The Role of Microloan on Women’s Entrepreneurship Development

The Role of Microloan on Women’s Entrepreneurship Development

Mohamad Hanif Baharudin, Nur Hazelen Mat Rusok, Mohammad Ikram Ramzi, Siti Aswani Mohd Ghazali, Mohamad Sayuti Salleh, Ahmad Mudzfir Zubir, Putra Faizurrahman Zahid

Faculty of Business and Management, Universiti Teknologi Mara, Kelantan, Malaysia

DOI: https://dx.doi.org/10.47772/IJRISS.2025.906000245

Received: 24 May 2025; Revised: 05 June 2025; Accepted: 09 June 2025; Published: 09 July 2025

ABSTRACT

The Malaysian government has outlined the accelerating growth of women entrepreneurs, both in acumen and number, as their number one priority. They have also highlighted concerns for the survival and long-term sustainability of the women’s businesses, especially as such active encouragement is in view of women entrepreneurship as a potent solution for accelerated economic growth. As of present, women entrepreneur’s involvement has increased, but their success and excellence are largely underdeveloped and can be improved further. This researched displayed the need for a bridge and assistance that will improve the viability and success of women entrepreneurs. Such bridging may be translated into a kind of support, such as microloan to become successful entrepreneurs. Thus, this study is aiming to examine the role of microloan aligning with women business success. A total of 392 women entrepreneurs under the Amanah Ikhtiar Malaysia (AIM) scheme from Kelantan will be involve in this study. Structural Equation Modeling (SEM) will be employed as the main statistical technique in this study. Lastly, this study will contribute towards the development of literature review related to the favorable outcome for women entrepreneurs.

Keyword: Microloan, Business success and Women entrepreneurs.

INTRODUCTION

As per the 10^th and 11^th Malaysia Plan (Rancangan Malaysia Ke-10 and 11), the government has outlined their focus for women empowerment for the purpose of improved economic contribution via entrepreneurship. This can be reflected by the projected rapid growth of the number of women entrepreneurs becoming involved and succeeding in their respective businesses. In the 10^th Malaysia Plan, efforts to improve entrepreneur’s confidence, skills, training have been undertaken by introducing special assistance schemes so as to spur women to triumph past challenging circumstances and engage in entrepreneurial activities. As of present, women entrepreneur’s involvement has increased, but their success and excellence are largely underdeveloped and can be improved further (Women Entrepreneurs Network Association (WENA), 2012). According to the 2015 Female Entrepreneur Index report, its analysis on conditions fostering high potential for female entrepreneurship in 77 countries has reported “61% of the countries have scored less than 50%. The Institute of Strategic and International Studies (ISIS) Malaysia has revealed that their study in 2014 has displayed the need for a bridge and assistance that will improve the viability and success of women entrepreneurs. Such bridging may be translated into a kind of support, such as financial assistance for working capital. Hence, this study is focusing on financial assistance like microloan influencing women entrepreneur business success.

LITERATURE REVIEW

Defining the concept of Business Success

Measurement of entrepreneurial success by Rhodes and Butler (2004) has recommended the financial approach, using elements of income, profit, return on asset, return on investment and asset owned. Other researchers have also studied the topic further according to each elements, specifically income (Haber & Reichel, 2005), profit (Orser, Hogarth-Scott, & Riding, 2000), return on asset (Masuo, Fong, Yanagida, & Cabal, 2001), asset owned (Norma & Jarita, 2010), return on investment (Gadenne, 1998), and more.

However, Kutsuna (2002) has concluded that labeling success according to financial criteria as a conventional assessment. Such observation has been supplemented further by Garengo, Biazzo, and Bititci’s (2005) findings highlighting difficulties of obtaining specific information regarding financial performance. Furthermore, Zinger, LeBrasseur, and Zanibbi (2001) has discussed the element further, stating that such situation may be due to improper financial record keeping, and the confidential nature of the information.

As per Chandler and Hanks (1993), measuring organizational performance and success using the approach utilizes information on net profit, sales growth, return on asset, share prize and return on investment. Such indicators can be obtained from financial market information and financial report (Richard, Devinney, Yip, & Johnson, 2009), but such data are limited in actual practice due to most being private and rarely available for research purposes. Besides, entrepreneurs often manipulate the data and avoid revealing them for tax purposes (Dijkhuizen, Gorgievski, van Veldhoven, & Schalk, 2015).

Therefore, Murphy, Trailer, and Hill (1996) have concluded for further studies proposing elements of subjective approach (i.e. non-financial approach) to measure success are required. Such suggestion has been extended by subsequent works by many researchers (Dafna, 2008; Harada, 2003; Masuo et al., 2001; McClelland, Swail, Bell, & Ibbotson, 2005). Swinney, Runyan, and Huddleston (2006) in particular have described the wider scope of non-financial approach to measure success; entrepreneurs of micro-sized businesses may be pleased of their performance despite recording less sales or profits than larger businesses. Furthermore, a “psychological approach” to firm success is also of importance towards entrepreneurs’ motivation and aspirations (Dijkhuizen et al., 2015; Gorgievski et al., 2011). It is based on the assumption that achieving valued outcomes like individual satisfaction, work-family balance, work enjoyment and autonomy are factors associated with success. Such assessment can be described using success criteria, subsequent subjective assessment and satisfaction with the realization of subjective goals (Kuratko et al., 1997; Orser & Dyke, 2009).

