Microfinance and small business development in a transitional economy: Insights from borrowers’ relations with microfinance organisations in Kazakhstan

Zografia Bika, Madina Subalova, Catherine Locke

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Microfinance is seen as an important vehicle for developing small businesses in developing and transitional economies despite the relative absence of supporting research. We use mixed methods to offer a nuanced empirical exploration of the relationship between microfinance and everyday entrepreneurial practice(s) in Kazakhstan. As in many transitional contexts, ‘unbankable’ borrowers here operate in a vibrant informal sector, face high degrees of uncertainty, and retain a strong distrust of a corrupt/predatory state. Our data-based methodology for analysing borrowers’ diverse relationships with microfinance organisations (MFOs) generates insights into their multiple pathways to business development. Both ‘outreach’ and ‘commercialised’ MFOs sustain micro-flows of resources that are critical for everyday entrepreneurs who need to finance ongoing consumption and contingencies whilst also (and by) building up their small businesses. Microfinance use did not promote formalisation or impersonalised banking relationships. Instead, MFOs focused primarily on repayment, clients’ businesses remained partially formalised or unregistered across all stages of growth and the lending relationships preferred by Private MFOs and borrowers were highly personalised. Consequently, we call for assumptions about how microfinance can (and should) drive small business development need to be rethought for transitional contexts.
Original languageEnglish
Pages (from-to)183-203
Number of pages21
JournalJournal of Development Studies
Issue number1
Early online date12 Aug 2021
Publication statusPublished - 24 Jan 2022


  • microfinance
  • entrepreneurial practice
  • transitional economy
  • Kazakhstan

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