This article examines whether the profit orientation of a microfinance institution (MFI) affects its decision to extend loans to business start-ups. Based on information from 198 MFIs in 65 countries, we show that for-profit MFIs are less likely to provide financial capital to business start-ups than their not-for-profit counterparts. This results from the adoption of a dominant ‘commercial’ logic by for-profit MFIs, which motivates them to maximize profit by extending loans to less risky ventures with mature projects. In contrast, a dominant ‘development’ logic motivates not-for-profit MFIs to alleviate poverty through supporting the creation of new ventures. The use of a propensity score matching technique to correct for any potential endogeneity problem provides us with greater confidence that the suggested association is not a spurious correlation.
- business start-ups
- institutional logics
- profit orientation
- propensity score matching
Shahriar, A. Z. M., Schwarz, S., & Newman, A. (2016). Profit orientation of microfinance institutions and provision of financial capital to business start-ups. International Small Business Journal, 34(4), 532-552. https://doi.org/10.1177/0266242615570401