Microloan

An entrepreneur may start his business using personal savings or opt to borrow either from family and friends or from microfinance institutions. It does not negate the need for more funds as working capital to finance the operations, especially when it grows or is being expanded. Such scenario usually calls for microcredit from microfinance institutions, whereby micro loan itself is a term coined in 1970 when it has been introduced in the Grameen Bank.

Nowadays, micro loans are a popular option in formal and informal institutions both, which includes commercial banks, non-government organization credit and pawn shops. The microcredit will benefit the entrepreneurs and the country concomitantly. Al-Shami, Izaidin, Nurulizwa, and Mohd Syaiful Rizal (2014) have described microcredit as the primary service offered by microfinance institutions, which allows entrepreneurs some extra assistance in running their business. Similarly, Asiama and Osei (2007) have also referred to it as the provision of cash (loan) in a smaller amount compared to micro loan to small entrepreneurs, which are meant for the improvement of their business operations.

Provision of microcredit has been projected to be a helpful factor for developing countries in their efforts to alleviate poverty and increase household income. Professor Mohamed Yunus in particular has stated that its main objective is regarding its goal to serve for the low-income people and reduce poverty. Furthermore, the credit (loan) granted is according to social collateral, which is an opportunity for those with low income to be involved in the economic market and expand their business.

Microloan and the success of women entrepreneurs

The theory of microcredit according to Al-Shami et al. (2014) is referring to the small amount of loan given to low income people, specifically women, to generate income through entrepreneurship. Its significance can be interpreted from different perspectives; in terms of people empowerment, it empowers the “weak” through enabling them to generate their own income and work. Haile, Bock, and Folmer (2012) have also commented that for Ethiopian women entrepreneurs, credit allows them to hone their decision-making capabilities and generate income. Another aspect of microcredit importance is regarding sustainability of life as it enhances the wellbeing of the poor and alleviates poverty. Garikipati (2008) and Nader (2008) have indicated respectively that micro “credit” allows those with low income to improve the quality of their lives, gain assets, enhance children’s education and maintain good health condition. Meanwhile, Al-Shami et al. (2014) has studied the effect of microcredit in Malaysia and revealed that it will enhance an entrepreneur’s income, increase their assets and improve their quality of life.

Moreover, micro loan is a tool that enhances economic growth by promoting start-up businesses, which will subsequently create job opportunities and alleviate poverty. As per Al Mamun et al. (2012), Ahmad (2012) and Burjorjee and Jennings (2008), microcredit is essential for business growth and has a significant effect (positive) on women entrepreneurs by stimulating new business formation and alleviating poverty. Although there are different opinions regarding the topic, its role remains the same: providing microcredit for women entrepreneurs especially, who run their own small businesses (Al-Shami et al., 2014).

Nowadays, researchers and scholars from various disciplines have acknowledged the importance of microcredit towards people’ performance, which includes pay back flexibility (e.g. loan size, interest charge). According to Al-Shami et al. (2014), pay back loan policy are important to financial and non-financial institutions as those with loan income are feared to lack the ability to manage their loans, subsequently posing high risks. Maniruzzaman, Rutherford, Sinha, and Acnabin (2003) have further emphasized that repayment flexibility and rescheduled loan pay back have been considered in the Grameen Bank model so as to solve borrower’s inability to pay back loan and ease the process of getting one. This is evidenced from Yeboah (2010), who has indicated that role of loan flexibility is significantly affecting individual’s well-being and businesses success.

Furthermore, Field, Pande, Papp, and Park (2012) have stated that in India, loan flexibility is important to encourage potential entrepreneurs (i.e. microfinance clients) of generating profitable loans and reduce financial distress. The effect of small credit in a borrower’s household and their SME is reliant upon the amount and size of loan granted at a given period. Al-Shami et al. (2014) and Hamdan and Hussin (2012) have declared that in Malaysian microfinance institutions, credit (loan) size, usage and amount are the key dimensions influencing their clients’ income. Furthermore, Al Mamun et al. (2012) has proposed that AIM allocate various products and services, like expanding the size of group loan, fixed asset loan, working capital loan, seasonal agricultural loan, emergency loan and others. Simeyo, Martin, Nyamao, Patrick, and Odondo (2011) have also emphasized that a bigger size of loan results in increased performance of youth entrepreneurs in Kenya. Additionally, Godquin (2004) has concluded that according to Bangladeshi microfinance institutions, increasing the size.

Conceptual framework

In this study, the conceptual framework has been devised according to the role of microloan and business success among women entrepreneurs.

DISCUSSIONS AND CONCLUSIONS

Nowadays, increased emphasis has been placed on the critical role of women entrepreneurs and its impact on SMEs and national well-being. Malaysian Government’s objective of wanting to see a rapid growth in the number of women entrepreneurs is a high priority, the long term sustainability and survival aspects of the newly created business ventures are also important. Malaysian government actively promotes women’s entrepreneurship as an effective instrument for accelerating economic growth. The Malaysian government also understands and at the same time recognizes that the role of woman entrepreneurs reflects Malaysia’s economic dynamism.

In general, the relevance of microloan is vital role in helping women entrepreneurs to become success. Nowadays, micro loans are a popular option in both formal and informal institutions, which includes commercial banks, non-government organization credit and pawn shops. The microcredit will benefit the entrepreneurs and the country concomitantly.

For future research, the present study should also be viewed for any research limitation for example utilizing only women entrepreneurs as the sample has limited the generalizability of this finding to other entrepreneurial populations. Therefore, further work is required to consider a bigger and more general entrepreneurial population, such as youth, men, and more.

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