Public Equity Capitalization of Microfinance Institutions

In this study, investor decision theory was used as the basis for a survey that demonstrates the barriers faced by those promoting microfinance institutions and public capital markets as the mechanism for implementing grassroots development theory. Grassroots development theory promotes entrepreneurship across the base of a developing country''s population by encouraging capital infusion at the local instead of national or industry level and promoting local ownership and local capital building. A common method for implementing grassroots theory in developing countries is through microfinance institutions. Investor decision theory, supported by the data from this study, raises concerns over the validity of grassroots development theory as a valid tool for economic growth in developing countries. While individual MFIs have encouraging performance, the aggregate of MFI loans globally are too small to measurably impact developing nations'' economies. Thus, for grassroots development theories to be implemented successfully, there needs to be an expansion of MFIs'' capitalization structure. Publicly traded mutual funds offer a method to access this capital.