"Human, Social, and Psychological Capital for Microfinance: How Do Entrepreneurs Access Resources?"

Abstract

Entrepreneurs from impoverished environments operate in resource-constrained settings that lack access to various forms of capital. To meet the need for tangible financial resources, microfinance institutions provide small loans to poor entrepreneurs. To foster intangible resources, microlenders are exploring ‘credit-plus’ training programs, raising questions as to how poor entrepreneurs acquire and deploy complementary resource bundles. Based on qualitative data from two regions of China, this study identifies mechanisms by which microfinance influences business development and provides a framework and research propositions for understanding how ‘credit-plus’ programs facilitate access to intangible resources for entrepreneurship. Our findings demonstrate that by offering financial advice, business consulting, networking, and psychological support, loan officers enhance clients’ human, social, and psychological capital to better manage their businesses. We also find evidence of a sequential process of bricolage and optimization. Whereas micro-entrepreneurs initially rely on the loan officer as the main provider of human, social and psychological capital, they switch to more varied resource providers as their capacity expands. These findings have implications for firms in resource-constrained environments beyond microfinance, as we explore inputs to intangible resources and how entrepreneurs in poverty settings engage in bricolage to overcome resource constraints.