Page 1 of 15
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 6
June 2016
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 82
Microfinance and Women Entrepreneurs’ Business
Performance: The Mediating Role of Social Capital
Yusrinadini Zahirah Yusuff 1
, Azizi Abu Bakar 2
, Shuhymee Ahmad 3
1-3School of Business Management, Universiti Utara Malaysia, Malaysia
Email: yusrina_yusuff@yahoo.com.my
2
Islamic Business School, Universiti Utara Malaysia, Malaysia
Email: abazizi@uum.edu.my
Abstract
These days, women are believed as
changing the global economy as
entrepreneurs, consumers and workers.
More women have been involved in
entrepreneurship and play vital role as
part of economic growth. Women
entrepreneurs are look forward to give
strong contribution to boost economic
growth by reducing poverty, drive
Malaysia towards the goal of becoming a
high income, sustainable and inclusive
economy by 2020.The Malaysian
Government has allocated RM 200 million
in 2016’s Budget for micro-financing
facility by Amanah Ikhtiar Malaysia (AIM)
to increase women participation in
entrepreneurship and expand their existing
business. Most literatures claim
microfinance and social capital seem
cannot be separated and play important
role in the entrepreneurial process and
crucial for the business performance.
Thus, the mediator role of social capital is
studied in this paper. 190 respondents
under the umbrella of Amanah Ikhtiar
Malaysia (AIM) were involved in the
questionnaire-based survey. Consequently,
this study expected to contribute empirical
evidence on the relationship between
microfinance on women entrepreneurs’
business performance and the mediating
role of social capital in the relationship.
Keywords: Microfinance, Social Capital,
Women Entrepreneurs, Amanah Ikhtiar
Malaysia, Business Performance.
Introduction
Today women are belief as changing the
global economy as entrepreneurs,
consumers and workers. Every year, the
number of women participate in labour
force is increasing and in 2012, women
represent 49.5% or nearly half of the
national labour force. Thus, the Malaysian
Government has set a 30% target of
women representation at senior decision
making and corporate boards by 2016.
Budget 2015 also has upheld the role of
women in national development and in
nurturing future generations. Hence, RM
2.26 billion has been provided to the
Women, Family and Community
Development Ministry for development
and operating expenditure to intensify the
involvement of women in the job market
and entrepreneurial activities. Among the
Page 2 of 15
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 6
June 2016
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 83
planned programmes are to train 125
potential women directors to fill the
position as members of the board of
Government-linked companies (GLC) also
private sector, 1Malaysia Support for
Housewife programme which emphasises
skills training and incentives for
housewives, Women Career Comeback
Programme for professional women
returning to the job market, Women
Special Protection Homes, Single Mother
Skill Incubator Programme (I-KIT),
Women Entrepreneurship Incubator
Programme (IkUnita) and Women Core
Development Programme. In Budget 2016,
a sum of RM 200 million is allocated to
Amanah Ikhtiar Malaysia (AIM) for
micro-financing facility to increase women
participation in entrepreneurship and
expand their existing business.
Nowadays, microfinance program is part
of main contributor in creating new job
opportunities and generating income for
the purpose of increasing social well being
and economic status of the poor and
eradicating poverty (Hamdino et al., 2012).
In 1987, an action research project carried
out by the Centre for Policy Research
University of University Science Malaysia
(USM) institutionalise the first
microfinance institution, Amanah Ikhtiar
Malaysia (AIM) replicating the concept of
Grameen Bank has been established. It
was sponsored by the Asia and Pacific
Development Centre (APDC), Islamic
Economic Development Foundation of
Malaysia (YPEIM) and the Selangor State
Government to facilitate in eradicating
poverty of the rural poor in Malaysia.
In this day and age, there are lots of
microfinance institution comprise of
Government programme, NGOs and
financial institutions (banks) which
provide financial services to poor people.
Some of the earliest microfinance
institutions in Malaysia are Yayasan
Usaha Maju began in 1988 formerly
known as “Projek Usaha Maju”, Yayasan
Basmi Kemiskinan (YBK) in 1990 and The
Economic Fund for National Entrepreneurs
Group (TEKUN) which has been set up in
1998. Amanah Ikhtiar Malaysia (AIM)
offers financial services or small loan to
about 82% of the total and hardcore poor
household in Malaysia (Mamun et al.,
2010). AIM duplicated the concept of
Grameen Bank which applied group based
loan, providing credit without any
collateral to a group of people with the
same interest to start up their business. The
participants were chosen based on their
gross monthly income that fall under
Poverty Line Indicator (PLI) consists of
poor and hardcore poor households.
AIM was established in 1987 in
accordance to Trustee Incorporation Act
258, 1952 (revised 1981). In 1986, the
microfinance scheme has been introduced
with the objective of reducing poverty by
providing microcredit programme,
facilities, guidance and continuous training
for the poor to become entrepreneurs. AIM
microfinance scheme can be divided into
three categories which are economic
purposes, non-economic purposes and
Page 3 of 15
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 6
June 2016
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 84
recovery. The loans/financings offered to
urban and rural poor households to be
involved in various types of legal business
activities such as small businesses,
manufacturing, animal husbandry,
agriculture, fishing and services. As the
establishment of AIM in 1987 until
February 2015, AIM has disbursed the
loan of RM 12, 153, 111, 093 to 356, 458
borrowers and has 137 branches to
facilitate its member.
Microfinance and social capital seem
cannot be separated since it was introduced
by Grameen Bank in 1976 as group based
lending which emphasized network and
trust. The role of social capital in the
entrepreneurial process is critical for the
performance of small firms where certain
forms of social capital can directly
improve business performance (Stam et
al., 2013). Besides financial capital and
human capital, social capital plays a
significant role to enhance the
performance of women owned business as
the business performance cannot be
attributed wholly to the effects of physical,
human and financial capital but also the
role of social capital (Tundui & Tundui,
2013). Hence, the objective of this study
is to examine the mediating role of social
capital in the relationship of microfinance
on women entrepreneurs’ business
performance.
Literature Review
Microfinance and women
business performance
The establishment of Grameen Bank in
Bangladesh has seen the role of
microfinance as important source of
financial resource (capital) for women
entrepreneurs. Microfinance as defined by
World Bank Report (2007), “Small loans
that help poor people who wish to start or
expand their small business but, are not
able to get banks to lend them”. While
Asian Development Bank (2008) referred
microfinance as “provision of a broad
range of financial services such as
deposits, loans, payment services, money
transfers and insurance to poor and low- income households and their micro
enterprises”.
Yusuff (1995) argues, access to financing
as one of the most critical factors
contributing to business success and it is
also the greatest single issue faced by
women entrepreneurs to start-up their
business (BMS, 2013). Financial resources
as internal resources are the key to
business success (Martinez et al, 2013;
Siegel & Renki, 2012; Davidsso et al.,
2006; Hisrich & Peters, 2002). Women
mostly labelled as “risky” borrowers and
less credit worthy than men (Brush, 1992)
which make them difficult to secure
financial capital that is crucial for their
business grow.
As Constinidis et al., (2006) supported,
financial capital is the biggest challenges
