Abstract:
The proponents of inclusive financial growth believe that giving relatively larger size loans to the non-poor or near poor entrepreneurs is the response of the micro finance institutions (MFIs) toward the demand of the existing and potential clients. But opponents are more likely to consider such response as mission drift by the MFIs. Therefore, this study attempted to measure effectiveness of such micro enterprise loan on increasing entrepreneurs’ income and innovation and found evidence to support the proponents of giving loans to entrepreneurs. Findings suggested that larger loans increase the income but less innovative business practice might risk such income. Therefore, micro enterprise loans with proper business skills, information, and technologies are suggested to be provided by the MFIs with careful screening and monitoring to ensure effective utilization of loan capital.
