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Description
Microfinance refers to institutional lending of small loans to the poor. As the microfinance industry increasingly dominates institutions, economies, and communities within developing nations the sustainability and impact of microloans and Microfinance Institutions has become a highly controversial debate. While these institutions have flourished around the globe in recent decades, their expansion, high repayment rates, and the production of many microenterprises is not adequate proof that microfinance is improving borrower lives or significantly impacting poverty levels. Through qualitative methods and original fieldwork in Uganda, this study asks: how are microlending programs experienced at the local level and how do microloan recipients qualify success? Since Uganda hosts one of the world’s largest microfinance industries, it is here where I conducted one month of field observations, interviews, and surveys for intensive case study research. Findings indicate the monetary transaction of a small loan alone does not produce any significant financial improvements for loan recipients. Long-term improvements (financial or otherwise) sustained beyond the life of the lending program were attributed to programs that foster strong inter-personal relations, increase social capital and grow positive social networks within lending groups. While social capital is widely unaccounted for in the majority of impact evaluations, this study’s findings further support the argument that social capital plays just as crucial a role as economic opportunity in borrowers’ ability to succeed and the ultimate objective of microlending initiatives, ameliorating poverty.
