The Relentless Pursuit of Financial Capital for Micro-enterprises: Importance of Trust and Social Capital
Adam Brown, Steve Garguilo, and Khanjan Mehta
International Journal for Service Learning in Engineering
Brown, A., Garguilo, S., Mehta, K., “The Relentless Pursuit of Financial Capital for Micro-enterprises: Importance of Trust and Social Capital”. International Journal for Service Learning in Engineering, Vol. 6, No. 2), 2011, pp 78 – 97
Entrepreneurs in developing countries often struggle with accessing financial capital to start small businesses. Formal lending practices meet the needs of small business owners who approach microfinance institutions (MFIs) for capital to expand their businesses, but they do not typically lend money to unproven entrepreneurs interested in starting new businesses. This gap is increasingly being met by informal lending and credit markets. These markets are growing fast, and few research initiatives have explored the mechanics and intricacies of this system. Instead of decomposing the microfinance industry into a binary relationship between MFIs and their clients, this paper discusses the interdependencies within the multi-actor financial system in Kenya that encompasses informal lenders, rotating savings and credit associations, solidarity groups, savings and credit cooperatives and microfinance institutions. This exploratory paper delves into the dynamics between these actors and describes the role of trust and social capital in their complex relationships. Insights into these relationships can help venture teams develop appropriate business strategies that make their products affordable and accessible to micro-entrepreneurs in resource-constrained settings.
Available from: https://www.researchgate.net/publication/257142786_The_Relentless_Pursuit_of_Financial_Capital_for_Micro-enterprises_Importance_of_Trust_and_Social_Capital