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Entrepreneurial value creation through green microfinance: Evidence from Asian microfinance lending criteria

Abstract

Microfinance has proliferated as both a poverty alleviation tool and catalyst for entrepreneurs running small-scale businesses with support from microloans. This article examines four rationales for incorporating concern for the natural environment into the practice of microfinance and suggests a typology to categorize microfinance sustainability initiatives as preserving, evolving, sustaining or restoring. Using a binomial descriptive content analysis of publicly available lending criteria, we investigate the incidence of ‘green microfinance’ in a sample of 40 Asian microfinance institutions (MFIs) – all members of the Banking with the Poor Network in Bangladesh, India, Indonesia, Laos, Nepal, Pakistan, Philippines, Sri Lanka, Thailand and Vietnam. We conclude that despite the existence of viable and strategic rationales to support the proliferation of ‘green’ microfinance, very few MFIs actually embed such a commitment into the structure of their financial products. This disconnect reveals that current microfinance practice in Asia, to the extent that it may ignore the natural environment, may correspondingly endanger the health and livelihoods of the very people it is designed to help. We consider this study as investigative and in need of replication in other regions; however, it reveals key contradictions while also suggesting strategic redirections for the microfinance field in Asia and elsewhere.

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Notes

  1. 1.

    The focus of this investigation is specifically on environmental impacts of microfinance, and we purposefully limit ourselves to defining and discussing this subset of impacts. Certainly, microfinance has been linked with many positive social impacts (empowerment, food security, consumption smoothing, improved health and education for clients and children) as well as many negative social impacts (violence against women, general over-indebtedness and related suicides, particularly in India). We mention these here to encourage further investigation, but they are outside the scope of this article.

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Acknowledgements

The authors would like to thank Gordon Rands, the editors and anonymous reviewers for helpful comments on earlier versions of this article.

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Correspondence to Geoffrey R Archer.

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Archer, G., Jones-Christensen, L. Entrepreneurial value creation through green microfinance: Evidence from Asian microfinance lending criteria. Asian Bus Manage 10, 331–356 (2011). https://doi.org/10.1057/abm.2011.9

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Keywords

  • microfinance
  • microcredit
  • green
  • poverty
  • environment
  • sustainability