer-reviewed journals [ 23 ]. The search criteria and article selection are indicated in Table ​ Table1 1 .

Search criteria and article selection

This table discloses a systematic procedure adopted to arrive at the final corpus of (388) articles for review

Results and discussions

Descriptive bibliometric analysis.

Data collection shows that a final sample of 338 articles was written by 904 authors and were published in 205 journals. Most authors wrote multi-author documents (868 authors) and only 36 documents were single-authored (Table ​ (Table2). 2 ). This study covers a duration of 6 years.

Main information about data collection

The level of item production in 2017 was slightly low with only four publications. However, the number of publications increased thereafter registering a total number of publications of 112 in August 2022 (Fig. ​ (Fig.1). 1 ). This suggests a growing research interests in microfinance research for SMEs and microfinance institutions.

Number of articles per year

The most important publications, authors, and institutions are listed in Table ​ Table3. 3 . Based on a set of citations, the most influential researchers in microfinance for SMEs and microfinance institutions are Chandio. A, Jiang Y. and Mohsin M. with 74, 72, and 51 citations, respectively. Based on several publications in microfinance for SMEs and microfinance institutions, Chandio. A is the most prolific researcher with three publications. In terms of institutions, the most influential institutions are Henan Agricultural University, Sichuan Agricultural University, and the Jiangsu University with 51, 51, and 51 citations, respectively. This shows that all top three institutions are based in China and recorded a similar number of citations and are majoring in the agriculture sector. This means that the agricultural sector is one of the most important sectors in need of microfinance support. In terms of intellectual contribution, the countries with the highest total number of publications and citations are the USA, China, and the UK with 54 (310), 29 (168), and 22 (161), respectively.

Top 10 authors, institutions, and countries

TC total citation, TP total publications, the research constituents (i.e., author, institution, country)

The main journals published in microfinance and microfinance institutions are listed in Table ​ Table4. 4 . Based on citations, the most influential journals are Review of International Political Economy, Journal of Business Ethics, and Journal of Asian Business and Economic Studies with 64, 58, and 51 citations, respectively. The first two journals are rated A by the Australian Business Dean Council’s Journal Quality List 2020 (ABDC). Most articles are published in leading journals hosted by publishers such as Elsevier, Taylor and Francis, Emerald Insight, Springer Open, and Wiley Online Library.

Most cited journals for topics in microfinance and microfinance institutions

Thematic clusters of microfinance and microfinance institutions research through bibliographic coupling

Using bibliographic coupling, we analyze the intellectual structure and recent knowledge development of the literature (Table ​ (Table5). 5 ). Bibliographic coupling captures the similarity between two documents based on the number of references they share [ 24 , 25 ]. The bibliographic coupling analysis revealed seven clusters as follows.

Thematic clusters of microfinance and microfinance institutions research

TC total citation

Cluster 1: access to and constraints on microcredit for SMEs

This is the largest among all the eight clusters, it consists of 31 articles related with access to and constraints on microcredit for SMEs. The three most cited articles on this cluster are Chandio et al. [ 26 ], Nguyen et al. [ 27 ], and Tran et al. [ 28 ] with 51, 11, and 10 citations, respectively. The studies in this cluster show that factors such as formal education, company size, investments, financial assets, debt, equity, registration, sex, and age of the business owner significantly influenced the likelihood of credit constraints or demand [ 26 , 27 , 29 ]. Factors such as farming experience, size of land holdings, road access and advisory services, credit source information, deposits, household size, and marital status were important in the agribusiness sector [ 26 , 29 ]. Likewise, gender was an important factor, as women were more restricted in accessing credit than their male counterparts, resulting in fewer women than men having access to formal credit [ 28 , 29 ]. Other factors include lack of collateral, higher interest rates, rigid loan repayment schedules that limit access to microcredit and contribute to higher default rates [ 32 , 33 , 34 , 37 ]. Initiatives such as empowering women in business leadership, strengthening credit agencies, membership of farmers’ unions, and agricultural extension services can increase both access to and demand for credit [ 28 , 30 ]. Similarly, increasing the informal sector’s credit base by providing credit to specific segments of the informal credit market, as practiced in India, creating novel rural financial institutions, and establishing separate channels for lending to the most disadvantaged are proposed [ 31 , 36 , 35 ].

Cluster 2: microfinance and economic empowerment

This is the second largest cluster with 30 articles dedicated to microfinance and economic empowerment. Articles in this cluster discuss the role of microfinance in economic empowerment. In this cluster, studies show that areas with dominant microfinance access have experienced high levels of economic improvement [ 41 , 44 ]. Similarly, access to microfinance by MFIs has benefited culturally excluded members of society, particularly women, thereby narrowing the gender gap in access to formal credit [ 38 , 42 , 43 , 45 ]. However, high interest rates still prevent many women from obtaining credit [ 47 ]. Studies in this cluster also show that despite the positive impact of MFIs, the saturation of uncoordinated microfinance institutions and the expansion of multiple indebtedness have created challenges for regulators and management of microfinance institutions, leading to deterioration in loan portfolios and the financial sustainability of institutions [ 39 , 41 ]. To enhance the sustainability of MFIs, effective MFI policies and improved regulatory regimes need to be put in place to enable MFIs to play a key role in poverty reduction [ 46 , 47 , 101 ].

Cluster 3: sustainability of microfinance institutions

This cluster consists of 27 articles related with sustainability of microfinance institutions. The three most cited articles in this cluster are Gul et al. [ 49 ], Awaworyi [ 50 ], and Cervelló-Royo et al. [ 51 ] with 20, 18 and 10 citations, respectively. The topics in this cluster deal with the financial sustainability of microfinance institutions (MFIs) for the thriving and growth of the microfinance industry. To achieve MFI sustainability, the complementarity between financial sustainability and outreach, the government’s positive ideology on MFI performance, social and technological innovation and financial deepening, and the exploration of digital technologies to increase operational efficiency are crucial factors [ 49 , 50 , 51 , 52 , 57 ]. We also observe different purposes between for-profit and not-for-profit microfinance institutions, while for-profit MFIs target relatively wealthier individuals and are therefore able to achieve wider outreach and charge higher interest rates than not-for-profit MFIs, the not-for-profit MFIs might have a smaller outreach and serve the poor more with lower interest rates [ 54 ]. Similarly, subsidies and deposit mobilization have been found to be a substitute fund with similar impacts on outreach and sustainability, lowering microcredit interest rates and allowing MFIs to reach poorer borrowers, but they both improve outreach and sustainability [ 56 ]. To improve sustainability, and institutional quality, most MFIs are targeting areas where they have a niche market or where commercial banks cannot serve low-income borrowers, and are trying to attract more start-ups and small industries, an activity which will potentially increase economic growth and the risk of insolvency of MFIs [ 55 , 59 ].

