The impact of ethnic diversity on microenterprise start-ups

Sefa Awaworyi Churchill, Vinod Mishra

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)


Until recently, factors determining the decisions made by microfinance institutions (MFIs) to extend loans to business start-ups had not been explored. Recent evidence shows that MFI performance with regard to funds issued for small business start-ups depends on MFI-level characteristics such as profit orientation. We argue that these decisions do not only depend on MFI-specific practices or characteristics, but also on the role ethnic diversity plays. Using data on microfinance lending activities for business start-ups, we examine the impact of ethnic diversity on microenterprise start-ups. Results show that ethnic diversity negatively affects the provision of financial capital for business start-up. Furthermore, results also suggest a negative association between ethnic diversity and the share of female borrowers recorded by MFIs. We examine social networks and outreach as potential channels through which ethnic diversity affects business start-ups.

Original languageEnglish
Pages (from-to)4328-4342
Number of pages15
JournalApplied Economics
Issue number40
Publication statusPublished - 27 Aug 2018


  • Business start-ups
  • ethnic diversity
  • microenterprise
  • microfinance

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