21038_haan_lakwo - Rethinking the Impact of Microfinance in...

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Unformatted text preview: Rethinking the Impact of Microfinance in Africa: ‘Business Change’ or Social Emancipation Alfred Lakwo , holds a PhD in Development Studies of Radboud University Nijmegen (The Netherlands), is a visiting lecturer in the Institute of Ethics and Development Studies at Uganda Martyrs University, Nkozi, Uganda. His main research focus is micro- finance, livelihoods and gender on which he conducted a number of research projects in Uganda. [email protected] PO Box 80, Nebbi Town, Uganda Leo de Haan is Professor of Development Studies and Rector of ISS in The Hague, now the International Institute of Social Studies of Erasmus University Rotterdam. He directed research on commercialization of agriculture, resource conflicts and migration in a number of African countries. His specialization concerns the conceptualization of livelihood research. [email protected] PO Box 29776, 2502 LT The Hague Acknowledgements The authors would like to thank two anonymous reviewers, for their useful comments on an earlier draft of this article and Ann Reeves for correcting our English. Word count article (incl. tables and references): 8442 words Rethinking the Impact of Microfinance in Africa: ‘Business Change’ or Social Emancipation ABSTRACT This paper questions received wisdom that the benefits of microfinance start with poverty reduction and are subsequently followed by social emancipation. Taking the case of Uganda and by using a consensual people-centred relevance test to assess the impact of microfinance on poverty alleviation, microfinance is shown not to improve much the well-being of microfinance clients. Only marginal well-being gains are achieved by clients. However, a subsequent (gender) power relations analysis reveals that in spite of these marginal well-being gains, the women clients achieved more emancipation. The paper calls for a rethinking of the microfinance (outreach) campaign in Africa and of the controversy between a business or welfarist approach to microfinance. The paper suggests that social emancipation should be pursued in its own right rather than waiting for poverty reduction to occur first. (132 words) INTRODUCTION The Dutch Algemeen Burgelijk Pensioenfonds (ABP), i the world’s third-largest pension fund with an invested capital of €215 billion, ii doubled its investments in microcredit in Africa, Asia and Latin America in October 2007. Its argument for doing so is that investments in microcredit funds, which are insensitive to macro-economic fluctuations in interest and inflation rates, yield a fair annual return of over 6%, one which correlated well with returns on stocks and bonds before the global credit crunch of 2008 (ABP 2007: 6). Given the current financial crisis, prospects of investments in microcredit funds are still comparatively attractive. ABP’s venture into microcredit is a clear sign of the ‘business change’ that the microfinance sector in Africa is currently experiencing. This change is characterized by a greater emphasis on financial sustainability and profits, i.e. change is characterized by a greater emphasis on financial sustainability and profits, i....
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21038_haan_lakwo - Rethinking the Impact of Microfinance in...

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