Microfinance & effectuation/causation thinking: evidence from Sri Lankan micro-entrepreneurs



Publication Details

Ranabahu, N., Barrett, M. & Moerman, L. (2016). Microfinance & effectuation/causation thinking: evidence from Sri Lankan micro-entrepreneurs. 29th Annual SEAANZ Conference Papers Small Business Association of Australia and New Zealand.

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29th Annual SEAANZ Conference Papers


This paper reports on a study of effectuation/causation thinking among micro-entrepreneurs, that is, entrepreneurs who borrow from microfinance (MF) institutions, and the effects of such borrowing on their entrepreneurial thinking. Analysis of data gathered using survey, interview, discussion and observational techniques revealed that overall, and whether or not a loan had been used to start the business, entrepreneurs used effectuation (mean-driven) rather than causation (predictive) thinking, and clearly preferred effectuation in venture start-up. However, when entrepreneurs had used an MF loan to start their business, there was no significant difference in entrepreneurs' use of effectuation and causation thinking. This may be due, at least in part, to the structured processes and pre-planning required by the lending institution. The paper recommends MF institutions seek to complement entrepreneurs' existing means in loan decisions and training programs, offer coaching and mentoring programs in financial management, and enhance entrepreneurs' peer learning through microfinance groups.

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