Bridging the Financing Gap for Pro-Poor Innovation: Towards a Framework
AbstractIn many developing countries, pro-poor entrepreneurship and innovation is facing a financing gap. Such innovation suffers from a lack of finance especially from the mainstream (or core) of the financial system. Instead, the little support that exists comes from alternative sources at the periphery of the financial system. This substantial gap in finance for rural PEBI, which remains unexplored, is the focus of this paper. To start, a number of barriers to access to finance are considered, from which a conceptual framework is constructed. The framework considers the financial system as made up of a core (the banks) and a periphery, where the way knowledge flows within the system, the type of knowledge that can be accessed and accumulated, and the kind of relationships that exists matter. It is suggested that at the core, path dependence and institutional lock-in together with a closed network of similar knowledge types and a dependence on collateral rather than relationships, result in a rigid and a closed system. The periphery organisations are better able to obtain and act on new knowledge (and provide finance) for a number of reasons which form the basis for a set of insufficient but necessary (INUS) condition. Accordingly, the organisations may posit the following characteristics: a dynamic and flexible approach to finance; a wide network of actors with varied knowledge; relationship focused; an emphasis on tacit knowledge, feedback loops and learning; ability to innovate close to users; and a systemic and integrated approach to finance.
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Bibliographic InfoPaper provided by United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology in its series UNU-MERIT Working Paper Series with number 049.
Date of creation: 2010
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Web page: http://www.merit.unu.edu
Pro-poor innovation; entrepreneurship; rural innovation; financing innovation; financing entrepreneurship;
Find related papers by JEL classification:
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
- I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
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- Perrot, Radhika & Filippov, Sergey, 2010. "Localisation strategies of firms in wind energy technology development," UNU-MERIT Working Paper Series 047, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
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