Work-family conflict and microfinance diversion

Research Summary Microfinance funds are often diverted to non-business usage, which defeats the purpose of microfinancing. Our study adopts boundary theory along with role commitment to investigate how microfinance recipients' integration of work-family roles affects microfinance diversion. We also examine the impact of family involvement and socially imposed gender role differences in microfinance diversion. We analyze data from an 11-wave survey in which grants were provided to microenterprise owners in Sri Lanka. Our findings indicate that work-family role integration and lower owner role commitment engender more microfinance diversion. In addition, family involvement weakens the effect of role commitment on microfinance diversion while gender influences microfinance diversion, depending on the nature of the duties within the family role. Managerial Summary Why would microfinance recipients divert funds from investing in their own business when such a diversion would make it more difficult for them to escape poverty? Using data from surveys in Sri Lanka, we find that in order to prevent microfinance diversion, it is important for microenterprise owners to draw a clear boundary between their work and family roles, while also being committed to their role as a microenterprise owners. In addition, owners should be cautious about involving family members in their businesses. We also find that patriarchal values for gender roles in the society may impact microfinance diversion. Specifically, compared to men, women entrepreneurs who feel more of a burden from household chores and childcare roles tend to divert more funds.