Microcredit as a strategy for employment creation: A systematic review of literature

Abstract National governments and their development partners have considered microcredit as a strategic tool for vulnerable populations. Easy access to finance increases the client’s ability to invest and allows clients to use resources to change their behaviour, increase their business opportunities and create employment. This paper aims to review studies that focused on microcredit and employment issues affecting beneficiaries, including gender-based employment creation and the informal sector. Through a systematic search of electronic databases and keywords to identify relevant studies, 40 core articles are identified for the period 1998–2021. The results indicate the significant impacts of microcredit on women’s employment creation and business revenue of microenterprises in the informal sector. Moreover, a few studies set out to integrate gender employment creation and the informal sector with reference to microcredit. A framework is proposed to address the relationship between employment structure and microcredit. Finally, this study recommends developing a financial social accounting matrix and run empirical analysis on macro modelling such as input-output or general equilibrium modelling. Doing so will help obtain better understanding of how microcredit participation is associated with employment creation in different sectors and different types of household groups.


PUBLIC INTEREST STATEMENT
This study aims to systematically review studies that focused on the issue of microcredit and employment creation. Microcredit significantly contributed to reduce poverty, and easy access to finance increases the client's ability to invest and allows clients to use resources to create employment, especially for women and in the informal sector. However, this finding is not same for every country and sector. Therefore, more macro modelling study is required to understand the overall picture. The findings of the study will help policymakers, including the microcredit authorities, NGOs, government and local and international actors to facilitate the development of microfinance.

Introduction
Governments have always focused on creating a favourable environment for the private sector to play a leading role in economic growth and employment generation. Microcredit schemes are the one of the important mechanisms of economic and business development for marginal groups, especially women, according to social capital theory. Microcredit programs mainly encourage women to participate in the labour market and help to absorb female informal employment. Thus, offering financial services such as microcredit to a low-income household without a bank account can create new job opportunities, enable the poor to manage their limited financial resources in a rational way and reduce unemployment (East and Southern Africa Banking Supervisors Group (ESAF), 2004; Javed et al., 2006;Latif et al., 2011;Stanila et al., 2014). Various studies have increasingly acknowledged the effectiveness of microcredit programmes in enhancing poor people's well-being by increasing income, production and positively benefiting the economy, adding value, productivity and business development (Al-Mamun & Mazumder, 2015;Thanh et al., 2019).
Furthermore, numerous studies stated that microcredit significantly contributes to poverty reduction by providing credit to vulnerable people (Chowdhury et al., 2005;Roodman & Morduch, 2014). (Pomi, 2019;Shirazi & Khan, 2009). However, very little research has investigated the relationship between microcredit and the structure of gender-related employment associated with different economic sectors and types of skills. The employment structure helps to understand the nature of a country's fragmented labour market in which the formal and informal sectors coexist and to identify the sector's contribution to employment (Chowdhury, 2009a;Fapohunda, 2012). Existing published systematic review studies exploring the microcredit impact have focused on health and poverty issues (Arrivillaga & Salcedo, 2014;Awojobi, 2019;Gupta & Sharma, 2021;Kennedy et al., 2014;Mohamed & Fauziyyah, 2020). There is growing evidence that microcredit is an effective approach for creating employment and growing businesses, and improving the productive capacity of a beneficiary (Al- Mamun et al., 2010;Pathak & Gyawali, 2010;. A significant gap remains in our understanding on how microcredit is associated with employment creation. However, because it has received less attention, it is more significant to conduct research on the impact of microcredit on the structure of employment which includes employment, gender and informal employment to help policy-makers, including the microcredit authorities, NGOs, government and local and international actors. This helps to facilitate the development of the microfinance sector by identifying the factors that influence the accessibility of microcredit, analysing the information and recommending possible solutions.
The purpose of this research, therefore, is to analyse the findings of published literature on microcredit and employment issues mainly affecting gender and the informal sector by applying a systematic literature review. Moreover, based on the findings from the literature this study proposes a framework on the issue to fill the knowledge gaps, in order to create evidence to support decisions in research and practice.

Methods
The study uses an integrative concept-centric technique that depend on the analysis of current literature and deductive logical reasoning to produce a new complete scientific understanding about a topic (Tadele et al., 2022).

