Abstract

We address the role microfinance institutions (MFIs) play in funding entrepreneurial ventures and present a distinction between the types of entrepreneurs that seek MFI and traditional venture funding. We argue that microfinance can serve successfully as seed financing for microentrepreneurs in under-developed economies around the world. By comparing bootstrapping and private equity seed-financing in developed economies to microfinance seed-financing in impoverished economies, we show that the different entrepreneurial characteristics in the two economies have similar funding gaps but are solved with different sources of funding.

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