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Eradicating Poverty in Uganda: A Case Study in Comparative Loan Approaches By Fiona Hanly CCTP-754 | Fall 2014 Professor D. Linda Garcia

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Table of Contents

Introduction

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Historical & Theoretical Framework Institutional History Theoretical Framework: Neoliberalism Theoretical Framework: Network Theory

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Uganda: Comparing Loan Approaches World Bank BRAC Grameen Foundation FINCA Kiva

Page 10 Page 11 Page 13 Page 14 Page 15 Page 17

Case Analysis & Comparison

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Conclusions

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References

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Introduction “Let me be clear: we cannot rescue them. The societies of the bottom billion can only be rescued from within. In every society of the bottom billion there are people working for change, but usually they are defeated by the powerful internal forces stacked against them. We should be helping the heroes. So far, our efforts have been paltry: through inertia, ignorance, and incompetence, we have stood by and watched them lose.” —Paul Collier, The Bottom Billion1 How do we, as a global community, “fix” pervasive poverty? Systemic poverty has a myriad of causes ranging from history to poor governance to geography to underdeveloped markets, and there is an even greater myriad of organizations working towards a remedy for any and all of these. From the economic standpoint, market liberalization and entry into a global market has allowed a subset of poorer nations to significantly decrease poverty rates (the oftenreferenced example being the Asian tigers in the 1990’s). At the same time, another subset of countries whose population totals around one billion (the inspiration for Paul Collier’s above cited work, The Bottom Billion) continue to struggle with systemic, seemingly irreversible poverty. The gap between these nations and developed nations grows larger day by day, and many national and global institutions funded by these developed nations seek to alleviate poverty by a variety of means. One of these institutions, perhaps one of the most well-known, is the World Bank Group (WBG). The Washington, DC based institution has been granting loans for poverty reduction since the end of World War II. However, its ideology and effect, particularly its adherence to a neoliberal ideology insisting among other things on free, deregulated markets, is often criticized for many macroeconomic failures it has encountered in its mission to reduce poverty. 1

Collier, Paul. The Bottom Billion: Why the Poorest Countries Are failing and What Can Be Done about It. Oxford: Oxford UP, 2007. Print.

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The failures of some of the World Bank’s approaches beg a second question: are there more successful approaches employed by other organizations seeking to reduce global poverty? In the current global economy, the World Bank Group is no longer the only institution seeking to alleviate poverty. While not in direct opposition to the WBG, a multitude of poverty-reduction institutions that employ different techniques have entered the scene. Among these, many employ a technique known as microcredit, of microfinance, that originated in Bangladesh in the 1970’s with the Grameen Bank. Microcredit institutions focus on individuals in developing nations who lack access and credentials to qualify for loans that are necessary to their enterprise, and provide small loans with low interest rates. These institutions also typically subscribe to neoliberalism as a dominant ideology. However, their structure also brings network theory into consideration as they allow the poorest percentage of a population connect to regional and national networks that are essential to their economic success. Considering their potential structural advantage, is it possible that microfinance organizations specializing in delivering small loans directly to individuals in developing countries, such as BRAC, the Grameen Foundation, FINCA, or even crowdsourcing microfinancial groups such as Kiva, make a more significant impact towards poverty alleviation than the World Bank? First, it is important to consider the history of both types of organizations and the theories central to their operations, as well as the history of the developing region itself. Then a comparison of each organization’s program in the field is necessary for comparative analysis to determine which, if any, is the more successful approach in the current global market.

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Historical & Theoretical Framework World Bank History The World Bank was formed in the aftermath of World War II, in an effort to rebuild a war-ravaged Europe. The Bank’s first loan was to France for post-war reconstruction, two years after the end of the war. In the close to seventy years since the end of the war, the World Bank has taken on a much broader and more complex mission. It now includes five different organizations: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).2 Its main mission continues to be eradicating severe poverty through increased economic prosperity across all organizations, known as the World Bank Group. Microfinance History Microfinance as a concept is not new; various cultures have practiced different forms of microlending throughout history. The recent focus on microfinance in international development began in the second half of the 20th century as a handful of pioneer institutions, including ACCION and the Grameen Bank, began lending small amounts of credit in countries such as Bangladesh and Brazil. The Grameen Bank was founded by Professor Muhammad Yunus, often credited as one of the pioneers of the modern form of microfinance. Refining and expanding upon the original practices and methodologies, microfinance groups realized that their

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World Bank. "World Bank History." World Bank Archives. N.p., n.d. Web. 16 Dec. 2014. <http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/EXTARCHIVES/0,,contentMDK:20053333~m enuPK:63762~pagePK:36726~piPK:437378~theSitePK:29506,00.html>.