Cluster 4: creditworthiness, microfinance technology infrastructure, and financing patterns

This cluster consists of 21 articles dealing with creditworthiness, microfinance technology infrastructure, and microfinance patterns. The three most cited articles in this cluster are Bernards [ 64 ], Tanima et al. [ 65 ], and Langevin [ 66 ] with 34, 20, and 13 citations, respectively. Studies in this cluster show that technological change and innovations in microfinance have increased efficiency in microfinance systems, this includes the use of big data technologies is trying to transform the fringe finance sector [ 66 ]. However, due to heterogeneity of MSMEs, the financing patterns of micro-enterprises differ significantly from that of larger SMEs. This explains to some extent why some MSMEs owners are reluctant to embrace mainstream funding [ 72 ]. It has also been found that alliances between SMEs and large companies do not have a major impact on overall creditworthiness, but do affect SME collateral and terms [ 67 , 68 ]. Likewise, trustworthiness in microfinance is linked to gender differences, for example, female micro-borrowers have a better repayment record than male borrowers [ 70 ]. Similarly, it was found that in post-conflict communities in sub-Saharan Africa, social cohesion was used as a tool of social protection and as a safety net when female MSME borrowers lacked collateral and property rights [ 69 ].

Cluster 5: Islamic financial inclusion

This cluster consists of 18 articles related with financial inclusion. The three most cited articles in this cluster are Pomeroy et al. [ 73 ], Ali et al. [ 74 ], and Zauro et al. [ 75 ] with 20, 12, and 8 citations, respectively. Financial inclusion enhances the ability of people to engage in economic activities that lead to economic development and poverty reduction [ 76 ]. The themes in this cluster discuss about the barriers and determinants of financial inclusion. The identified barriers in this cluster relate to factors such as limited financial capability and literacy, lack of assets for collateral, geographic distance from a financial institution, and lack of formal identification [ 73 ]. Zauro et al. [ 75 ] proposed the use of Islamic financial instruments as means to enhance socioeconomic justice and financial inclusion in the Muslims’ communities. However, determinants of Islamic financial inclusion include financial literacy, religious commitment, socio-economy, and social influence, human capital, product and services, infrastructure readiness, and policies and regulation [ 74 , 75 ]. Financial inclusion improves people’s ability to engage in economic activities that lead to economic development and poverty reduction [ 76 , 80 ]. The themes in this cluster discuss the barriers and determinants of financial inclusion. Identified barriers in this cluster relate to factors such as limited financial capacity and literacy, lack of collateral assets, geographic distance from a financial institution, and lack of formal identification [ 73 ]. Zauro et al. [ 75 ] and Khmous and Besim [ 78 ] proposed the use of Islamic financial instruments as a means of enhancing socioeconomic equity and financial inclusion in Muslim communities. The determinants of Islamic financial inclusion include financial literacy, religious commitment, socioeconomics and social influence, human capital, products and services, infrastructure readiness, and policies and regulations [ 74 , 75 ]. In terms of the performance of Islamic finance in Islamic countries compared to conventional finance, it has been equally successful with conventional finance. However, the percentage of women empowerment through financial inclusion in Islamic financial countries has surpassed the conventional financial sector in non-Islamic countries, thereby narrowing the gender gap. However, conventional finance is more advanced than Islamic finance in terms of the use of technology to provide financial services [ 77 ]. A study by Shaikh [ 79 ] proposes an integrative model embedding fintech on both the demand side and the supply side to enhance the reach, scale, and impact of Islamic microfinance services. This cluster suggests that more research needs to be explored in areas such as digital financial services in Islamic finance and financial sustainability issues.

Cluster 6: credit assessment models for microcredit

This cluster consists of 14 articles related with credit assessment models for microcredit. The three most cited articles in this cluster are Shi et al. [ 81 ], Liang and He [ 82 ] and Ali et al. [ 74 ], and Enimu et al. [ 83 ] with 18, 13, and 8 citations, respectively. The themes in this cluster discuss about credit assessment models for microcredit. A study by Liang and He [ 82 ] examines whether semantic textual information on the loan description helps in predicting the credit risk of different types of borrowers using a Chinese P2P platform. The results show that the semantic features of textual soft information significantly improve the predictability of credit scoring models and the promotional effect is most evident in first-time borrowers. One of the credit risk assessment tools is the loss given default (LGD) which is performed by minimizing the LGD for higher rated loans as a standard for risk rating in the sense that decreasing LGD is associated with higher creditworthiness from the creditors’ perspective of the borrower. This helps guide the way to solving the phenomenon of mismatch between credit ratings and LGDs in the existing credit rating literature [ 81 ]. de Paula et al. [ 88 ] also found that using statistical methods such as combining credit scoring and profit scoring makes it possible to provide credit to the customers with the highest potential for paying off credit union debt. Similarly, a study by Enimu et al. [ 83 ] argued that lenders should consider the socioeconomic determinants of group members to ensure sustainable loan repayment benefits. Factors such as age of group members, household size, household income and level of education, amount of credit received, length of stay in their community, distance to credit source, supervision, and disbursement are important in determining viability and sustainability of repayment [ 83 ]. Another method is the spatial random effects credit scoring model. It helps improve the ability to predict defaults and non-defaults for both individual and group loans, and several credit characteristics and demographic information are important determinants of individual loan defaults but not group loans [ 84 ]. On the other hand, to predict the credit risk of SMEs in supply chain finance (SCF), DeepRisk is proposed. This method applies the multimodal learning strategy to merge the two different data sources. The concatenated vectors derived from the data fusion are then used as input to the feed-forward neural network to predict SME credit risk. The fusion of the two different data sources is superior to existing approaches to SME credit risk forecasting in SCF [ 85 ]. Furthermore, three methods such as logistic regression (LR), artificial neural network (NN), and support vector machine (SVM) were compared to achieve the banks’ strategic and business goals. The results showed that the LR model outperformed both ANN and SVM on various performance indicators, including the achievement of the bank’s strategic and business objectives [ 87 ]. A study by Wang et al. [ 91 ] discusses the role of social and psychological soft information in predicting defaults in the P2P lending market and assesses the importance of such information in fintech lending analysis by combining hard and soft information on defaults. The results show that soft information can make a valuable contribution to credit assessment. Soft information shows high predictive power in our test, and in combination with hard information, it increases the power of our model to predict failures [ 91 ].

Cluster 7: microfinance and innovative business models

This cluster consists of eight articles related with microfinance and innovative business models. The three most cited articles in this cluster are Zhang et al. [ 92 ], Kimmitt and Dimov [ 93 ], and Souza et al. [ 94 ] with 14, 9, and 4 citations, respectively. The themes in this cluster discuss about microfinance and innovative business models for entrepreneurship development. A study by Kimmitt and Dimov [ 93 ], which uses Amartya Sen’s concepts of freedom of process and freedom of opportunity to understand microfinance and entrepreneurial behavior, found that microfinance institutions need to understand the needs of their customers in terms of a generative recursive mechanism that drives the chain of action and how entrepreneurs deal with their attitudes and intended relationships in practice. Souza et al. [ 94 ] discussed the importance of understanding each microfinance program and its clients on a case-by-case basis in order to use microfinance consumer market segmentation to develop the most appropriate strategies to address clients’ needs. Similarly, Kumra et al. [ 95 ] found that the faster access and ease associated with P2P lending positively influence borrowers’ intention to participate, lenders are positively influenced by the high returns and diversified risk. In addition, a study by Zhang et al. [ 92 ] proposes the use of new business models to leverage more opportunities to deliver customer value. This includes the use of e-business microcredit platforms. However, a thorough understanding of the models and their implementation is crucial to avoid disruptive business model innovations of e-business microcredit.

