The Impact Of Microfinance On Entrepreneurship In Kyrgyzstan

The concept of microfinance has developed rapidly since its inception in 1976. Despite its development, the impact it has on entrepreneurship is a subject of debate. Scholarly articles have recently emerged outlining that successful entrepreneurship depends on individual and household characteristics, and on the status of the microfinance loan received. This paper investigates the impact of microfinance on entrepreneurship in Kyrgyzstan using the nationally representative household survey data for 2013. Due to the endogeneity issue, we applied the binary response model with instrumental variables. After the adjustment for endogeneity, the result indicates that access to microcredit has a significant positive impact on entrepreneurship and shows there is a significant gender difference between men and women when making the decision to become 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 likely to be entrepreneurs. Therefore, it can be assumed that entrepreneurship in Kyrgyzstan is mostly represented by unskilled workers, many of which are unpaid family workers and self-employed who manage small trade markets, shops, and own land in order to generate income that does not require a particular education or labour skills.