Main search strategy-peer-reviewed literature
We begin the search process by checking the following electronic databases related to microcredit and employment creation: Science Direct, Scopus, IEEE, JSTOR and Web of Science. The search function in each database has been used for in-depth research on articles related to microcredit and employment creation, gender employment, and informal employment. The following search strategy was used: ("microcredit" OR "microfinance") AND ("employment" OR "job creation") AND ("gender" OR "male" OR "female") AND ("informal sector") within each database. The keywords used in the search are selected based on our preliminary review of the relevant literature and our understanding of the terms used in microfinance that vary from publication to publication.

Criteria for selection the sample studies
The initial search results were then checked to see if they met the inclusion criteria. However, working papers are excluded and we only included the peer-reviewed publications for review. Information was put onto an Excel spreadsheet. Full-text articles were then examined and met the eligibility for analysis.

Final inclusion criteria-and study quality assessment
Full-text articles that met the initial inclusion criteria were then assessed for quality and added to the data extraction form before included in the analysis to reduce any risk of bias.

Data extraction
Papers identified as eligible for analysis were read and key information extracted, data extraction form was used to extract important information. These include author, title, country, research design, data collection, and key findings.
The study was conducted in July 2021 and all publications since 1998 were checked. A preliminary search found 215 articles, including duplicate ones throughout databases. A total of 45 duplicates article were detached, and titles of articles were reviewed to confirm they met the criteria of inclusion or exclusion. In total, 70 research articles were chosen for review, with 40 finally meeting the final inclusion measures. A total of 30 articles that did not assess the microcredit impacts on employment creation or gender-related employment or the informal sector and not a formally published study (e.g., Working paper), were not included. The last set of articles (N = 40) are assembled on the subject of employment creation and synthesis according to six key components: author, title, country, research design, data collection, and key findings. The search strategy is detailed in figure 1.  quantitative research evaluating the impact of microcredit and employment creation (Alnaa, 2017;Atiase et al., 2019;Awan & Ibrahim, 2015;Datta & Sahu, 2021a;Khandker et al., 1998;Ncanywa & Getye, 2016;Ruslan et al., 2020;. Four reviewed studies presented results from mixed methods that evaluate the role of microfinance in employment generation (Augsburg et al., 2015;Banu et al., 2021;Pathak & Gyawali, 2010;Singh et al., 2021). Another study conducted in Algeria used a quasi-experimental assessment (Nacera & Djamila, 2017). Two of the reviewed studies presented results based on qualitative methods (Banerjee & Jackson, 2017;Shaw, 2004).

Microcredit and employment creation
The seven quantitative studies reviewed stated the positive impact of microcredit on employment creation. For example, Atiase et al. (2019) found that microcredit has a positive impact on employment creation among SMEs in Ghana. The South African study found that microcredit is negatively correlated with unemployment, and it is an effective device for economic development (Ncanywa & Getye, 2016). They also recommend the policymakers to continue to implement measures of this policy given its positive contribution to GDP. Awan and Ibrahim (2015) and Khandker et al. (1998) demonstrated the positive effect of microcredit on self-employment. Correspondingly, Alnaa (2017) stated that accessing to credit has a 46% probability of employment creation.  confirmed that microcredit has the potential to generate employment. Datta and Sahu (2021a) show that employment generation has a positive association with micro ventures in rural areas of India.
On the other hand, one quantitative study showed no impact of microcredit assessment on employment in Small and Medium Enterprises (SMEs; Ruslan et al., 2020). Pathak and Gyawali (2010) provided insights on the microfinance program initiated by Paschimanchal Grameen Bikash Bank (PGBB); they revealed the effective role of PGBB's micro-finance program in establishing and starting micro-enterprises in rural areas. Singh et al. (2021) stated that micro-credit usage patterns are positively associated with economic activities. Banu et al. (2021) stated the positive significant effect of microfinance on the average income of participants. Augsburg et al. (2015) show evidence of higher self-employment, while the quasi-experimental assessment by Nacera and Djamila (2017) showed the effective role of the ANSEJ system on micro-enterprises during 1999-2013 in Algeria. Results from qualitative studies find that microfinance led to increasing levels of indebtedness in rural areas and to aggravate poverty instead of creating employment for the majority of borrowers (Banerjee & Jackson, 2017;Shaw, 2004).