Cluster 8: gender and equity crowdfunding

This cluster consists of four articles dealing with gender and equity crowdfunding. The three most cited articles in this cluster are Geiger and Oranburg [ 97 ], Figueroa-Armijos and Berns [ 98 ], and Zhao et al. [ 99 ] with 24, 7, and 3 citations, respectively. The topics in this cluster discuss about relationship between gender and funding raised through equity crowdfunding. Geiger and Oranburg [ 97 ] using population data collected from US equity crowdfunding campaigns, found that campaigns receive significantly less funding when the main signatory is female. Regarding the interactions between gender and a campaign’s funding goal, their results show that campaigns raise significantly less funding as the target amount increases when the main signatory is female. Similarly, Figueroa-Armijos and Berns [ 98 ] found that applying for funds through a field partner that targets vulnerable populations can negatively impact the entrepreneur’s application for full funding. However, identifying the entrepreneur as female or rural as key characteristics of individual vulnerability increases the likelihood that the project will be fully funded. This study provides evidence that prosocial crowdfunding can indeed support the vulnerable and poor through a unique framing mechanism. Along the same lines, Zhao et al. [ 99 ] found that female entrepreneurs are more likely to be funded through equity crowdfunding than their male counterparts. The study found that lead investors placed the funding advantage for women entrepreneurs in the equity crowdfunding market. These results contribute to the literature on equity crowdfunding and female entrepreneurship by showing that an entrepreneur’s gender influences equity crowdfunding performance. This finding is supported by Cicchiello et al. [ 100 ] who found that having at least one woman on the board of companies seeking equity financing increases campaign success rates. The articles in this cluster suggest the existence of a relationship between gender and funding raised through equity crowdfunding.

Based on bibliographic coupling of thematic clusters, we present the research gaps and the future research direction (Table ​ (Table6 6 ).

Research gap and future directions based on clusters

Collaboration networks in microfinance research for SMEs and microfinance institutions

In terms of co-authorship and collaboration between authors and countries, the analysis shows that Chandio A., Jiang Y., and Kumar A. are the most influential authors in terms of overall link strength. Figure ​ Figure2 2 shows the nodes representing author names, the links representing the co-authorship relationships between different authors, and the node sizes representing the publication counts of each author. Chandio. A is the most influential author with 74 citations. The data and network structure in Table ​ Table7 7 and Fig. ​ Fig.3 3 show that the research collaboration ties between developed economies and African countries is low. However, the analysis suggests that the collaborative network among developing countries is increasing. In terms of the country co-author network, Malaysia, Bangladesh, USA, and China are influential centers for research in microfinance for SMEs and microfinance institutions. Others are India, UK, and France. The cooperation relationship between the Malaysia and Bangladesh is the most common with six cooperations. USA and China follow with 6 cooperations.

The author co-authorship network. The whole network consists of 51 nodes, 10 clusters, and 141 links. The total link strength value is 202

Top collaborating countries and authors

Bibliographic coupling network of publications

Thematic development of the microfinance research for SMEs and microfinance institutions using a conceptual thematic map

A conceptual thematic map was used to assess the thematic development of the microfinance research for SMEs and microfinance institutions based on keywords analysis (Fig. ​ (Fig.4). 4 ). The strategic diagram is divided into four quadrants (the upper right quadrant defines motor clusters, the upper left quadrant defines highly developed and isolated clusters, the lower left quadrant defines emerging or declining clusters, and the lower right quadrant defines fundamental and transversal clusters). Centrality measures the degree of a network’s interaction with other networks and can be understood as the external cohesion of the network, and density measures the internal strength of the network and can be understood as the internal cohesion of the network [ 102 , 103 ].

Conceptual thematic map

First quadrant (motor themes)

This part presents well-developed themes that are of central importance for the structure of the research field. There are three bubbles in this quadrant, two of which traverse the fourth quadrant. Regarding to the Ghana corresponding bubble, the keywords with the highest frequency scores (occurrence) are; Ghana (6), credit access (5), and formal credit (4). Referring the bubble corresponding to financial inclusion, the keywords with the highest occurrence are; financial inclusion (24), Vietnam (8), and Fintech (6). Similarly, the bubble corresponding to microcredit, keywords with the highest frequency are: microcredit (38), Bangladesh (10), and poverty alleviation (10). The results of the two bubbles crossing the fourth quadrant suggest that they are well-developed themes that can structure the research field and are still the leading themes in broader microfinance research.

Niche themes (second quadrant)

These are well-developed and very specialized topics that are marginal in the overall field. This quadrant consists of two bubbles represented by India and COVID-19. In terms of the bubble corresponding to India, the top occurrence scores are: India (10), access to finance (4), and emerging economies (4). On the other hand, with the bubble corresponding to COVID-19, the highest occurrence scores come from COVID-19 (4), Islamic social finance (4), and waqf (3). The results suggest that issues in this quadrant (niche) such as access to finance, COVID-19, and Islamic social finance are potential topics that need to be more loosely linked to broader microfinance research. Researchers can explore these areas to advance knowledge in the broader field of microfinance.

Peripheral themes (third quadrant)

This quadrant consists of three bubbles represented by credit union, microfinance institution, and credit scoring. Credit union is the smallest bubble in this quadrant with only two occurrences. Regarding the bubble corresponding to credit scoring, the keywords with the highest frequency scores (occurrence) are: credit scoring (7), crowdfunding (6), and entrepreneurial finance (5). Similarly, with a bubble corresponding to a microfinance institution traversing the fourth quadrant, the highest frequency scores are: microfinance institution (13), financial development (5), and credit rationing (4). This bubble means that some of its components are fundamental and necessary for the development of the microfinance field. The results in this quadrant suggest that future research direction will continue to focus on topics such as microfinance institution, credit scoring, crowdfunding, credit union, entrepreneurial finance, and credit rationing.

Transversal and general basic themes (Four quadrant)

These are high-centrality, low-density themes that are important to the microfinance field but are not well developed. This includes four major bubbles represented by gender, sustainability, credit, and microfinance. Regarding the bubble corresponding to gender, the top occurrence scores are found for gender (15), Pakistan (7), and credit constraints (6). On the other hand, the bubble corresponding to sustainability, sustainability (11), financial performance (7), and microfinance institution (7) are the highest occurrence values. Similarly, the bubble corresponding to credit, credit (9), productivity (6), and agriculture (5) are the highest occurrence values. Lastly, the bubble corresponding to supply chain, supply chain (46), local food (11), and agriculture (8) are the highest occurrence values. On the other hand, the bubble corresponding to microfinance, microfinance (95), poverty (14), and empowerment (10) are the highest occurrence values.