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experiences defied typical expectations of financing the poor3. Their projects had excellent repayment rates and were overall deemed a success, leading to a surge in microcredit groups in the last 40 years. Microfinance institutions today, much like the World Bank Group, focus on bringing people out of permanent poverty, addressing multiple dimensions of poverty with a variety of services, while still focusing on microcredit as the cornerstone technique4.

Theory I: Neoliberalism The World Bank, as a product of the ideologies of the economists and theorists who designed its efforts since its conception, is based fundamentally in neoliberalism. Neoliberalism is an economic theory centered in a core set of prescriptions such as the liberalization of a nation’s economy and privatization of government owned companies that are necessary for economic growth. The goal of neoliberalism is to inject life into a stagnant economy, and John Williamson’s 1989 Washington Consensus is one effective way to summarize its effect on World Bank programs. The Washington Consensus detailed ten specific neoliberal economic policy prescriptions that were a cornerstone to any aid packages coming from Washington DC-based institutions such as the World Bank and the IMF, meaning that the nations accepting these aids and loans were required to adopt the economic policies as part of the package. The effects of the prescriptions in the Washington Consensus, and neoliberalism as an ideology on both developing and developed countries has changed throughout the time of the World Bank’s projects (for a

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Global Envision. "The History of Microfinance." "The New Vision of Microfinance: Financial Services for the Poor." 16 Dec. 2014. <http://www.globalenvision.org/library/4/1051>. 4 Ibid.

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while they did not even account for the situations in what we now consider “developing” countries), but they have several central tenets at their core5: 1. Free Market: in the ideal neoliberal market, the principal rule is that private enterprise and capital flow are free from government restrictions, which includes several other key tenets, including: 2. Eliminating Price Controls: in a neoliberal market, prices should not be controlled by the government 3. Deregulation: a central tenet of neoliberalism is that an unrestricted and unregulated market allows for increased growth that will ultimately benefit everyone in a nation 4. Privatization: government-owned companies should be turned over to private enterprise in order to redirect the usage of public resources towards government programs (such as education) while also improving the operational efficiency of these companies, principally through competition6 5. Eliminating Safety Nets: a liberalized market proposes redirecting government funds dedicated to welfare programs towards areas that offer a high return and simultaneous ability to redistribute income, including health care, education, and infrastructure7 6. Lower Taxes: tax reduction lowers marginal rates and helps to broaden a nation’s tax base8 7. Openness to Trade: under neoliberal policies, a country’s markets must be open to investment and capital flow 5

Martinez, Elizabeth. "CorpWatch : What Is Neoliberalism?" CorpWatch : What Is Neoliberalism? CorpWatch, n.d. Web. 15 Dec. 2014. <http://www.corpwatch.org/article.php?id=376>. 6 Shirley, Mary. “The What, Why, and How of Privatization: A World Bank Perspective." Fordham Law Review. Vol. 60, No. 6, pp 23 – 36. 1992. Print. 7 "Washington Consensus." Global Trade Negotiations. Center for International Development at Harvard University, Apr. 2003. Web. 16 Dec. 2014. <http://www.cid.harvard.edu/cidtrade/issues/washington.html>. 8 Ibid