Microcredit and gender-based employment creation
The 18 articles addressing microcredit and gender employment creation are listed in Table 2 Datta, & Sahu, 2021b;Li et al., 2011;Maity & Sahu, 2020;Mazumder et al., 2017;Mustafa et al., 2020;Nessa et al., 2012;Salgado & Aires, 2018). Out of 12 articles, 9 present results from quantitative studies which confirmed that participation in the microcredit program is consistently important and can improve women's lives, empowerment, and monthly income (Al-Shami et al., 2018;Arouri & Cuong, 2020;Corsi & De Angelis, 2017;Datta & Sahu, 2021b;Li et al., 2011;Mustafa et al., 2020;Nessa et al., 2012;Salgado & Aires, 2016). On the other hand, Mazumder et al. (2017) found that the gender of entrepreneurs has a significant impact on obtaining credit, where male respondents were more favoured in terms of obtaining formal credit. Maity and Sahu (2020) show that women entrepreneurs are facing challenges of financing and non-cooperation from their family members. Chowdhury (2009b) found that Grameen Bank helped the husbands of female members to start micro-enterprises, increase the capital of their micro-enterprises and generate their own employment. On the other hand, one qualitative study showed that women who received the loans increased their income significantly (Panjaitan-Drioadisuryo & Cloud, 1999). Findings from mixed analyses produced different results, while several studies (Al- Mamun et al., 2014;Torri & Martinez, 2014) indicated that microcredit helps to start up income-generating activities and lead to substantial women's empowerment, productive competence, leadership skills and learning abilities. However, Wahidi (2017) and Bahta et al. (2017) showed that although loan repayment rates among women are higher than men, non-governmental organisations and microfinance institutions provide more loans to men than women, indicating that the financial system is still dominated by men so women are less likely to obtain microcredit because of higher barriers such as: low education level; low participation in the formal market economy and having to undertake traditional roles such as household/family activities. Meanwhile, Naeem and Rehman (2016) applying a crosssectional experimental design, showed that male clients use microfinance services more effectively than female customers.  Findings showed that Grameen Bank helped husbands of women members but did not support women's self-employment.

Indonesia
Qualitative method Data was collected by interviewing 121 randomly selected women who had received loans at least one year before the interview and 94 lowincome women who lived in the same village but had not yet received the loans. These women formed a control group.
The incomes of women who received loans increased significantly, the nutritional status of their families improved, and the loans were repaid.

Microcredit and informal employment
The seven articles addressing microcredit and informal employment are comprised in Table 3. The countries included in the table are India (N = 2), Madagascar, Bangladesh (N = 2), Kenya, and Ghana. The three articles used a quantitative research approaches (Gubert & Roubaud, 2011;Isaac, 2017;Shahnaz et al., 2018). Four studies used a mixed method (Svensson, 2021;Sahai et al., 2020;Zafarullah & Nawaz, 2019;Kamath & Ramanathan, 2015). Generally, results showed a significant impact of microcredit on informal employment. Gubert and Roubaud (2011) analysed the impact of microfinance loans on small informal businesses in Madagascar. Over time, the authors compared the situation of a representative sample of client firms to a control group. The results indicated a positive impact of the project in which client's companies performed better than companies without funding. Isaac (2017) provides evidence that microfinance has a statistically significant impact on informal sector business revenue in Ghana. Shahnaz (2018) stated that the constraints in the absorptive capacity of the rural labour sector led to the creation of an informal rural sector and as much as 89% of the total number of jobs in the labour market. Using an analytical exercise, they found that microfinance can effectively help reduce informal employment. Hence, Bangladesh can use its large microfinance operations to achieve poverty reduction goals, leading to greater economic development. Svensson (2021) finds that women participating in microfinance grew their business earnings in the informal economy. Zafarullah and Nawaz (2019) stated a gradual increase in female participation in the workforce where microfinance provide informal employment to unemployed women in rural areas. Meanwhile, Kamath and Ramanathan (2015) generated a description of informal activities involving the sale of vessels and other products in India. They have shown that the microfinance loan is not suited to their business' cash flow. In addition, they reported that informal activities were characterised by seasonality and volatility resulting from the contextual and socio-demographic circumstances of families. Sahai et al. (2020) find that determinants such as market location, value chain, gender of the entrepreneur, investment, cluster, and entrepreneurship of the entrepreneur explain the lack of impact of microcredit and the growth of informal sector microenterprises.