Conclusion, future research direction, and study limitations

This research is among the few studies covering microfinance research for small SMEs and microfinance institutions using bibliometric analysis. By applying bibliographic coupling, we found that recent research in this area has evolved around eight thematic clusters, covering (1) access to and constraints on microcredit for SMEs, (2) microfinance and economic empowerment, (3) sustainability of microfinance institutions, (4) creditworthiness, microfinance technology infrastructure and financing patterns, (5) Islamic financial inclusion, (6) credit assessment models for microcredit, (7) microfinance and innovative business models, and (8) gender and equity crowdfunding. The emerging research topics in the microfinance research for small SMEs and microfinance institutions relate to COVID-19, Islamic social finance, microfinance institution, credit scoring, crowdfunding, credit union, entrepreneurial finance, and credit rationing. Areas where research gaps remain include the sustainability of informal sources of credit and their impact on SME performance, financing models and patterns used by MFIs, the sustainability of Islamic finance, crowdfunding in developing countries, and regulatory and policy frameworks for MFIs. We have also observed that most microfinance research is focused on the agricultural sector and Western countries and Asian countries like China, Bangladesh, Australia, USA, and UK are dominating microfinance research lately and there is less research collaboration between Africa and Western countries. The limitations of the research are that is based on the bibliometric analysis and only one database, namely Scopus was involved. Secondly, the research conducted a retrospective review from 2017 to August 2022 to identify the current research trends, a wider inclusion of other databases and deeper content analysis could expand the findings of this research.

Theoretical and managerial implications

The results of this study may be of practical interest to managers, industry researchers, and policy makers. For example, managers can apply various models and techniques to enhance sustainability of microfinance institutions such as increasing outreach, social and technological innovation, financial deepening, and the use of digital technologies to increase operational efficiency. Managers can also employ various efficient credit assessment models such as the loss given default (LGD). Similarly, managers can combine credit scoring and profit scoring makes it possible to provide credit to the customers with the highest potential for paying off credit union debt. Another method is the spatial random effects credit scoring model which helps to improve the ability to predict defaults and non-defaults for both individual and group loans. Industry researchers can use our research to understand the broad spectrum of research in the field, emerging research areas, research gaps, and future research direction. Similarly, policy makers can apply the outcomes to design policies and interventions in regions of the regulatory and policy frameworks for financial access to the poor and the sustainability of MFIs.

Acknowledgements

Not applicable.

Abbreviations

Author contributions.

FL involved in writing, data analysis, editing, and finalizing the manuscript. ABSM involved in reviewing, editing, and analysis of the manuscript. Both authors read and approved the final manuscript.

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• Open access
• Published: 08 December 2022

Exploring the role of microfinance in women’s empowerment and entrepreneurial development: a qualitative study

• Ambreen Khursheed   ORCID: orcid.org/0000-0003-1497-5848 1  

Future Business Journal volume  8 , Article number:  57 ( 2022 ) Cite this article

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In developing countries, women’s empowerment is a major concern. Several efforts were made to tackle this issue as the aims of poverty reduction and development cannot be achieved without giving attention to women’s empowerment. Over the past decades, microfinance institutions (MFIs) have appeared as crucial tools not only to address the issue of poverty but also particularly to empower women. Resultantly, a huge number of studies focus on the relationships between MFI and women empowerment. However, in the context of rural areas of Pakistan, the research is limited. Therefore, the objective of this study is to investigate the role of MFI in women’s empowerment in Pakistan so that the research will facilitate MFIs and policymakers in strengthening the link between MFIs and women entrepreneurship. We have used a qualitative methodology, using primary data collected through in-depth interviews and a focus group discussion with six female borrowers of Rural Community Development Programs (RCDP). The empirical results provide valuable insights into the efforts made by RCDP to empower women and combat poverty by encouraging women’s entrepreneurship. Hence, this paper not only examines empowerment, which women are attaining from microfinance but also assists MFIs to know about their significance in developing the economy. The paper is significant for MFI practitioners to develop policies for boosting women’s entrepreneurship and to help their existing women clients with efficient training and supervision.

Introduction

Microfinance has a unique ideological demand as compared to charity. It is particularly designed to support poor people. However, it is a long-term process that enables the poor to improve their living standards in an effective manner [ 39 , 41 , 74 ]. In particular, when we talk about microfinance from the perspective of women, the role of benefactors of microfinance seems important in making it a relatively effective resource for poverty alleviation, the stability of economic growth, and women empowerment [ 25 , 39 , 41 ].

The difference between male and female ratios is not considered significant, but in several areas, women are provided less importance and power in comparison with men [ 29 , 37 ]. Women around the world have little control over their assets and have less political power. Further, they do not have a lot of properties to their name [ 58 , 68 , 87 ]. Due to a lack of security saved in the financial sector, women faced several difficulties during the financial crisis period which lasted from 2007 to 2008 [ 52 ]. Similarly, it is crucial to understand the impact of the recent crisis of COVID-19 which affected all businesses badly and also threatened world health security [ 81 ].

However, several researchers have questioned this statement. The classification of all expected benefits and disadvantages of MFIs is still in the initial phase. We are still discovering how to improve the living standards of poor women and their families. This study aims to broaden existing knowledge about the role of MFIs in empowering women in rural Pakistan.

In emerging economies, MFIs and women empowerment is considered to be one of the most effective tools for poverty alleviation by particularly focusing on women [ 62 , 87 ]. Certainly, women are one of the most important parts of society and without their presence, societies cannot improve [ 23 ]. Women empowerment leads to the increased participation of females in the workforce, the capability to decide, and poverty reduction. Thus, an increase in their income will not only prove beneficial for their family but will also have a very positive influence on the economy [ 58 ]. Another study investigated the nonlinear effect of the education level on the ecological footprint by incorporating the variation in the population and income structures and recommended crucial policies regarding education levels and environmental sustainability [ 82 ].

In developing countries, all businesses are male-dominated and females have to suffer from discrimination in most of the phases whether it is their personal life or professional life. However, financial segregation seems complicated for developed nations regardless of the gender factor. Financial stability is a key concern for developing as well as economically challenged countries as these economies do not have a stable financial environment and well-established institutions [ 42 , 43 ]. The presence of poor health facilities, underdeveloped financial industries, illiteracy, and weak infrastructure have raised serious problems for developing nations. To consider the requirements of financially excluded women, MFIs step forward to help those women in establishing new endeavors [ 55 ]. As a result, non-government organizations and government agencies decided to provide subsidized loans for a better lifestyle of people and poverty alleviation. Prior researchers appreciated the initiative of such investments (for example, [ 25 , 60 ]), but disproportion has been observed in these investments from the side of rich landlords or agencies. To tackle this issue, some highly effective alternative social networks, social collaterals, and credit scoring are needed here to approach the poorest women [ 57 ]. Moreover, women in more rigid cultural settings are likely to face a higher risk of domestic violence because economic empowerment intervenes with patriarchy and expedites change in rigidly defined gender roles [ 27 , 28 ]. Therefore, the need to address gender power imbalance and existing gender roles need to be taken into account before making interventions to empower women. It is found that the main body of the related existing literature primarily discussed only those factors that played a key role in the supply side of agriculture finance and microloans. A few past studies have also focused on the demand side of microfinance loans. However, the study of Guirkinger and Boucher [ 21 ] and the study of Ashraf and Ali [ 7 ] have highlighted the possible hurdles of the demand side of microfinance loans faced by smallholders. These obstacles include complex application procedures and complexity in providing loan securities. The seminal work of Garikipati et al. [ 18 ] reveals that the process of providing loans to the poor is uncertain, and is not easily generalized. So, people should be careful to utilize this development tool. However, it is clear that these loans provide financial benefits for poor women in developing new endeavors [ 71 ] and also act as a smart policy to help the poor [ 10 ]. Irrespective of the talk of “gender neutrality,” MFI clients that are women of immobile poor backgrounds have a lower default record as compared to men. MFI start-ups usually have significant and underreported economic effects because the poor women who work within households are not getting the standard pay and have limited start-up funds.

