A waterfall model of microfinance: innovation and entrepreneurship for sustainable development

Abstract

Microfinance is considered as investment asset. Investors create special purpose vehicle (SPV) in the form of microfinance institutions (MFIs), which is aimed to promote entrepreneurship among its clients to achieve ultimate goal of poverty alleviation for development. This research finds that MFIs are deviating from their ultimate goal of poverty alleviations and getting engaged in subsistence work, which is a major obstacle in the success of microfinance institutions. Against this background, a ‘waterfall model of microfinance’ is proposed, which helps in defining scope of innovation for entrepreneurship and its sustainability for development. A number of evidences against each possible dimensions of innovation to promote entrepreneurship are provided. These evidences establish validity of model theoretically. This model reveals that market-based solution is not sufficient and there is need of intervention by state.