Framework for microcredit leading employment creation
Analysing the literature on microcredit and employment creation, gender-related employment and informal employment have generated different results concerning the relationship between the variables studied. However, the intensification of interest in investigating how microcredit is associated and integrated with different structures of employment is very important in this research. After conducting a deeper analysis of previous studies as a means of clarifying and elaborating the elements of the framework, this paper suggests a framework in order to evaluate the impact of microcredit on employment structure. figure 2 shows that the introduction of microcredit through its institutions to various sectors of the economy will lead to increased sales of goods and services. Moreover, it increases the volume of factors involved in production, mainly labour and create employment categorised by different types of skills, gender, formal and informal employment.

Discussion
After a systematic review of the literature, important findings and conclusions were drawn. The results of this review show that microcredit can have a positive impact on employment creation, gender employment and the informal sector. A majority of those articles have focused on gender employment creation. However, despite the rise of the informal sector in developing countries, a few studies have assessed the impact of microcredit participation on different business sectors in that sector (Gubert & Roubaud, 2011;Isaac, 2017;Kamath & Ramanathan, 2015;Shahnaz et al., 2018;Svensson, 2021;Sahai et al., 2020;Zafarullah & Nawaz, 2019). Moreover, a few studies set out to integrate gender employment creation and informal sector related to microcredit. Research on microcredit needs to be expanded to understand employment creation in various industries and different types of households. The articles discussed are concentrated in different locations, most of which are in Asia (n = 27) and Africa (n = 11). This study found that Asia has the largest volume of MFI activities. The implementation of microfinance schemes provides effective results in terms of employment generating and poverty reduction in most countries. Despite Africa having the poorest economies, internecine conflicts, etc., the continent has seen an increase in microfinance services in recent years. Results from African studies indicate a positive impact of microcredit schemes (Arouri & Cuong, 2020;Isaac, 2017). However, financial services still need to be improved in order to increase the expansion of microfinance activities. One study from Brazil has documented the positive impact of microcredit (Salgado & Aires, 2018) whereas one study from Europe shows evidence of better performing loans extended to nonmarginal clients of the MFI in Bosnia and Herzegovina (Augsburg et al., 2015).
According to Srivastava (2010) microfinance performance in developed and developing countries is associated with socioeconomic and political differences. The author concluded that the U.S. microfinance sector does not provide a conducive environment for asset building among its poor and the different laws and levels of competition have hampered the growth of microenterprises, whereas microenterprises in Bangladesh can flourish in an informal market where losses are small and paying tax on informal businesses is not legally mandatory. In developing countries, microcredit helps poor people to better manage financial resources and to protect themselves. In high-income countries, microcredit is designed to correct the failure of the labour market and serves as a measure for social integration (Balkenhol, 2018). Developing countries has successfully achieved good microcredit results in mitigating poverty, create employment and attain what the social theory states. However, the impact in high-income countries is still in its infancy and give priority to financial performance of MFIs rather than social performance.
In terms of urban and rural areas, most studies showed the significant impact of microcredit on employment, average income of participants in rural, semi urban and urban areas (Al- Mamun et al., 2014;Banu et al., 2021;Datta & Sahu, 2021b;Shaw, 2004;Singh et al., 2021). However, the study by Banerjee and Jackson (2017) indicated that the distribution and use of microfinance in rural sites served to exacerbate poverty and increase vulnerabilities rather than create empowerment for the majority of borrowers. Most articles addressing microcredit and employment found a positive relationship between microcredit and employment creation. They suggested that the government continue to implement the microcredit program given its positive contribution to economic growth, adding value, productivity and business development. Other studies found microcredit had no effect on employment such as the study by Ruslan et al. (2020) which found microcredit has no effect on Small and Medium Enterprises' employment statistics. Regarding the relationship between microcredit and gender employment, the results reveal that microcredit has had a more positive impact on  women entrepreneurs as they play a vital role in the economic growth of families and communities. Akram and Hussain (2011) found that higher percentages of female clients as compared to male clients revealed a positive impact of microfinance on their business's performance.
Microcredit program empowers women economically, socially and politically and changes the client's life standards through the creation of employment. This is the theory of change on the access to microcredit and its positive impact (Awojobi, 2019;Datar et al., 2008). In addition to the change occurred in the beneficiary better social relationships are created. This last point is supported by social capital theory which asserts that social relationships can improve the ability to raise incomes and employment (Coleman, 1990). Since the mid-1980s, women entrepreneurs have received more attention and assistance from governments, international donors and NGOs. Microenterprises were of particular advantage to women because of their flexibility and location. Supporting their entrepreneurship is seen to have important effects on the broader reduction of poverty and gender inequalities (Mayoux, 1995).
Although the significant impact of microcredit on women's employment and income generation is noted in the majority of studies Al-Mamun et al., 2014;Al-Shami et al., 2018;Arouri & Cuong, 2020;Corsi & De Angelis, 2017;Hassan et al., 2015;Kamaluddin et al., 2015;Li et al., 2011;Mustafa et al., 2020;Nessa et al., 2012;Salgado & Aires, 2018;Torri & Martinez, 2014), women still suffer from social differences and the gender gap in access to credit (Mazumder et al., 2017). With the growing role of micro-entrepreneurs, women still need to get rid of different obstacles and constraints they face in order for this strategy to succeed, including discrimination in ownership, lack of access to productive resources, lack of skills due to low levels of formal education, inability to access work due to gender and segregation hierarchy criteria, and lack of access to profitable markets (ILO, 1998;Kamaluddin et al., 2018). Moreover, this review stated the significant impact of microcredit on the business revenue and performance of microenterprises when it comes to informal employment.
In this review, we recommend the use of innovative research methods, such as financial social accounting matrix-based analysis (FSAM), and input-output model (Harun et al., 2018;Hassan et al., 2014), which are essential for understanding how microcredit participation is associated with employment creation (Alam & Molla, 2012;Molla et al., 2008). FSAM is a very comprehensive and complete system that offers the advantage of integrating financial instruments and institutions into the social accounting matrix (SAM) and taking over the national account of different economic agents providing information on cash flows. Using this method will aid in investigating the direct and indirect impact of microcredit on employment creation in different sectors and different types of household groups (Alam & Molla, 2012;Tria et al., 2020). This review study only considered published peer-reviewed articles, and there is possibility of many other related and appropriate work in the literature. In addition, due to the search terms and databases used, we may have overlooked important articles. However, this review does indicate that there is an enormous gap in knowledge that needs to be filled regarding the relationships between microcredit and employment variables.