Brière and Szafarz [ 13 ] reported that MFIs have now become a risk-averse thing and it is “financialized,” i.e., MFIs now act as mainstream financial institutions. On the other hand, MFIs are considered a good source of financial support for women in starting new businesses and a tool to eliminate poverty in the country but this fact is not applicable universally because MFIs can also appear as an enigma in providing microfinance access to women. In various literature studies, researchers have focused on savings and credit products MFIs. It has been found that research studies are showing great interest in microfinance. Therefore, we aim to explore how MFI can lead to women’s empowerment and entrepreneurship. Furthermore, we also decided to investigate the possible benefits of microfinance for women from RCDP’s microcredit program.

Problem statement

One of the objectives of microfinance is to enhance women’s empowerment and to generate employment opportunities by promoting self-employment that consequently improves the social well-being of poor people. Most of the existing studies, mainly in economics, have only focused on how MFIs lending helps in poverty alleviation, rather than analyzing its impact on social and financial empowerment and new venture creation by women. The majority of the past studies were quantitative [ 9 , 15 , 17 ], while there were a few qualitative studies applied in various contexts that analyzed the impact of MFIs in enhancing women’s empowerment but still substantial studies are not available which explores specific lived experiences of women borrowers when they avail microloans and how they utilize that loan in starting their businesses. Therefore, this study aims to enhance the understanding of the role of microfinance from the viewpoint of beneficiaries in improving their empowerment and entrepreneurial development.

Significance of the study

Pakistan is a developing country and the majority of its population is living under the poverty line and are mostly unaware of different sources of financial facilities. MFIs particularly focus on such rural areas in which most of the people are un-bankable and marginalized. This study contributes to the extant literature, as it explores the lived experiences of women borrowers regarding empowerment and entrepreneurial development. To get deeper insights into the structural meaning of empowerment analyzed by considering participants’ histories, lived experiences, and social interactions, we used a qualitative approach that relies on in-depth interviews and a focus group under the case study research design. This study provides valuable insights into how MFIs are making women socially and financially empowered. Also, how microfinance helps in women-led ventures’ creation process. To investigate how microfinance is increasing women’s empowerment, we deduced the following sub-objectives.

To explore how women become socially empowered after getting micro-financed.

To figure out how women become financially empowered after getting micro-financed.

To determine how microfinance increases women’s entrepreneurship.

Literature review

• Microfinance

Microfinance programs have been playing a dominant role in poverty alleviation since long ago [ 40 ]. The vision behind the growth of microfinance is to pull the poor toward the entrepreneur side by giving them enough credit to achieve this goal. However, microfinance usually considers one assumption, i.e., the beneficiaries have adequate social capital, human capital, and other required assets for expanding their small-scale businesses. This indicates that the lack of credit is the only prominent hurdle experienced by poor women [ 73 ]. This assumption seems quite complicated because the growth of even a small business requires a lot of competencies, knowledge, expertise, and abilities [ 2 ]. Another major issue is that microfinance faces difficulty to approach the right poor people [ 16 ]. In the light of practical aspects, microfinance refuses the poorest division of people from borrowing money. This violates its role in approaching very poor applicants [ 14 , 83 ]. Furthermore, the poorest household people who are availing the benefits of microfinance still lack the proper technical skills that are necessarily required for business. The background of microfinance shows it is an essential tool to alleviate poverty, it works by receiving donations and lending money to poor people. Microfinance programs disregard the non-income parameters of poverty such as health, security, and education [ 11 ]. The study of Shaw [ 64 ] explains how the poorest households possess limited formal education. Also, poor health and undernutrition play a vital role in limiting the overall productivity of such households. The lack of education results in severe illiteracy which can badly affect the poor and make them unable to properly understand the effective working procedure of loans. Famous examples include Akhuwat, AGAHE Pakistan, AMRDO Foundation, non-bank microfinance companies, and many more.

Measuring empowerment

The study of Malhotra et al. [ 47 ] reports that the identification of empowerment as a primary development tool has been done, but still, institutions such as the World Bank and development agencies haven’t introduced an authentic method for estimating and analyzing the tracking variations in various levels of empowerment. Researchers define empowerment as a dynamic procedure that is complex to measure. The reason behind this is that empowerment is related to social, economic, and political challenges as well [ 63 ]. The spiritual, social, political, and health factors make the complete empowerment measurement procedure and these all factors are interconnected with each other. The term empowerment can also be expressed as a way of independent decision making, identification, and utilization of resources [ 1 ]. The literature reveals that empowerment is a multidimensional concept and it can be assessed under multiple dimensions [ 31 ]. This study primarily focuses on the influential impact of microfinance on women’s empowerment in the context of the financial and social aspects. This is because the financial and social aspects of women’s empowerment help increase the development of both the quality and quantity of existing human resources. These two aspects are proven as critical factors in enhancing the development of a society.

Meaning of women’s empowerment

There is significant diversity in the agendas, emphases, and terminologies used for describing women’s empowerment. Many papers have defined empowerment and its measurement approaches. The most common terms used in the extant diverse approaches use power, choice, control, and the option to describe women’s empowerment [ 72 , 78 ]. However, it is still confusing to say whether the terms “empowerment”,” “gender equality,” “women’s autonomy,” and “women’s status in society” are similar or different concepts. The term women empowerment has been conceptualized mostly as an outcome or a capacity or some means to an end, and a process of achieving power [ 35 , 54 ].

Microfinance and women’s empowerment

Women are the main target audience of microfinance programs. This credit amount not only helps poor women to grow economically but also improves gender equality, the status of women within the family, their health, and their education level [ 35 ]. Moreover, women are examined as a good credit risk by microfinance programs due to their increased propensity to repay loans [ 24 ]. In contrast, men are more interested in moving their money toward risky business practices and are at high risk to consume this money on tobacco, gambling, or drinking [ 20 ]. However, Goetz and Gupta [ 20 ] also highlighted that a significant percentage of women’s loans are directly invested in business activities by their male relatives, but the liability of repayment goes to women borrowers. The recent literature primarily discusses the evaluation process of microfinance programs [ 3 , 38 , 65 ] in the context of the well-being of borrowers [ 14 , 50 ] and empowerment capabilities of women [ 61 ]. The reporting of these evaluations reveals some conflicting conclusions, and it still tells that borrowers have an absence of accounts for themselves and this impact of credit can affect their lives [ 35 ]. There is limited evidence in the literature on how the poor perceive the process of microfinance loans. In addition, the existing literature has limited scope regarding the “transformative process” of entrepreneurship which reveals the lives of those needy people who are living in extreme poverty [ 76 ]. In response, this study fills the gap in the literature by examining how most disadvantaged borrowers or potential borrowers themselves perceive and experience microfinance in a context characterized by extreme poverty, one where family responsibility and entrepreneurial activities are closely intertwined.

