Microfinance and innovation

This mini-study examines microfinance and innovation. The two themes are both extremely topical, and would seem to have obvious links.  There has been some treatment of microfinance as an innovation itself, and of innovations that can support microfinance.  But there is surprisingly little material readily available, at least not in the public domain, that explores the implications of microfinance for innovation.

The review of microfinance instruments, and of the constraints that innovators face, leads to the conclusion that microfinance could well support innovative activities of some kinds.  Finance is a major constraint for innovators, especially for smaller firms.  Microfinance’s benefits are most likely to be experienced, then, by smaller firms, and by those undertaking relatively small-scale and/or less capital-intensive innovations.   It could play a substantial role in enabling the diffusion of innovations that have been taken up by larger firms and enterprises and other organisations in more affluent regions, and which have thus been rendered cheaper and more user-friendly.  It could support configurational activity, new service and software development, and some types of protection of new intellectual property.

The ministudy thus represents an early effort in bringing together the themes of microfinance and innovation.  Microfinance should be explored as an innovation-enabling tool, both through analysis of existing case material and through action research.  And innovation criteria could be added to at least some types of microfinance initiative.

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