Conclusion
The major contribution of this study is finding the link between microcredit and employment creation through a systematic review. This systematic review showed that by following the social capital theory, microcredit has the potential to create employment, especially for women and through the informal sector. This study develops a framework that explains the contribution of microcredit to employment creation. Introducing microcredit through the institutions of microcredit to various economic sectors will lead to increased sales of goods and services, and increase the volume of factors of production, mainly labour and different types of skills, gender, formal and informal employment. This study also found there is still good scope available for utilising microcredit as a tool for accelerating job expansion in the informal sector. At the same time, other factors are required for employment generation. Enhanced skills-training and management skills for borrowers is very essential for better outcomes. Moreover, providing basic education to women will increase their ability to manage credit. Policymakers should emphasise building awareness and promoting financial literacy for microfinance clients to enhance the empowerment of marginal groups, especially women.
However, further studies are needed in this area given its important contribution to the growth of the economy and to the challenge on how to support and formalise informally created jobs. Moreover, empirical analyses are needed to understand the impact of microcredit on the structure of employment in different economic sectors, especially in order to integrate the variables mentioned in our framework to assess whether microcredit policy can affect the labour force profile, generate equal employment opportunities, create jobs for skill and unskilled labour, and create formal or informal employment. These empirical efforts might offer better information on the productive utilisation of credit based on different types and modes of microcredit programs. To conduct these empirical study based on macro modelling such as input-output or general equilibrium modelling, this study recommends developing a financial social accounting matrix.