The Impact of Group Lending on Participants’ Entrepreneurial Resources: A Case Study of Microcredit in Rural Estonia

Thea Teinemaa

Student thesis: Master thesis


The aim of microcredit group lending is generally seen to be the provision of affordable credit that enables the participants to start or develop small scale business activities. However, how does participation in a loan group more broadly affect entrepreneurship? The thesis studies how social capital is built within loan groups and how it affects the members’ access to entrepreneurial resources such as information, motivation and material benefits. It is based on the case of loan groups in rural Estonia, formed within two consecutive female entrepreneurship and network supporting programmes. In order to obtain a thorough understanding of how participation in a loan group may affect the important resources that are precondition for entrepreneurship, a qualitative, constructivist methodological approach is chosen, taking its point of departure in the participants’ perceptions of the issue. The study finds that all three types of entrepreneurial resources are indeed exchanged within and occasionally also across the loan groups. Firstly, informational benefits include ad hoc business information, advice on relevant issues and referring contacts, among other things. Secondly, there are material benefits as the group members engage in different types of business related cooperation, which aids them in production, marketing or sales. Thirdly, motivational benefits are also perceived to play a role through encouragement, finding solutions to common problems and receiving positive emotions from social interaction. The exchange of these resources in the groups is generally irregular in frequency and extent, and its scope and scale also vary from person to person depending on their field of business among other factors. Generally, no fixed cooperation arrangements have evolved among the loan group participants, which can be caused by the nature of their business, but may also indicate a high level of risk aversion and strive for independence. The latter characteristics can be connected to the specificities of the type of entrepreneurship practiced by the loan group participants. Lastly, the importance of loans in this context should not be underestimated as findings indicate that small entrepreneurs in rural Estonia indeed face a lack of affordable funding.

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
Publication date2013
Number of pages95