Developing social entrepreneurship in rural areas: A path mediation framework

Local wisdom is increasingly crucial to preserve rural societies’ self-confidence and solidarity spirits in boosting economic growth. Notwithstanding the success of microfinance groups in East Sumba, Indonesia, the problem related to a small capital base exists. In this respect, adhering to local wisdom likely develops social entrepreneurship to strengthen the microfinance group’s capital base. This research investigates how local wisdom affects social entrepreneurship and microfinance sustainability. Data are collected by distributing questionnaires to microfinance stakeholders and analyzing the partial least squares-structural equation model. The findings show that local wisdom plays an essential role in social entrepreneurship development to ensure the stability of microfinance. In other words, rural microfinance sustainability can perform the mediating role as hypothesized. It implies that policy-making by the local government related to social enterprise development and microfinance sustainability may consider local wisdom. Thus, all stakeholders need to create conducive environments to increase the development of social entrepreneurship.