The recursive interplay of capabilities and constraints amongst microfinance entrepreneurs

Abstract

PurposeThe purpose of this paper is to investigate, through practices and capabilities, how entrepreneurs use microfinance in a context of serious constraints.Design/methodology/approachThe chosen methodology for this paper is longitudinal. A three-and-a-half-year study was conducted to be able to capture the entrepreneurial journeys of ten entrepreneurs at a micro-level in the developing economy of Ghana. This was augmented by a further 15 interviews with entrepreneurs and loan officers. This data is used to develop a theoretical model of entrepreneurial practices in this context.FindingsThe paper identifies two distinct pathways for understanding the recursive nature of entrepreneurial practices. It highlights how entrepreneurs generate capabilities through microfinance resources through convergent or divergent venturing in response to the serious constraints they face. This is identified as a generative recursive mechanism for the process, representing the “chain of actions” and how entrepreneurs engage with their “settings” and “intended relations” in practice.Research limitations/implicationsThe research is limited by its focus on one nation in Sub-Saharan Africa and therefore how the findings may be transferred to other contexts.Originality/valueThe paper contributes to a practice approach in entrepreneurship by identifying how mechanisms of practice relate to entrepreneurial action in this context. It also provides an important contribution to discussion at the intersection of entrepreneurship and the capabilities approach by using Amartya Sen's concepts of process and opportunity freedom to understand practices.