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1 – 2 of 2Adwin Surja Atmadja, Parmendra Sharma and Jen-Je Su
The purpose of this paper is to address the small, women micro-entrepreneur dominated and heterogeneity limitations of the Atmadja et al. (2016) study. The sample is much larger…
Abstract
Purpose
The purpose of this paper is to address the small, women micro-entrepreneur dominated and heterogeneity limitations of the Atmadja et al. (2016) study. The sample is much larger, includes more men and is more heterogeneous, which allows deeper insights and more meaningful explanation of the relationship between microfinance and microenterprise performance in the case of Indonesia, including the effects of gender, lending scheme and money separation.
Design/methodology/approach
This study used a survey of 556 respondents across five microcredit providers in the city of Surabaya using an updated instrument. Ordered probit is used to analyse data.
Findings
Microfinance may not matter for microenterprise performance in the case of Indonesia. Additionally, microcredit schemes (individual vs group) and gender may also not matter for performance, but money separation might have some influence.
Practical implications
Non-financial factors such as human capital, spousal involvement, and money separation should be considered as important factors for improving microenterprise business performance in Indonesia, with less focus on microcredit per se.
Originality/value
This study provides further evidence that microfinance may not matter for microenterprise performance in the case of Indonesia, a populous middle income country with a very long history of microfinance.
Details
Keywords
Adwin Surja Atmadja, Jen-Je Su and Parmendra Sharma
The purpose of this paper is to examine the impacts of microfinance on women-owned microenterprises’ (WMEs) performance in Indonesia. It especially observes how financial, human…
Abstract
Purpose
The purpose of this paper is to examine the impacts of microfinance on women-owned microenterprises’ (WMEs) performance in Indonesia. It especially observes how financial, human and social capital influences performance of enterprises.
Design/methodology/approach
Data were collected from a survey conducted in Surabaya, Indonesia’s second largest city, covering more than 100 WMEs. The ordered probit technique is applied to estimate the performance vis-à-vis financial, social and human capital relationships.
Findings
This study finds a negative relationship between performance and financial capital, and positive relationships between performance-human capital and performance-social capital. However, with respect to human capital, the level of education has a marginally significant relationship with performance.
Practical implications
Microcredit for the purposes of enhancing business performance might not necessarily be a good idea, if it is unable to generate higher returns. As a business develops, the volume of microcredit should be reduced, and replaced by owners’ own savings and retained profits. Regarding the non-financial factors, it might be useful for policy makers to contemplate providing incentives for spouse involvement in microenterprises run by women, and to consider them in designing credit policies. Group meetings activities should be extended to facilitate members to engage in business-related conversations and to develop social relationships. The ability of loan officers and group leaders to facilitate such conversations appears important.
Originality/value
To the best of the authors’ knowledge, this study provides the first in-depth understanding of the role of microfinance programmes in the case of performance of WMEs in Indonesia, one of the world’s most populous economies.
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