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Criticisms of Neoliberalism & World Bank Policies Many scholars present various critiques of the neoliberal policies inherent in World Bank projects. Some argue that it has not even achieved its main goal, which is to stimulate capital accumulation9. Comparing the respective situations of countries that adopted neoliberal policies in the 1980’s, the only true success across the board is the decrease of inflation rates. While neoliberalization is intended to generate wealth, what its policies often achieve is a redistribution thereof due to commoditization and privatization of assets that were previously public, particularly the labor force. Neoliberal programs often tend to be extremely environmentally degrading, as contract-driven short-term projects such as natural resource extraction are focused on immediate gains as opposed to the long-term health of the environment. There are even critics who oppose neoliberal policies on a human rights basis, suggesting that even though the World Bank’s chief mission is to reduce poverty, none of their pronouncements align “with the actual practices that underpin the restoration or creation of class power and the results in terms of impoverishment and environmental degradation10.” Joseph Stiglitz, lauded economist and former vice president of the World Bank himself, critiqued the policies of neoliberalism at the core of the World Bank and IMF, saying neoliberal policies did not in fact help economic growth in developing countries and that the countries leading these organizations suffered from ideological short-sightedness11 (one could even say they are a homophily). Ultimately, the straightforward prescriptions of neoliberalism and the Washington Consensus do not account for situational needs in developing countries.

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Harvey, David. A Brief History of Neoliberalism. Cambridge, UK: Oxford University Press, 2005. Print. Page 154. Ibid. Page 176. 11 Trend Online. “Criticism of Neoliberalism: Interview with Joseph Stiglitz.” Portland Independent Media Center. Web. 16 Dec 2014. <http://portland.indymedia.org/en/2004/03/282123.shtml>. 10

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Theory II: Network Theory While it is important to consider neoliberalism when looking at alternate loan approaches other than the World Bank’s work, other theories are also necessary to understanding these approaches. One such theory is network theory, a part of complexity theory, which David Singh Grewal presents in his work Network Power, an analysis of the social dynamics of globalization12. Rather than focusing exclusively on economic capital, which is the focus of neoliberalization and the initial consideration when attempting to devise programs to reduce poverty, network theory also considers societal structure and social capital. For example, impoverished individuals may have strong ties to other individuals close to them in their network, such as family members and neighbors, who are likely in the same economic situation. However, they often lack weak ties, which are necessary components in the architecture of a strong network. One World Bank scholar, Deepa Narayan, analyzed different forms of social capital and their relation to poverty in her work “Bonds and Bridges: Social Capital And Poverty13.” She noted the different between bonding ties, or the close ties in a network, and bridging ties, weaker network ties, which are essential to an individual’s economic well-being. Governments can help to foster weak ties through civil institutions, connecting people outside of their instinctive networks and allowing for a network with many weak ties connecting many strong hubs. Mark Buchanan, in his work Small Worlds and the Groundbreaking Theory of Networks, touched on the same topic, noting that trust increases and transaction costs decrease when people are linked

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Grewal, David Singh. Network Power: The Social Dynamics of Globalization. New Haven: Yale UP, 2008. Print. Narayan, Deepa. "Bonds and Bridges: Social Capital and Poverty." World Bank Policy Research Working Paper 2167 (1999). Print. 13

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via networks, creating an “efficient network for transactions14.” Network theory helps to paint a bigger picture of ways to create programs alleviating poverty by stressing social capital in addition to economic capital. Focusing only on the latter, economic capital, leads to limited and reductive approaches to poverty relief programs. Network theory is also an important consideration when assessing the heterogeneity of an impoverished population. Individuals with “higher access to information about market conditions could access a wider range of investment opportunities and cushion themselves better against risks,” meaning that “initial life circumstances [are] an important factor accounting for successful entrepreneurship15.” Individuals, therefore, with greater network access, a broader range of weak ties and more comprehensive access to information, benefit more from credit, particularly in the scope of microfinance. Network theory allows for a nuanced analysis of the benefits and potential shortcomings of the microfinancial approach and is an important theory for consideration in the forthcoming case comparisons. Uganda: Comparing Loan Approaches Comparing the World Bank to any agglomeration of microfinance institutions on a global scale is nearly impossible – the World Bank currently runs projects in 12,164 projects in 173 countries16, and while it does produce aggregate reports on its global impact, focusing in on a specific nation proves to be more useful. Current projects in Uganda are an excellent example when comparing the work of the World Bank with other microfinance institutions, as many of them have a presence in the country. Among these microfinance institutions, the Grameen Bank, 14

Buchanan, Mark (2002 Small Worlds and the Groundbreaking Theory of Networks, NY: NY, W. W. Norton & Company. Print. Page 201. 15 Kalpana, K. "Shifting Trajectories in Microfinance Discourse." Economic and Political Weekly. Vol. 40, No. 51, pp 5400-5401+5403-5409. 2005. Print. 16 World Bank. "Projects & