Abstract
We conducted a grounded study of a recent microfinance crisis in the Indian region of Andhra Pradesh to generalize more broadly about the role of the state in the success of business-led efforts to alleviate poverty at the base of the pyramid (BOP). While the existing BOP literature often sees business as a solution to failures of the state, our case analysis shows that market participants in Andhra Pradesh increasingly looked to the state as a solution to the perceived failure of the market. A comparison of the rapid rise and fall of the microfinance industry in Andhra Pradesh to the slower but more stable evolution of microfinance in Bangladesh further supports the argument that the state plays an important role in shaping the long-term success of BOP innovation. We discuss the implications of a more synergistic perspective on states and markets for future BOP research.
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