Small Groups as Context for Institutional Entrepreneurship: An Exploration of the Emergence of Commercial Microfinance in Bolivia

Data collected

The author conducted more than 70 interviews, including interviews with all central firsthand participants, during several visits to Bolivia between 1997 and 1999 (list available upon request). Following grounded theory (Strauss & Corbin, 1998), interviewees included not only individuals who championed the new commercial microfinance archetype (Greenwood & Hinings, 1993), but also those who supported and resisted it, and even individuals who remained on the sidelines. All the critical participants were interviewed. The open-ended interviews averaged one-and-one-half hours and followed a protocol of questions that evolved with the research project (Strauss & Corbin, 1998). Questions that persisted throughout the interview process included the following: Where did the original idea originate? How and when did you become personally involved in the project or initiative? How, when, and why did other people become involved? All but a handful of interviews conducted in public spaces where sound quality was too poor were tape-recorded and transcribed.

In addition, because the emergence of commercial microfinance in Bolivia had attracted the attention of development scholars, the research also benefited from rich archival material that facilitated triangulation and enabled the author to complement field data with case studies written before, during, and following the fieldwork. The study thus benefited from a historically informed understanding (DiMaggio, 1991; Rao, 1998; Schneiberg & Clemens, 2006) of the individuals and organizations that launched the first commercial microfinance organizations. Among the documents collected were (1) case studies about microfinance in Bolivia (see, e.g., Christen, 1985; Fidler, 1998; Frankiewicz, 2001; Gloser, 1994; Gonzales & Rivas, 1999; Gonzalez-Vega et al., 1996; Ramirez, 1998; Rhyne, 2001), (2) reports generated and statistical information collected by banking regulatory agencies (e.g. the Superintendencia de Bancos y Entidades Financieras, or SBFI, and Bolivia’s central bank) and associations of organizations that lend to the poor (e.g. Asociación de Entidades Financieras Especializadas en Microfinanzas, or ASOFIN, and Asociación de Instituciones Financieras para el Desarrollo Rural, or FINRURAL), (3) technical reports published by donor organizations (e.g. Germany’s Gesellschaft für Technische Zusammenarbeit, or GTZ), and (4) other professional reports.

Analysis

Analysis began with a simple narrative (Eisenhardt & Bourgeois, 1988) summarizing the individual efforts that paved the way for the emergence of commercial microfinance. This was followed with a more in-depth exploration of individuals who founded and led organizations with features that went against the grain of the logics of the organizational archetypes (Greenwood & Hinings, 1993) dominant in the field of provision of services to support the economic activities of the poor. These engagements were identified as instances of institutional entrepreneurship when they met three conditions:

The value of applying these three criteria became clear in an iterative process of dialogue theory and data (Ragin, 1994). This process showed that adopting these criteria helped to identify multiple instances of institutional entrepreneurship and to match the empirical evidence of these instances with three factors which, while enmeshed in the practice (and thereby the data), have been identified in the literature as influencing individual engagement in analytically distinct and relevant ways, i.e. motivation to engage, opportunity for engagement, and resources to advance engagement (Aldrich & Fiol, 1994; Aldrich & Ruef, 2006; DiMaggio, 1988; Dorado, 2005).

The next two steps of the analysis involved an exploration of these three factors to identify patterns in the seven instances of institutional entrepreneurship identified using the above criteria. The exploration revealed the influence on individual engagement of factors identified in the literature, namely, macro-conditions such as events with hard-to-disregard outcomes, logic tensions, and field positioning, and micro-conditions such as access to skills and resources. It also identified the influence of meso-level conditions that had been previously considered subsidiary in our explorations of institutional entrepreneurship, namely, social dynamics, including interpersonal bonds and status competition, and a history of social interactions. These conditions are introduced next to facilitate reading of the empirical evidence and findings.

In institutional literature, interpersonal bonds have been equated with social capital and identified as relevant for individual involvement in institutional entrepreneurship considering their role in facilitating access to resources and support to advance these engagements (see, e.g., Aldrich & Fiol, 1994). The evidence suggested, however, that interpersonal bonds also can play a role in engagement by influencing people’s motivations to get involved. It showed that, as suggested in other bodies of research in organization theory (see, e.g., Korsgaard et al., 1995), individuals’ motivations to act are framed not only by their own interests but by those of others with whom the individuals have strong interpersonal bonds (Deutsch, 1949; Janis, 1982).

