Does microcredit empower micro-entrepreneurs? Empirical evidence from Indonesia

Purpose
This study provides fresh survey-based evidence from Indonesia on the impact of
microcredit on empowerment of micro-entrepreneurs.
Methodology
Data was collected from a survey of microcredit-funded microenterprises in
Surabaya, Indonesia, and its surroundings; 556 microenterprises participated
voluntarily in the survey. Weighted least square mean and variance adjusted
structural equation modelling (WLSMV-SEM) estimator was used to analyse the
data.
Findings
Results show that microcredit has a positive and significant relationship on
control over resources, but business performance does not significantly mediate
the microcredit-empowerment relationship.
Limitations
Some limitations noted in this study are that the sample was obtained from one
region of Indonesia, and was unbalanced in gender. The cross-sectional data of
this study limits inferences of causality in the analyses, and prohibits the study
from assessing longitudinal effects and from examining non-recursive models.
Contribution
At least in the case of Indonesia, the microcredit programme is working and
the actions of policymakers and donors can be justified. However, further,
more detailed and cross-country investigations are required to help donors
and policymakers take a more informed approach in continuing to invest in
microcredit programmes at the cost of other competing alternative strategies.