Contents lists available at ScienceDirect Journal of Rural Studies journal homepage: www.elsevier.com/locate/jrurstud Does microfinance impede sustainable entrepreneurial initiatives among women borrowers? Evidence from rural Bangladesh Arijita Dutta a,* , Sharmistha Banerjee b a Department of Economics, University of Calcutta, 56 A B T Road, Kolkata 700050, India b Department of Business Management, University of Calcutta, 1, Reformatory Street, Alipore, Kolkata 700027, India ARTICLE INFO Keywords: Microfinance initiatives Entrepreneurship Innovativeness Bricolage Impact assessment Propensity score matching ABSTRACT Across the world, microfinance (MF) has been recognized as an effective instrument for simultaneous reduction of poverty and long-term growth through creation of entrepreneurship. Available research does suggest that MF experiment in most cases was successful to reduce poverty, especially among poor women. However, evidence- based research on impact of MF initiatives on nature of entrepreneurial activities and on the psychological capital or potential of the entrepreneurs remains under-studied. This paper attempts to bridge the gap and seeks to diagnose the entrepreneurial behaviour of MF users in comparison to a comparative set of non-users in the same socio-economic climate in an emerging economy and the haven of MF, Bangladesh. The outcome variables considered are not just participation in income generating process, but specific qualitative attributes of en- trepreneurship, including ability to innovative, bricolage, risk taking, marshalling etc. and also some quanti- tative indicators in the form of frequency of repeated loans and income generated there from that may offer proxy measures of scaled up and sustainable entrepreneurship. Data exploration posits that transformative en- trepreneurship, which indicates sustainability of the venture to usher in prosperity, is rare among MF users. Small loan sizes, quick repayment cycles and repeated loans of MF institutions constrict the borrowers to opt for low-risk ventures, with women borrowers facing additional barriers as their gendered role force them to be less risky and follow traditionally accepted business modes, rather than making big headway. Using propensity score matching technique, the paper finds that easy access to credit through MF initiatives could not inculcate the psychological potential to bear risk and bricolage among the borrowers. Self-employment in micro enterprises, without much innovation and risk taking, has been the characteristics of overall income generating process of the model. 1. Motivation In terms of endogenous growth theory, entrepreneurship represents the crucial and scarce input, which a prime mover finds necessary to initiate the development process by mobilizing supply of other pre-re- quisites. This paper is motivated from the fundamental understanding that entrepreneurship is an important mechanism for economic devel- opment through employment, innovation and welfare effects (Schumpeter, 1934; Acs and Audretsch, 1988; Baumol, 2002). Thus, entrepreneurship development resulting in innovative new ventures and employment generation is identified as one of the most efficient avenues to increase competition, shape market, thereby stimulating long-term growth, and escape from poverty (Knight, 1921; Schumpeter, 1942; Singer, 2006). However, it would be over-simplified to under- stand entrepreneurs as homogenous actors that are uniformly in- novative and respond similarly to the enabling environment conditions and policy interventions. They can be divided into two distinct groups: subsistence entrepreneurs who become entrepreneurs as a means of pro- viding subsistence income, and transformational entrepreneurs who aim to accept risk and innovate to create large, vibrant businesses that grow much beyond the scope of an individual's subsistence needs and provide jobs and income for others (Schoar, 2010). The transformational en- trepreneurs continue the business in a far more sustained way and thus are expected to increase income beyond their subsistence need for avoiding consumption poverty. However, the vast majority of the en- trepreneurs lie in the subsistence mode, trapped in a ‘‘necessity, survival and maintenance’’ cycle and their activity does not affect national eco- nomic development (Acs, 2006). Such entrepreneurship seeks to help people simply meet their basic needs and this very focus on basic needs substantially undervalues what entrepreneurship can really achieve in any economy (Viswanathan et al., 2014). Thus, any development policy, which focuses on long run sustainable growth process, should https://doi.org/10.1016/j.jrurstud.2018.03.007 Received 27 November 2016; Received in revised form 26 November 2017; Accepted 14 March 2018 * Corresponding author. E-mail address: adeco@caluniv.ac.in (A. Dutta). Journal of Rural Studies 60 (2018) 70–81 0743-0167/ © 2018 Elsevier Ltd. All rights reserved. T