Status competition describes decision-making following individuals’ expectations on how their decisions will influence their social status (Weber, 1978). People derive status from material (e.g. a well-furnished home) and cultural or symbolic (e.g. familiarity with “high culture”) assets (see Bourdieu, 1990; Veblen, 1970; Weber, 1978) and are said to win or lose status depending on their relative access to these assets. The influence of status competition on individual involvement in institutional entrepreneurship has seldom been acknowledged in the institutional literature (see Battilana, 2006; Washington & Zajac, 2005, for noteworthy exceptions). Its influence, however, is well established in organization studies (see, e.g., Granovetter, 1978).

Finally, research on institutional entrepreneurship has discussed the influence of interactions on individual engagement (Hallett & Ventresca, 2006; Lawrence & Suddaby, 2006). Fundamentally, it has suggested that interactions can encourage engagement when they generate dissonance, thereby creating an opportunity for individual engagement in institutional thinking (Heclo, 2008). But as discussed earlier, this research still requires development to explain under what circumstances dissonance is likely to generate puzzlement and thereby engagement in institutional entrepreneurship, since individuals have a tendency to discard dissonance-generating events and information (Fiske & Taylor, 1991).

The next two sections introduce the case and present the exploration conducted.

Launching of BancoSol-NGO and subsequent launching of BancoSol

Bolivia’s urban poor had traditionally relied on loan sharks, pawnshops, and pasanaku ¹ brokers for their working-capital needs. This reliance began to diminish when Fernando Romero launched BancoSol-NGO in 1987. Considering the hard-to-disregard game-changing conditions (Greenwood & Suddaby, 2006) that Bolivia was undergoing at this time, the fact that NGOs began to provide loans to the poor at this time appears unsurprising. Between 1980 and 1985, Bolivia’s GNP fell by nearly 10%, and inflation reached a historical high of 24,000% (Jemio, 1999). At the time, Paz Estenssoro (1985–1989) was leading the country, and, under the advisement of the International Monetary Fund and the World Bank, his administration adopted drastic measures to deal with this unprecedented crisis. One measure was the closing or restructuring of state-owned companies, which was expected to result in sharp increases in unemployment. In this context, there was an urgent need for programs to support the economic activities of the poor, including facilitating their access to loans.

But whereas the launching of NGOs to provide loans to the poor was not surprising, it was surprising for any NGO to have someone with the profile of Fernando Romero as founder and for it to have most of the features which we now associate with microfinance – those listed earlier except the two last ones (financing of the lending portfolio with commercial sources and private ownership).

Fernando Romero possessed the ideal profile of an institutional entrepreneur (DiMaggio, 1988). “An eclectic and vigorous entrepreneur with an intellectual bent” (Rhyne, 2001, p. 63), he had the requisite social assets and political skills to champion this pioneering NGO. But, in the context of Bolivia, the involvement of any businessman in the NGO field, including Romero, was, to say the least, unusual. As Sanchéz de Lozada, former president of Bolivia, observed, “Bolivia has no Anglo-Saxon tradition of philanthropy. We’ve got confession to get us to heaven” (Rhyne, 2001, p. 64). Moreover, Romero had, at this time, little understanding of what microfinance was. He had no problem with the idea of BancoSol-NGO serving the urban street vendors, unaware of how this ran against the grain of the practices dominant in the field. But the motivation for his involvement was philanthropic and he was shocked when he realized that BancoSol-NGO was charging interest rates that were about three times those charged by regular financial institutions in Bolivia (around 45%). So why did he lead the founding of BancoSol-NGO? All interviewees, including Romero himself, answered this question by pointing out how he was convened (Dorado, 2005) to do so by Jack Duncan, the chairman of Acción International’s board, with whom he shared both a long history of interactions and a personal friendship. Recalled Romero:

I met with Duncan, who was the first person I worked for when I graduated from MIT, in WR Grace & Co., and Jack told me: “We are developing a small institution in Boston that is called Acción where we are putting together some money to give credit …” And I said, “Okay, send me one of your guys.” (interview, 24 April 1998)

Romero would participate as chairman of the board and help the organization leverage local resources, Acción International’s staff would provide the operational know-how, and a carefully selected NGO professional would run the organization. Fatefully, the professional hired for the job was Francisco (Pancho) Otero. In the next quote, Otero explains how he was hired for the job.

This period [the period he spent working with lending organizations in rural areas] lasted about 10 years, and it is when I learned a lot of things about providing loans to “excluded” people [those not being served by the local institutions]. Then, in the year ’86, is when Acción International approaches me to run […] at the same time my sister Maria joined the organization in Honduras […] she had gained their trust, and they said, “Your brother, what do you think?” and she said yes. (interview, 24 March 1998)

Under Otero’s leadership, BancoSol-NGO succeeded beyond anyone’s expectations. Regardless of the high interest rates it charged, “people would wait for hours, around the block, to get a loan” (interview with regional manager, 25 April 1998). By 1991, BancoSol-NGO had 22,700 loans outstanding, a portfolio of $4.6 million, and an absurdly low loan-repayment default rate of 0.0002% (see Frankiewicz, 2001, for a detailed review of PRODEM’s operations in these early years). Moreover, its client base was growing at a surprising 50% per year (Rhyne, 2001).