A study reported that 95% of Grameen’s borrowers were females and this percentage kept on raising till 2011. Similarly, Aghion and Morduch [ 6 ] highlighted that 71% of total borrowers of MFIs were women. Further, past researchers have also pointed out that MFIs target women because their default rates are very low as compared to men [ 5 , 36 ]. Because of this reason, MFIs have launched several innovative schemes to financially support their female clients. MFIs play a crucial role in enhancing the empowerment of women as it boosts their resources, increase return on human capital by improving their affordability, and consequently improve their living standards.

Social empowerment of women

Women’s social empowerment refers to having a supportive environment by using different affirmative programs and policies for the empowerment of women along with the provision of easy and equal access to necessities of life [ 48 ]. In the field of development, empowerment has become a catchword, with a specific focus on poverty alleviation and the political addition of marginalized groups of women [ 49 ]. Microfinance has proved socially beneficial for women [ 35 ]. In a pivotal study, Mahmud [ 46 ] described that microfinance institutions have a significant positive influence on women’s social empowerment as it substantially improves their control of income spending and intra-household decision-making power, which resultantly enhances their welfare. Sinha et al. [ 67 ] found that women’s participation in MFIs enhanced their capability to spend money, mobility, and dominance in household decision making. Further, Montgomery and Weiss [ 51 ] concluded women’s participation in MFIs leads to enhance family decision making and found that family landholdings, media exposure, and institutional access are key determinants of women empowerment [ 26 ]. Similarly, it was found that savings impact is more significant on women as compared to men as it enhances their decision-making power related to family planning, family expenses, recreation, and their lifestyle [ 8 ].

Therefore, there is a need for an integrated microfinance program comprising education with skill-building training for increasing the capacity building of women and fortifying the relationship between women’s social empowerment and microfinance [ 4 ].

Financial empowerment of women

Many past studies have analyzed women’s empowerment from different perspectives; however, financial empowerment is ignored to some extent. In this study, one of the main objectives is to examine the financial empowerment of women. Past studies have reported that financial empowerment can be understood through three factors; financial literacy, financial attitude, and financial well-being. Financial literacy is inherent in humans and is recognized as the primary privilege of humans. “Financial literacy is the capability of understanding finance” [ 75 ]. Lack of financial knowledge ultimately pulls poor people away from success in financial markets or businesses [ 79 , 86 ]. The importance of financial literacy is equal for men and women. However, it is reported that if women have stronger financial knowledge then they can do effective future planning [ 45 ]. Financial knowledge is related to financial attitude. The financial attitude refers to the capability to manage finances, interest in enhancing financial knowledge, and investment decisions. Past studies revealed that financial knowledge, financial attitude, and financial behavior affect financial empowerment or financial well-being [ 33 , 66 ]. The concept of financial well-being is related to personal traits, knowledge of finance, and attitude. Therefore, the subjective meaning of financial well-being varies from person to person [ 32 ]. Thus, the financial empowerment of women can be assessed by considering financial literacy, financial attitude, and financial well-being.

Research gap

The literature discussed following the structure from the history of microfinance to concepts of women empowerment leads to the discussion on the relationship between women empowerment and microfinance. The literature depicts that different indices were explained in prior research studies giving a quick overview of empowerment but they are limited as they used a few variables, ignored key ontological issues, details, and subjective experiences that deepen the understanding of empowerment [ 9 , 15 , 17 ]. Therefore, this study fills the existing gap as we interviewed women in their natural settings and in their contexts in which they interpreted empowerment from their viewpoints.

Further, there was a strong practical gap regarding the lack of research on how women experienced empowerment and entrepreneurship through microfinance. A majority of the past studies applied quantitative methodology with the top-down approach which focuses on the views of service providers instead of beneficiaries and thus the beneficiaries’ views were not considered. Therefore, it becomes evident that the quantitative approach is not suitable for understanding women’s empowerment because it is a process of realization and only participants can explain what empowerment means to them through their experiences and feelings of becoming empowered. Hence, it is significant to use a qualitative methodology to capture the real feelings and experiences of women. Therefore, we applied the bottom-to-top approach to analyzing the true essence of the lived experiences of women regarding empowerment and entrepreneurship. Thus, this study is based on a case study research design to explore the perspectives of women that how they interpret and understand the phenomenon of empowerment achieved through microfinance in their natural context. Overall, this study enriches the extant literature about women’s empowerment by explicating the complex phenomenon of empowerment through social, financial, and entrepreneurial contexts.

Research question

For exploring the effectiveness of MFIs in terms of women’s empowerment and entrepreneurial development, we propose the main research question of this study as follows;

What is the impact of microfinance on women’s empowerment?

Sub-questions

How does a woman become socially empowered after getting microfinance?

How does a woman become financially empowered after getting microfinance?

To what extent microfinance leads to women’s entrepreneurial development?

Theoretical framework

William’s theoretical model of women’s empowerment.

In this study, two theories as theoretical frameworks are used. The first theory is by Williams [ 84 ] who formed a theoretical model on women’s empowerment. In the development of this model, the innovative insights of Kabeer [ 34 ] were used. Given this theory, empowerment comprises three factors, resources, agency, and achievements. Here, the resources present the supporting factors which are utilized by women to achieve empowerment, the agency presents the ability of the women to achieve their goals, and achievement refers to the success of women in achieving their life goals. Resultantly, the results achieved represent achievements by combining resources with the agency. We have used this model for measuring women’s empowerment.

Status withdrawal theory

The second theory used in this study is the status withdrawal theory, this theory explains that when certain groups of people realize that they are not respected by society. They switch to entrepreneurship for getting respect from society [ 22 ]. Thus, entrepreneurship is a function of status withdrawal. We follow this theoretical framework for understanding the entrepreneurial development among women borrowers. As all women borrowers belong to a poor class so we will explore whether they have any status withdrawal intention behind starting their own business or not (Fig.  1 ).

Conceptual framework of the study

Methodology

This study adopts the case study design approach for the empirical investigation as it inspects a contemporary phenomenon within the real life of participants, particularly when the limits between the context and phenomenon are not visible [ 59 , 85 ]. The case study design is the most suitable design for this study to carefully understand the impact of MFIs on women’s empowerment as it provides more in-depth views about the phenomenon under study.

The variables and themes analyzed in the focus group discussions and in-depth interviews are presented in Table 1 .

Semi-structured interviews

A qualitative method, in particular, semi-structured interviews, and a focus group were employed in this study. We used an interview checklist for the collection of qualitative data as it helps to properly understand the psychology of the participants. Also, it helped us to identify missing information from the participants. All interviews were conducted by telephone. The participants were selected through purposive sampling, as it is widely used in information-rich case studies [ 56 ]. The MFI selected for this study is RCDP, this MFI has played a key role in developing economic activities in communities and it exclusively focuses on women. The sample size consisted of six participants, who are aged 35 or above. Semi-structured interviews were organized in two sections, the first section included background questions based on the loan history of participants at the RCDP, demographic details, and a description of current business progress. The s econd section comprised questions that were related to participants’ viewpoints about their experience of gaining empowerment. For example, respondents were asked to provide in-depth explanations regarding their daily tasks and how their tasks get influenced after getting microloans. We also used sample prompts such as, “What role has microfinance played in your life?” and “Have you experienced any change due to microfinance? How it supported you in establishing your business?” Grand tour questions were also used such as “How would you explain a usual work week?” The grand tour questions lead us to get in-depth information through mini-tour questions for determining the details about certain events and the experience of women borrowers [ 69 ], such as Could you describe to me what you do for the mid-day meal when you are at your business? This helped in inquiring about delicate features such as advantages and changes associated with the role of microfinance in enhancing women’s empowerment. After conducting the semi-structured interviews, a focus group discussion with borrowers was conducted. This discussion helped us to collect data about the socioeconomic factors of women’s empowerment. This method helped us to have firsthand information (Table 2 ).

