Dialectic evolution through the social innovation process: from microcredit to microfinance

Arvind Ashta,Abu Saleh Musa,Mawuli Couchoro

doi:10.1186/2192-5372-3-4

Abstract

Microfinance is the provision of financial services to the financially excluded, usually the poor. We use literature reviews and descriptive research to present different aspects of the relationship of the microfinancial services to microenterprise. The first thrust in this field had been from microcredit and group lending to encourage business initiatives among the poor. The hope that these services would lift them out of poverty had largely built the brand image of the sector. However, the spread of consumer microcredit and uncontrolled growth of microfinance led to over-lending without adequate checks and balances, leading to over-indebtedness and associated stress, and critique of microcredit. To restore balance, other financial products, such as microequity, microsavings, microinsurance, microguarantees, and microremittances, have been suggested. We place these developments in a social innovation process perspective by showing that microfinance, through its wide range of innovatively distributed products, can be a key factor to foster entrepreneurship.JELL26, O16, O17, O30

Highlights

We will start with the relationship of entrepreneurship to microcredit because it is the most developed product in microfinance
It is being increasingly realized that other complimentary financial products are necessary for the poor, and the relationship of these to entrepreneurship will be discussed in the part
To the extent that a dent has been made in the exclusion problem, we can say that in this respect, microcredit is a social innovation

Summary

Introduction

There are many other issues involved such as health and education All these researchers and practitioners realize that the tool they are focusing on is just one in a bag of tools required to increase the capital of the poor: Since the governments of these countries are poor and cannot provide the basic services such as property rights, adequate public works, or even high-enough minimum wages, one possible solution advocated is selfhelp: for the poor to rise from poverty requires them to become microentrepreneurs and take charge of their own fate. The free market has not solved the problem because entrepreneurship requires financial capital, social capital, and human capital

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Conclusion