BancoSol-NGO’s uncanny success came as a surprise to all involved. Nobody had realized the pent-up demand for loans among Bolivia’s poor. The loans BancoSol-NGO was offering were indeed expensive, but poor borrowers had no access to regular bank loans. BancoSol-NGO’s loans, when compared with the informal sources accessible to poor borrowers (e.g. loan sharks, pawnshops), appeared reliable and even affordable. (The 45% interest rate charged by BancoSol was well below half that charged by the informal lenders serving the poor.) Romero, who owned a commercial bank, regarded BancoSol-NGO’s success with disbelief. He asked Otero to take him on a field visit to learn firsthand who these people were that were borrowing and repaying their loans; BancoSol-NGO’s repayment rates were close to 100%, a figure unheard of in the country, even among its most reputable financial institutions.

Interestingly, BancoSol-NGO’s uncanny success generated an unexpected problem: Donor funds, the conventional source of financing for NGOs, were woefully inadequate to fuel the organization’s fantastic rate of growth. BancoSol-NGO’s leadership had to revert to its members’ personal wealth just to keep up. Recalled one member of BancoSol-NGO’s management team:

I remember going personally to the banks I knew and asking them for loans. First I would ask them to use [BancoSol-NGO’s] loan portfolio as guarantee. But they would say no and ask for other assets, and I would propose someone’s jewelry, my father’s house. Pancho mortgaged his house; we all mortgaged things to get money […] what the donors were giving was just not enough. (interview, 23 April 1998)

BancoSol-NGO’s operational success, then, can be fairly described as a moment of dissonance (Festinger, 1957). Its success and the financing difficulties it generated created an opportunity for institutional thinking (Heclo, 2008). Interestingly, consistent with institutional theory insights (Meyer & Rowan, 1977), the group of individuals involved, namely Acción’s staff, Otero, and Romero, discussed and generated ideas which, while testing their boundaries, followed by and large the dominant financing logics.

Acción’s staff, within their role as NGO experts, suggested a system of loan guarantee letters that BancoSol-NGO could use to get loans from local banks. The source of the guarantee funds was the same – donations – and thus this solution did not break with the dominant donations-based model. Otero, the local NGO professional managing the organization, did not offer any specific solution. He did suggest, however, that it was “a big mistake” to try to alleviate BancoSol-NGO’s financing problems with guarantee letters or any other instrument dependent on donors: “Every year we have to go out with the hat to get money to finance [our] growth” (interview, 24 April 1998). He talked “to anyone willing to listen” (interview, 23 April 1998) about the need to grow BancoSol-NGO so that it could “masificar” microfinance, i.e. extend access to all.

Romero shared Otero’s dislike for the need to “pass the hat” to get donor financing, a painful reminder of Bolivia’s dependency on the whim of donors. But at this point in time he was rather disengaged from the organization. Disengagement was, in fact, the norm for all the businessmen who sat on BancoSol-NGO’s board, as a manager from BancoSol-NGO commented: “Board meetings happened over lunch, and dessert would arrive before discussing BancoSol-NGO” (interview, 24 April 1998).

An unexpected and fateful interaction with Martin Connell, a member of Acción’s board, redefined the group’s thinking. As leaders of BancoSol-NGO, Otero and Romero were part of Acción’s network and had traveled together to New York to attend Acción’s 1989 board meeting. Connell invited them to join him for dinner. During the meal Connell said:

[…] we need to create a bank. The interesting example […] was done at the end of the 19th century by Crédit Agricole. […] They used the bakers and gave them a little box. [… T]his will be difficult in Latin America […] We have to imitate McDonald’s. (interview, 24 April 1998)

Much like the generative metaphor described by Mary Douglas (1986) and Donald Schön (see 1979), this piece of institutional debris (Schneiberg, 2007) put BancoSol-NGO’s uncanny success and its financing difficulties in perspective for Romero and Otero. Crédit Agricole had extended access to loans by working with local bakers; Connell thought BancoSol-NGO could accomplish this by franchising like McDonald’s. Back in Bolivia, an energized Romero and Otero engaged in institutional thinking (Heclo, 2008), discussing their options. They settled on a plan to launch a commercial microfinance bank. They reasoned that with the creation of a commercial bank, BancoSol-NGO would, like Crédit Agricole, be able to access commercial funds, including deposits, and in this way it would be able to solve, once and for all, its fund-raising difficulties. But they had to convince Acción’s staff to support their actions. Acción’s staff – all NGO professionals – were reticent. They worried that the commercial transition could, in time, push BancoSol to abandon its social mission. They were also concerned about the impact on Acción itself. Restrictions on the ability of US-based not-for-profit organizations to invest in for-profit endeavors constrained Acción’s ability to invest in the future bank: “[They said,] ‘Look, we can get you a donation of $5 million, but do not ask us to invest $100,000 because it means accountability, and it is for-profit, and we do not have the situation’” (interview, 24 April 1998).