Focus group

To analyze the experience and interactions among participants, a focus group plays an important role. Through focus groups, we probed answers to the best lending practice, saving plans, and effective interpersonal relationships between members. The group discussion helped us to make certain aspects clearer.

Data analysis, results, and discussion

Developing first-order codes and second-order themes.

For analyzing the data, thematic analysis is used. First, to form codes, the data analysis started with coding iteratively, recorded interviews were used in performing the analysis [ 19 ]. At the initial stage, the data is linked with first-order codes that focus on the main research topic, the impact of MFIs on women’s empowerment. After this, common themes were used to join data fragments together from different but interconnected categories developed in the open coding [ 70 ]. This helped in combining first-order with second-order codes in a more precise manner.

Incorporating first-order codes with second-order themes

In the second phase, the data was revisited to ensure precision in the second-order themes. The existing themes were refined or used to create new second-order themes. We analyzed the constructs for ensuring that the themes are reflecting first-order themes. For example, first-order coding statements related to respondents’ increased level of independence in decision making led us to form a second-order theme explaining “increase in independence in decision-making power.”

Later this statement was defined as “Social Empowerment” described by the first-order coding statements explaining independence to decide without asking anyone. This analysis adds precision in this phase, while simultaneously permitting us to better examine and improve other evolving concepts, such as “being independent.”

Accumulating the theoretical dimensions

After second-order themes, we determined the theoretical dimensions for understanding the interaction among themes. For instance, some themes represented real experiences of social empowerment (e.g., “autonomy in decision making”) while others related to their response to social empowerment (e.g., “confidence in expressing an opinion”). We examined multiple models to check how multiple conceptual models relate to each other, using existing empowerment theory whenever suitable. We evaluated potential models against the data to investigate how emergent theoretical understanding described our research model. Table 3 presents the methodology, presenting the first-order codes, the second-order codes, and the theoretical dimensions that effectively describe the lived experiences of participants and the impact of microfinance in gaining empowerment.

Table 4 reveals the data supporting each second-order theme by presenting that microfinance has proved very beneficial for all six participants. Our main research question was to determine how microfinance increases women’s empowerment. Thus, our results presented that microfinance drastically changed the perception of women borrowers about living an independent life and societal dynamics. Fulfilling the necessities is one of the primary issues of poor people and due to this, they have to earn for each day’s expenses. Further, because of having no savings to rely upon, the lines between households and businesses are often not so clear. All our respondents reveal that now they feel more confident and empowered as compared to their earlier condition. All participants shared that they spend their income on fulfilling their household expenses such as children’s schooling and utility bills. The findings of this study were obtained through thematic analysis which is useful in conducting identification analysis and pattern reporting within data [ 12 ]. This study aimed to determine how microfinance is an effective tool for women’s empowerment, and how microfinance leads to develop entrepreneurial characteristics among women, and how it is useful for women. The conclusions achieved from this study may not become generalizable for the whole population but it is generalizable at a conceptual level [ 30 ].

The study determines the role of RCDP in women’s social and financial empowerment with the help of a case study methodology. We have used focus group discussions with in-depth interviews. We explored the lived experiences of women before and after taking a loan from RCDP and its impact on their social and financial empowerment with a view of William’s theory. In the focus group discussion, all participants shared their lived experiences and in the in-depth interviews, each case was analyzed for understanding the actual circumstances through which each participant has gone through. In this analysis, open-ended questions helped in understanding the real scenarios. The main research objective was to utilize open-ended questions for developing a comfortable association with the participants so that they can share all their lived experiences conveniently. We have selected in-depth interviews and focus groups because these methods were found more suitable for analyzing each case.

Case 1 Participant (1) described when her husband died in a road accident. She became helpless. Her in-laws abandoned her with six children. Then, she applied for the microfinance program of RCDP and was provided with an initial loan worth Rs.75,000/- for establishing a small retail store of food items. In her village, no women were running their retail store. But she took this step to support her children and now she is running a successful business. The credit for her success goes to her decision of taking a loan and starting a new journey in her life. She expressed;

Life became miserable without my husband. It was difficult to feed six children. Without having a source of income and no place to stay. I felt that my life has come to an end. But microfinance helped me to get out of the crisis. Now I am living a peaceful life with my children.

Case 2 Participant (2) shared that she remained in an abusive relationship with her husband for 11 years. Her husband was addicted to drugs. He divorced her after the birth of their seventh daughter. Then, he got married to some other woman. She expressed that she has gone through severe depression during that time when was alone with her daughters. Her mother and sister supported her but financially they were not capable to feed her children.

I was extremely depressed due to my divorce. I had no source of income other than him. I was worried about my daughters. I have four brothers and they also refused to support me at that time. Then, I started weaving and also started a dressmaking business on a small scale after taking a loan from RCDP. Particularly, I was good at making girls’ dresses. Now my mother and sister are living with me and I am supporting my family with my business.

Case 3 Participant (3) expressed that microfinance helped her a lot in supporting her family. Initially, she took a loan of Rs 80,000 to start her business. She shared;

My husband was a plumber but his income was not enough to support the household expenses. Then a time came when my husband couldn’t find any job for three months. We were deprived of all necessities. And we also have three children who were not going to school due to our crisis. Then I asked my husband to start his own business of baking food items. Because I was good at baking. We both decided to take a loan and started our own business. My husband was narrow-minded, initially, he refused to accept me as a partner in his business. But when he realized that only after one week our business showed visible growth. Then he allowed me to help him and we also hired two more workers. Now our children are going to school and we are managing all our household expenses.

Case 4 Participant (4) expressed that her husband was an employee in a garment factory. One day the owner of the factory decided to wind up his business because of a lack of profits. My husband lost his job, he searched a lot for other jobs but he failed to find any suitable job. Then, he died due to a heart attack. She took a loan of Rs 60,000 for purchasing a sewing machine and some clothes. She shared

I was living a happy life with my husband and children but life changed when my husband lost his job. Further his death made the situation even worse. One of my neighbors told me about RCDP. Just because of my children I took a loan and started my own stitching business and now I am in a position to manage my all household expenses.

Case 5 Participant (5) shared that her husband was employed in a workshop. But he lost his job due to the closure of that workshop. They had no other source of money. For four months, her husband searched for another job but he couldn’t find any opportunity. Their children left school because they were not able to pay their fees. Then, she convinced her husband to take a loan and start their own business. Her husband was afraid that we will not be able to repay the loan. Then, they will lose their respect in the family. But she told him that they have no other option and they have to take this risk.

My husband knew how to manage a car workshop so we decided to use the loan amount for starting a business. Gradually our business flourished, and we also managed to repay our monthly loan installments.

Case 6 Participant (6) shared her life experiences by stating that her husband was an electrician and his income was not enough to support the family. They have six children and their school fees were not payable with that income. Thus, she asked her husband to start his own business as a retail store as there was no other store in their area.

I am managing a retail store with my husband. Initially, my husband took all decisions related to savings and asset purchases. But now as I am helping him in managing our retail store. He acknowledges my effort and now we collectively decide how to spend our income. I and my husband started doing all chores together now. We both listen to each other, and collectively make decisions. He respects my suggestions and decisions. As we both couldn’t get a higher education, so we have realized the importance of education. Therefore, we are sending our children to good schools for quality education. The credit for our success and better well-being goes not only to my hard work but to all including my family, friends, and also to RCDP who helped us to build up our lives once again.

We have found that after establishing their own business, women became more confident and self-empowered due to microfinance. They have developed a true belief in their entrepreneurial skills and independent decisions. These women are highly efficient as they not only make a business investment but also save some amount of money for future needs at the same time. Women use their amount of loans in smart investments in some entrepreneurial activities and in providing financial support to their families. But after becoming financially stable, they start saving money for future needs. This indicates the smart and strategic planning of women. After this phase, women are very confident in developing a strong position in their family and taking financial responsibility on their shoulders. These results also find support from past studies [ 53 , 80 ]. Women have developed a serious working attitude toward their profession and are happy for supporting their husbands and family [ 77 ]. Hence, we can say that this all has become possible due to microfinancing as it not only provides financial support to women but also encourages them to contribute positively toward the development of society. [ 44 ]. Also, it plays a prominent role in establishing entrepreneurial knowledge and independent decision-making habit in women. Despite these efforts, many areas such as quality of services and working on new skill development trades, and gender responsiveness need improvement. The present form of this paper is not gender-friendly because it has mainly targeted the female gender and the male gender seems neglected. In addition to tangible development (food access and other necessities of life), it also provides intangible development to women in the form of motivation, self-belief, self-empowerment, confidence, and independent decision making. The findings of the study are in line with William’s theoretical model of women’s empowerment as the participants expressed that they have achieved empowerment by using their resources and agency. Further, the results are also in line with the status withdrawal theory as the participants expressed that they want to become independent because they want respect in society. Hence, our results are in line with the theories.

Microfinance plays a dominant role to motivate and enhance entrepreneurial activities in any country. This study aims to examine the efficiency of microfinance in empowering women in Pakistan. The analysis and results revealed that microfinance is an effective tool that can contribute to the development of women’s empowerment and entrepreneurship. The findings also support the theoretical aspect of William’s theory as women empowerment is being discussed with a view of three dimensions including resources, agency, and achievements. The study contributed to breaking the conventional hurdles levied on women’s decisions and mobility. A developing country needs to focus on the growth and development of entrepreneurship for achieving stability. People find microfinance as an opportunity for themselves as it provides a way to enter into the entrepreneurship field. The six cases elaborated in this study reveal that the RCDP microfinance loan has been proven as a full-time and consistent earning source for the people and helped them a lot in improving their living standards. In the initial stage, the clients operated their business as sole proprietors, and over time, they involved many other people in the business. Thus, microfinance has become a potential source of earning for many needy people.

Hence, this study highlights that microfinance creates a positive and influential impact on rural women. It not only works for the betterment of women but also considers the entire families of those women by supporting them in enhancing their family earnings. In this way, this study will help in increasing the percentage of school-going children and a reduction in child labor due to an increase in family earnings. Although this project is concerned with providing small-scale services still it is contributing a lot toward the growth of Millennium Development Goals related to women’s empowerment, health, child welfare, and poverty alleviation. In light of these results, we came to know that microfinance has a diverse portfolio of benefits. It is not only a source of finance but also a tool that makes women more confident and boosts their morale. The findings indicate that even the small-scale loans taken from RCDP have helped women a lot to grow their socioeconomic and financial position through entrepreneurship which supports the theoretical foundation of the status withdrawal theory. It has benefited females with strong and independent decision-making power. Our results can help policymakers and practitioners to adopt suitable policies that assimilate empowerment in the formation of more effective projects for women. The findings of this study may encourage more women to take part in microfinance projects and entrepreneurial activities.

Limitations and future directions

This study has some limitations. The first limitation is the shortage of time that resulted in designing a moderate sample size as compared to a bigger one. Second, the data collection is done for just one city and is limited to interest-based loans, whereas it has been found that RCDP is also concerned with interest-free loan programs. Third, the study used only six detailed interviews due to the time constraint factor which indicates that the findings cannot be fully generalized as only six cases were taken into account. However, this study has a potential scope in elaborating on all the possible dimensions of the related topic and it would enhance the recognition of women’s empowerment. This paper is dynamic as it covers both practical and theoretical aspects. Keeping in mind the time limitation and resource constraints, the above-discussed six cases can serve as a good starting step to allow the researcher to explore it further and investigate more dimensions in a longitudinal analysis. This study motivates women of our country to take a positive stand and contribute their role in poverty alleviation.

By documenting the limitations of the present study, future researchers are suggested to explore certain areas. Firstly, this study primarily deals with only a single project in the context of the most modern areas of Pakistan, it is recommended to future researchers perform this study in different regions of the country. Secondly, the sample size is limited due to time limitations; hence, future researchers are advised to conduct a study on the related topic by designing a large sample size. Lastly, it would be better for researchers to investigate the sustainability of community-based development projects via localized community-based adjustments with the support of local NGOs’ involvement rather than government funding.

Availability of data and materials

The data analyzed during the current study is available from the corresponding author on reasonable request.

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Khursheed, A. Exploring the role of microfinance in women’s empowerment and entrepreneurial development: a qualitative study. Futur Bus J 8 , 57 (2022). https://doi.org/10.1186/s43093-022-00172-2

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DOI : https://doi.org/10.1186/s43093-022-00172-2

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Spain | 1Q2024 Quarterly Labor Market Observatory

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Published on Monday, May 27, 2024 | Updated on Monday, May 27, 2024

In this edition of the QLMO, we analyze the labor market situation with data available up to the first quarter of 2024. We review the trends of the main indicators, examine the differences between the Labor Force Survey and administrative records, and highlight Spain's productivity deficit.

• Key points:
• Job creation picked up in the first quarter of 2024, but total hours worked decreased due to a third consecutive quarterly reduction in the intensive margin.
• The growth of labor costs has moderated, both per hour and per employee.
• After several years of convergence, the unemployment and employment data from the LFS and administrative records have diverged following the LFS's adjustment to the 2021 population census.
• Spain's chronic labor productivity deficit compared to the Eurozone has worsened over the last decade, despite the fact that both gross value added per hour worked and per employee have increased more in Spain since 2022.
• The presentation of the Observatory (in Spanish) is available here .

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Report (pdf).

• Rafael Doménech BBVA Research - Head of Economic Analysis
• Juan Ramón García BBVA Research - Principal Economist

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• Geography Tags
• Regional Analysis Spain
• Productivity
• Unemployment
• Labor Economics

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