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The impact of ethnic diversity on microenterprise start-ups

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  • Sefa Awaworyi Churchill
  • Vinod Mishra

Abstract

Until recently, factors determining the decisions made by microfinance institutions (MFIs) to extend loans to business start-ups had not been explored. Recent evidence shows that MFI performance with regard to funds issued for small business start-ups depends on MFI-level characteristics such as profit orientation. We argue that these decisions do not only depend on MFI-specific practices or characteristics, but also on the role ethnic diversity plays. Using data on microfinance lending activities for business start-ups, we examine the impact of ethnic diversity on microenterprise start-ups. Results show that ethnic diversity negatively affects the provision of financial capital for business start-up. Furthermore, results also suggest a negative association between ethnic diversity and the share of female borrowers recorded by MFIs. We examine social networks and outreach as potential channels through which ethnic diversity affects business start-ups.

Suggested Citation

  • Sefa Awaworyi Churchill & Vinod Mishra, 2018. "The impact of ethnic diversity on microenterprise start-ups," Applied Economics, Taylor & Francis Journals, vol. 50(40), pages 4328-4342, August.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:40:p:4328-4342
    DOI: 10.1080/00036846.2018.1444264
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    Cited by:

    1. R. Isil Yavuz & Berrak Bahadir, 2022. "Remittances, ethnic diversity, and entrepreneurship in developing countries," Small Business Economics, Springer, vol. 58(4), pages 1931-1952, April.
    2. Katarzyna Lukaniszyn-Domaszewska, 2021. "Minority Groups as Socio-Economic Development Factor of the Emerging EU Region in the Opinion of Regional Authorities: Evidence from Poland and the German Minority," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 507-521.

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