Romero’s point of view prevailed, but only when he turned his request into a personal appeal building on his long-standing bond with Acción’s chairman (Duncan) and the newly formed one (through their work in BancoSol-NGO) with Acción’s general manager (Bill Burrows). As Romero commented: “This exception, they took it, because I insisted personally with Jack Duncan and also with Bill Burrows” (interview, 24 April 1998). With the counsel of legal experts, Acción defined a solution that allowed it to invest in BancoSol. With this agreement, Romero, Otero, Connell, and Acción’s leadership began the arduous negotiations necessary to leverage the financial support and regulatory changes required to launch a commercial bank devoted to providing microfinance services. They succeeded, and the commercial microfinance bank Banco Solidario (BancoSol) commenced operations in February 1992.

Plans to launch a development microfinance organization

The professionals leading the other Bolivian NGOs also witnessed BancoSol-NGO’s success in disbelief. Like Romero, they wondered why people were queuing for hours to get a 45% interest-rate loan. But these professionals did not use this moment of dissonance as an occasion to launch a commercial microfinance organization. Even though the NGOs they headed were involved in providing loans, they did not identify themselves as lenders but as development professionals. From this perspective, BancoSol-NGO’s unique features, such as targeting street vendors, charging high interest rates and insisting on repayment, were inappropriate, and its plan to form a commercial bank with owners who could privately benefit from its operations was unwarranted and illegitimate.

A group of them – namely, the leaders of ANED, CIDRE, FADES, FIE, and Sartawi – began discussing an alternative institutional entrepreneurship opportunity: the launching of a development microfinance organization. All local NGO professionals saw BancoSol-NGO’s formation of BancoSol as inappropriate, to say the least, and most remained disengaged. But this group had emerged when these individuals worked together in the launching of FADES, an NGO devoted to providing loans to farmers. From this social platform the launching of a development microfinance organization appeared as a reasonable response. The organization they envisioned would follow up on their design for FADES. Like FADES, it would have an independent board of directors, populated not by businessmen and/or private investors but by themselves, and it would finance its portfolio with donor funds. It would adopt those microfinance innovations that did not conflict with NGO logics, such as microfinance’s manpower-intensive approach to loan evaluation. But it would have a large portfolio of loans in manufacturing and agriculture and would not charge the high interest rates of BancoSol, have private investors, or provide services other than credit.

This group’s plan to launch a development microfinance organization did not progress. In a fateful moment, later referred to by interviewees as the “Los Andes fiasco”, their conversations were unexpectedly sidetracked when C.-P. Zeitinger, founder of Internationale Project Consulting gmbf (IPC), approached them with the proposal to work with IPC to launch an NGO-founded commercial microfinance organization. Initially Zeitinger’s invitation was welcomed. As one participant observed, it was perceived as “an opportunity not to have to do this alone [by themselves]” (interview, 14 April 1997); after all, he had already secured funds from the GTZ to finance the project. But this enthusiasm was short-lived.

Central to Zeitinger’s project was the idea of self-sufficiency, which he thought would be possible only if the organization provided only credit and focused initially on serving urban areas (e.g. street vendors). The group disagreed with his assessment, which they perceived as overly intrusive: “He would get involved in areas of decision-making that are out of the scope of a consultant” (comment by one of the NGO leaders involved; interview, 18 March 1998). They wanted his know-how and the funds from the GTZ, but they did not want him to change their plan. He insisted, and as a result his proposal was rejected by all except Pilar Velasco, at the time the acting general manager of FIE-NGO. Not surprisingly, her decision cast her, and by extension FIE-NGO, as social deviants (Goffman, 1963). The decision, however, allowed Zeitinger’s initiative to continue.

Plan to launch a commercial microfinance organization with FIE-NGO, which led eventually to the launching of Los Andes

Zeitinger began his consulting engagement with FIE-NGO immediately, but it was short-lived. FIE-NGO’s leaders were four women (Maria Eugenia Butrón, Ivet Nava, Pilar Ramirez, and Pilar Velasco) who had begun to provide loans the same year BancoSol-NGO was founded, and with financing from the InterAmerican Development Bank they had built a rather healthy loan portfolio. Pilar Velasco had led the idea of engaging Zeitinger and the other women had gone along, but they soon began to have second thoughts. Zeitinger adamantly insisted that FIE-NGO should change its board of directors to include individuals with a high social profile in the country. Recalled one member: “He would say, ‘You are a group of mere housewives, and no one is going to want to hear what you have to say. You need an umbrella of important people [on the board]’” (interview, 11 April 1997). FIE-NGO’s founders worried about its implications for their own ability to control the future of FIE-NGO. Since most had no background in finance (or any other field connected with business lending), it was possible for the new board to consider them unqualified and ask them to leave, with little regard for their role in and contribution to the building of FIE-NGO.

Following their disagreement and distrust, the group decided that FIE-NGO should stop working with Zeitinger. They wanted to keep the funds that the GTZ had earmarked for the project but they would ask the GTZ to engage a different consultant to work with them. As one member recalled, “[W]e began questioning why this man [Zeitinger] wants to do this to us. … [T]hen, on a Sunday, we said, ‘Leave us; we are going to keep going alone without you’” (interview, 11 April 1997). Pilar Velasco disagreed, but when she failed to convince the other group members she decided that the only logical thing to do was for her to resign from FIE-NGO. This was a difficult decision. Already written off as an outcast by the local NGO leaders with whom she had worked, she was also now self-excluding herself from FIE-NGO, her home institution which she had helped to found and which was her main source of income.

Impressed by Velasco’s bold decision, Zeitinger invited her to present with him a reformulated version of the project to the GTZ. In this new version the GTZ funds would be used to launch a brand-new NGO earmarked to transition into a commercial microfinance organization (the prior project involved working with an existing local NGO). Together they rushed to the offices of the GTZ in La Paz. Rather dramatically, they arrived a few hours before FIE-NGO’s leaders could present their own request for a new consultant. They were granted permission to use the funds earmarked for the project to launch the new NGO.

In 1992, working now with Zeitinger and his consultants from IPC, Velasco assumed leadership of this new effort. She leveraged the support and participation of friends and relatives who could act as an “umbrella of important people” and launched Los Andes-NGO. In 1995, after arduous work and negotiations with the regulatory authorities, Los Andes-NGO spun off from Los Andes. The interpersonal bonds of the umbrella of important individuals that Velasco had attracted played an important role in their successful lobbying for the new legislation (Decree 24,000, creating Private Financial Funds) needed to launch Los Andes as a commercial microfinance organization, as shown in the following comment:

Mr. X [a member of the Los Andes-NGO board] has an important level of social standing. He is in the Chamber of Commerce and has access to the leadership of the SBFI [banking regulatory agency] without having to go through secretaries or setting up audiences. (interview, 16 March 1998)

FIE-NGO’s members decide to launch a commercial microfinance organization

While Velasco worked to build Los Andes, her ex-peers at FIE-NGO decided to launch their own commercial microfinance organization. The group was fueled by their sense that, without access to the commercial funds available to commercial organizations (which BancoSol and Los Andes were enjoying), FIE would not be able to grow its portfolio as rapidly and would unwarrantedly lose its status vis-à-vis Los Andes (see Table 2). Consider the following comment by the leader of one of these NGOs: “Los Andes was growing […] and then we said, ‘If we do not risk it and continue, we are going to remain a very small thing that at some point was a good idea and stay there’” (interview, 11 April 1997).

OPEN IN VIEWER

Table 2.

Comparative evolution of selected microfinance organizations in Bolivia (portfolio outstanding in $000).

	1992	1993	1994	1995	1996	1997	1998
BancoSol	8,800*	24,800	33,200	36,700	47,400	63,100	74,068
Los Andes	711	1,362	2,863	6,049*	11,880	20,430	28,614
FIE	2,082	3,108	4,159	5,881	7,694	12,127	16,700*
IDEPRO	N.A.	N.A.	N.A.	N.A.	2,383	5,003	7,343
CIDRE	N.A.	N.A.	N.A.	N.A.	921	919	1,148
FADES	N.A.	N.A.	N.A.	N.A.	5,200	6,512	9,047
ANED	N.A.	N.A.	N.A.	N.A.	4,535	5,808	6,451

Source: Boletín Financiero (1997, 1998, 1999) and annual reports (BancoSol, Los Andes, FIE-NGO).

*

Year in which the organization transitioned into a commercial financial organization.

