Impact of Microfinance Institutions for Female Entrepreneurs: Evidence from Philadelphia, Pennsylvania

Abstract

Microfinance encompasses a broad range of financial services targeted at low income individuals seeking to build income and assets. There has been extensive research on the role of microfinance institutions (henceforth “MFIs”) in developing countries on poverty reduction, particularly for female clients. In contrast, research on MFIs operating within the United States is more limited. This study seeks to fill this gap in the literature and is one the first to focus on the impact of an MFI on female clients in the US using data from a Philadelphia-based MFI. The study examined the factors affecting outcomes of female entrepreneurs as compared to their male counterparts measured by changes in financial capability, repayment history, household incomes, and sustainability. Although the study does not statistically support the existence of differences between the outcomes for female and male clients of the MFI, the data does indicate positive outcomes for the clients. The business survival rates on average are above national indicators. The personal credit scores for MFI clients reflect improvement subsequent to receiving loans. This study utilized survey instruments and a focus group study to identify barriers to the success of female entrepreneurs. Noted barriers such as lack of access to capital, lack of relevant business knowledge provide a foundation for future research study.