Bridging the financing gap for pro-poor innovation: Towards a framework

Sonne, Lina (2010). Bridging the financing gap for pro-poor innovation: Towards a framework. UNU-MERIT.

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  • Author Sonne, Lina
    Title Bridging the financing gap for pro-poor innovation: Towards a framework
    Publication Date 2010
    Publisher UNU-MERIT
    Abstract In many developing countries, pro-poor entrepreneurship and innovation is facing a financing gap. Such innovation suffers from a lack of finance especially from the mainstream (or core) of the financial system. Instead, the little support that exists comes from alternative sources at the periphery of the financial system. This substantial gap in finance for rural PEBI, which remains unexplored, is the focus of this paper. To start, a number of barriers to access to finance are considered, from which a conceptual framework is constructed. The framework considers the financial system as made up of a core (the banks) and a periphery, where the way knowledge flows within the system, the type of knowledge that can be accessed and accumulated, and the kind of relationships that exists matter. It is suggested that at the core, path dependence and institutional lock-in together with a closed network of similar knowledge types and a dependence on collateral rather than relationships, result in a rigid and a closed system. The periphery organisations are better able to obtain and act on new knowledge (and provide finance) for a number of reasons which form the basis for a set of insufficient but necessary (INUS) condition. Accordingly, the organisations may posit the following characteristics: a dynamic and flexible approach to finance; a wide network of actors with varied knowledge; relationship focused; an emphasis on tacit knowledge, feedback loops and learning; ability to innovate close to users; and a systemic and integrated approach to finance.
    UNU Topics of Focus Entrepreneurship
    Keyword Pro-poor innovation
    Rural innovation
    Financing innovation
    Financing entrepreneurship
    JEL O16
    Copyright Holder UNU-MERIT
    Copyright Year 2010
    ISSN 1871-9872
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    Created: Wed, 11 Dec 2013, 16:48:39 JST