In their founding of a commercial microfinance organization, FIE-NGO’s leaders had hoped to avoid having businesspeople on their board of directors – the suggestion that sparked their disagreements with Zeitinger – but the regulatory agency insisted. As the group grew convinced that they could not continue without assenting to this request, they agreed to assume the risks associated (their losing control over the organization and potentially their jobs) and identified a private investor in Mr Johnson, a local industrialist, and invited him to join them. FIE-NGO launched its own commercial microfinance organization in 1998. Interestingly, the Private Financial Fund legislation that the Los Andes-NGO founding group had lobbied into existence allowed FIE-NGO’s founding group to gain the financial support and regulatory approval required to launch their own commercial microfinance organization in 1998.

Local NGO professionals re-ignite efforts to launch a development microfinance organization and decide to form a commercial microfinance organization

The group of leaders of the other NGOs involved in the Los Andes fiasco (ANED, CIDRE, FADES, and Sartawi) followed their own path and continued to be involved in two institutional entrepreneurship efforts, namely a new plan to create a development microfinance organization and a plan to launch their own commercial microfinance organization.

In 1993, taking advantage of the Bolivian Congress’s work on drafting new banking legislation, the group spearheaded lobbying efforts for regulatory changes tailored to their vision for a development microfinance organization. These changes would allow organizations engaged in lending to the poor to capture savings and deposits without requiring them to become for-profit or have private investors, although they could have municipality governments as investors. Their idea was that with access to deposits and, if needed, public investment, they would be able to access sufficient funds and keep up with the growth of BancoSol and Los Andes but without undermining what they called “the human side of microfinance” – their freedom to decide who and how to serve, prioritizing clients’ human needs over financial concerns.

Interestingly, in parallel with these lobbying efforts, three of them (the leaders of ANED, CIDRE, and FADES) formed another group joining forces with the leaders of two other local NGOs (IDEPRO, which had participated in the conversations to launch a development microfinance bank, and UNITAS, an umbrella NGO providing financing to all of these NGOs), to launch together a commercial microfinance organization. When asked about their participation in groups with parallel and apparently contradictory initiatives, these individuals argued that it was the only way they could retain their competitive position. In the words of one of them:

[Commercial microfinance] is the future, but we are resisting it so it would have a human face and not a monetary face. […] Maybe tomorrow, the group in power will decide that the NGOs are not going to do microfinance anymore. […] In that case, we are out of the battle. It is for that reason that we are in Ecofuturo: to fight also from the side of PFFs [Private Financial Funds]. (interview, 17 March 1998)

The efforts of the group working in the development microfinance organization related plan were only partially successful. The Bolivian Congress included the desired language in the new law, but the banking regulatory agency stalled on developing this language into specific legislation. But the efforts of the group to launch a commercial microfinance organization prospered, and this group launched Ecofuturo in 1999.

In ending this brief narrative, it is interesting to note that there were several local NGO professionals who, while affected by the emergence of commercial microfinance, did not get involved in institutional entrepreneurship. Among them were the leaders of ProMujer and Crecer, two of the most successful local NGOs providing microfinance. ProMujer’s leaders were a local Bolivian and an American living in the United States. Crecer was a foreign implant that belonged to an international network of organizations that provided services to the rural poor around the world. It was led by a foreigner with no ties to the leaders of local NGOs.

In contrast with the group of NGO leaders who got involved, these individuals were engaged in alternative groups with pasts which did not include the founding of FADES or discussions to create a development microfinance bank. Their lack of involvement in FADES explains their disengagement from the local NGOs’ discussions to launch a development microfinance bank. Their lack of involvement in these discussions, in turn, explains why they never perceived Los Andes as a suitable referent for their status calculations. The leaders of ProMujer and Crecer continued to successfully grow their organizations. They adopted microfinance practices selectively, consistent with their own organizational identity, but they did not assume risks or costs beyond those necessary to advance their mission or leverage resources and support for projects that ran against the grain of the logics of the dominant organizational archetypes (Greenwood & Hinings, 1993). In short, they were successful, entrepreneurial individuals, but they did not become invested in the advancement of any one organizational archetype.

By 1997, a street vendor in La Ceja, one of the busiest street markets in Bolivia, was receiving up to three visits a day from loan officers offering credit. Of note, the Private Financial Fund legislation lobbied for by Los Andes was not only used by NGOs to launch commercial microfinance organizations but also co-opted by private investors to launch for-profit consumer lending ones. By 1999 the growth of these consumer lenders, with their disregard for the risks of over-indebting clients, created a repayment crisis that threatened the survival of most organizations lending to the poor in Bolivia. Following this crisis, these consumer lenders closed their doors, but, at the time of writing this paper, all the organizations covered in this study (BancoSol, Los Andes, FIE, Ecofuturo, ProMujer, and Crecer) had survived the crisis and were still thriving. Poverty continues to be a significant problem, yet Bolivia’s poor, both in urban and in rural areas, have unprecedented access to financial services, and the interest rates they pay for loans, while still quite high, have fallen substantially. In 2012, they averaged around 18% – about one-fifth of what they had to pay to loan sharks and pawnshops, their only sources of financing prior to 1987.

