THE IMPACT OF MICROFINANCE ON ENTREPRENEURSHIP IN KYRGYZSTAN

Abstract

The concept of microfinance has developed rapidly since its inception in 1976. Despite itsdevelopment, the impact it has on entrepreneurship is a subject of debate. Scholarly articles haverecently emerged outlining that successful entrepreneurship depends on individual and householdcharacteristics, and on the status of the microfinance loan received. This paper investigatesthe impact of microfinance on entrepreneurship in Kyrgyzstan using the nationally representativehousehold survey data for 2013. Due to the endogeneity issue, we applied the binary responsemodel with instrumental variables. After the adjustment for endogeneity, the result indicatesthat access to microcredit has a significant positive impact on entrepreneurship and showsthere is a significant gender difference between men and women when making the decision tobecome an entrepreneur. Thus, men are more likely to become an entrepreneur than women.Another interesting finding is that elderly, less educated, and married individuals are more likelyto be entrepreneurs. Therefore, it can be assumed that entrepreneurship in Kyrgyzstan is mostlyrepresented by unskilled workers, many of which are unpaid family workers and self-employedwho manage small trade markets, shops, and own land in order to generate income that does notrequire a particular education or labour skills.