Co-Production Related To Business Counselling in the Microfinance Sector as a Demonstration of Social Cooperation: An Interpersonal Relationship Approach

Abstract

Microfinance Institutions (MFIs) provide services such as microcredit, savings, insurance, and Business Development Services (BDS) to low-income people in order to start new businesses and expand existing businesses. MFIs cater to micro-enterprises. A microenterprise is defined as an owner-managed business that has fewer than 10 employees. The studies show that microenterprises not only need microcredit but also BDS in order to grow their businesses. This study focuses on BDS. BDS are non-financial services such as management training, vocational training skills, marketing assistance, and technology access provided to owner-managers by MFIs. MFIs could provide BDS to owner-managers/clients using business counseling. A good relationship between the counselor and the client can be considered a defining feature of any successful counseling intervention. This interpersonal relationship enhances the co-production of BDS in counseling. Therein, the objectives of this study are; to identify the factors that enhance the interpersonal relationship between the counselor and the client in microfinance settings that result in enhanced co-production, to identify how interpersonal relationships enhance co-production, and to understand how organizational factors affect interpersonal relationships. The multiple case study method was used to conduct the study and six (6) Sri Lankan Microfinance Institutions (MFIs) were chosen as cases and data were collected by holding in-depth interviews. Findings show that factors such as the expertise of the counselors, social interaction, similar attitudes, intensity of contacts, and power distance influence the relationship between the counselors and the clients. As a result of the enhanced interpersonal relationships between counselor and client, parties exchange personal and communal favors thereby further enhancing co-production as well as improving the provision of information by clients. The findings further reveal that interpersonal relationships could be affected by organizational factors such as the type of MFI and type of linkages. Therefore, the findings of this study will enable MFIs to improve the counseling intervention and will further contribute to the microfinance knowledge and practice domains. Keywords: interpersonal relationship, co-production, counseling, microfinance, business development services (BDS).