Motivating engagement

The institutional literature has explained individual motivation to engage in institutional entrepreneurship considering how field positioning defines the alignment or lack thereof between an individual’s interests and field logics (Hensmans, 2003; Leblebici et al., 1991). The evidence supports the influence of field positioning but also suggests that the social dynamics framing individual relations within their group stage crucially influence their perceptions of alignment beyond field positioning.

The groups involved in launching commercial microfinance organizations were positioned at the fringe of the field. The creation of BancoSol-NGO was led by a group that included the chairman of a US-based international NGO (Jack Duncan) and a member of Bolivia’s business elite (Fernando Romero). Duncan was acting on behalf of Acción International, advancing this organization’s agenda of expansion. Without the benefit of additional evidence, it is difficult to explain his engagement beyond his organizational role and field positioning. But he was not leading the effort; that person was Romero, his protégé, who, with little understanding of microfinance, agreed to lead the launching of BancoSol-NGO. Romero’s acceptance was framed by his concern for the need to alleviate the impact of structural adjustment on the poor. In Bolivia, however, the likelihood of a member of the economic elite forming an NGO was small. They got involved in social issues by assuming positions in government or financing church-based charities, not by launching NGOs. Accordingly, it is unlikely that Romero’s general concern for the poor would have materialized in his assuming the risks and cost of launching an NGO outside the group stage created by his interactions and interpersonal bonds with, first, Duncan and subsequently the individuals who worked with him in BancoSol-NGO, i.e. Bill Burrows (Acción) and Pancho Otero.

In the case of Los Andes, the so-called Los Andes fiasco had positioned C.P. Zeitinger and Pilar Velasco at the fringe of the NGO field. But their field positioning only partially explains the motivation of this tight small group. Instead, it is more easily explained by the interactions accompanying the fiasco. Zeitinger’s motivations can be easily understood by focusing on his organizational role, but not Ms Velasco’s – the eventual leader of the initiative. Her willingness to assume the risks and costs involved emerged from the interactions and decisions that created and followed the fiasco and particularly her decision to quit FIE. Only by considering these interactions can we explain her accepting Zeitinger’s invitation to request and use funds already earmarked for FIE to launch Los Andes and her calling on her friends and family to support her in this endeavor.

The other initiatives were carried out by two overlapping groups of field insiders. As in the case of field outsiders, field positioning emerges only as a partial explanation for their engagement. Instead, the two overlapping group stages housing these individuals explain why these NGO professionals and not others engaged. The groups had emerged from past interactions which led to the launching of FADES and were buttressed when their efforts to launch a development microfinance organization derailed. From this stage BancoSol and particularly Los Andes stood as relevant status referents (Weber, 1978) and their fantastic operational success as a source of status loss. The wish to regain status vis-à-vis BancoSol and Los Andes fueled the groups’ will to assume the risks and costs involved in advancing plans that would allow them to regain the lost status, i.e. lobbying for regulations that would support the launching of development microfinance organizations and launching of a commercial microfinance organization. Absent from (or out of) these overlapping groups NGO leaders did not consider BancoSol and Los Andes as relevant status referents and therefore lacked the motivation to engage in institutional entrepreneurial efforts. This insight, which suggests that individuals’ past interactions influence who are perceived as relevant status referents, and thereby individuals’ motivations for action, is consistent with social psychological research exploring the influence of identity and status competition on decision-making within organizations (see, e.g., Ibarra et al., 2005).

Inspiring opportunity identification

As suggested in the institutional literature, individual appreciation of opportunities to engage in institutional entrepreneurial efforts was facilitated by macro-conditions with hard-to-disregard outcomes (Greenwood & Suddaby, 2006), such as Bolivia’s hyperinflationary crisis, and tensions in field logics (Whittington, 1992), such as those generated by the financial constraints experienced by BancoSol-NGO. Engagement was also facilitated by a micro-factor, namely, the dissonance (Emirbayer, 1997) generated by the unexpected and uncanny operational success of BancoSol-NGO. These macro- and micro-conditions provided ground for opportunity identification, but who perceived in these conditions an alignment with their individual interests so as to justify their engagement in institutional entrepreneurship is better explained by looking at how these macro- and micro-conditions interplayed in the meso-group stage.

First, Romero’s initial involvement in the launching of an NGO with unusual attributes (BancoSol-NGO) did not follow from the identification of an opportunity but by his being convened to engage by Jack Duncan, with whom he shared a lengthy history of interactions and a personal friendship. But Romero’s later engagement in launching the commercial bank BancoSol emerged within a group stage which now included not only Mr Duncan but also the other members of Acción’s staff and Pancho Otero. It occurred in the milieu of the financing difficulties created by the unexpected and uncanny operational success of BancoSol-NGO, but it was fueled by Otero’s interpretation of BancoSol-NGO’s success as an opportunity to democratize access to loans in Bolivia, and it was irremediably kindled by the interaction with Connell, who unveiled the surprising parallels between BancoSol-NGO and Crédit Agricole.

Second, the initiative to develop Los Andes can be traced back to plans that Zeitinger and his staff at IPC had defined prior to their involvement and, therefore, can also be explained without reference to the meso-group stage. However, it required the involvement of Pilar Velasco in order to progress. Only with her engagement as leader of the initiative could it advance. But the engagement of someone with Ms Velasco’s profile can only be explained considering the group stage in which she was operating. The launching of a brand new NGO from scratch ran against the grain of dominant practices – something that both Zeitinger and Velasco, aware of its illegitimacy, dismissively described as an exercise in “artificial insemination”. The engagement of both Zeitinger and particularly Velasco in such a deviant initiative is hard to imagine outside the tight grouping of Zeitinger and Velasco after her decision to abandon FIE-NGO.

Third and finally, as mentioned earlier, the other initiatives were led by groups of field insiders. The literature on the influence of field positioning suggests that these individuals were likely to get involved but only in defense of the dominant archetype that housed them (NGOs). The evidence, however, shows that they did not work to protect the established archetype and instead engaged in advancing an alternative although related archetype, namely a development microfinance organization. The features of the development microfinance organization were close to that of the dominant archetype, but they still differed from it in relevant ways.

The group stages created by these professionals’ history of interactions crucially explains their inspiration to engage first in launching a development microfinance bank as well as their later engagement in the launching of a commercial microfinance plan. The development bank plan can be explained considering the history of interaction of the group, which placed FADES, and not Crédit Agricole, as the relevant historical referent. The commercial microfinance plan can be explained considering changes in members’ shared understandings sparked by the Los Andes fiasco, which placed two commercial financial institutions (BancoSol and Los Andes) as relevant operational referents for the provision of financial services to the poor.

Enabling access to resources and support

Finally, as has been previously argued in the literature (see, e.g., Aldrich & Fiol, 1994), the evidence does suggest that the interpersonal bonds facilitated access to resources and support and thereby enabled institutional entrepreneurship. The launching of BancoSol-NGO and BancoSol was enabled by the wealth of international know-how and access to international donors brought by Duncan and his staff from Acción. They were also enabled by Romero’s access to local sources of financing as well as his reputation as a successful businessman. In turn, the launching of Los Andes was enabled by the know-how and access to financing brought by Zeitinger and his staff as well as the network of family and friends brought by Velasco, crucial in negotiations for regulatory approval.

Interestingly, the evidence suggests that individuals may engage in institutional entrepreneurship even in the absence of an enabling group stage. But it also suggests that without this stage efforts are likely to fail. Efforts to advance the development microfinance archetype failed largely because individuals could not mobilize funds or regulatory support. Moreover, the later efforts of these individuals to early-adopt the commercial microfinance model with the launching of FIE-PFF and Ecofuturo were possible not because the group stage of its founders enabled their accessing the required resources and regulatory support but because supporting these endeavors had become institutionally acceptable following the launching and operational success of BancoSol and Los Andes.

In summary, the evidence does not disconfirm that macro- and micro-conditions allowed individuals to become institutional entrepreneurs. But it suggests that we can explain why individuals facing similar macro-conditions and with similar micro-profiles have a different likelihood of engaging in institutional entrepreneurship considering the interplay of macro- and micro-conditions in the meso-group stage. Engagement in institutional entrepreneurship requires motivation, opportunity, and resources, and these three elements can be present at the group level even when they are not at the level of its individual members (when considered solo). The social dynamics linking individuals can motivate engagement and the shared references tied to the group can inspire opportunity identification. In addition, the evidence shows the relevance of looking at the group as enabling institutional entrepreneurship by facilitating or not facilitating access to the support and resources required to advance institutional efforts. Table 3 provides a summary of the findings.

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Table 3.

The social group as stage for individual engagement in institutional entrepreneurship.

Motivating engagement	The group stage fuels individuals’ will to assume the risks and costs involved.
Inspiring opportunity identification	The group stage allows individuals to appreciate alignments between their interests and field conditions invisible to non-members.
Enabling access to support and resources	The group stage defines access to resources and support to advance institutional initiatives.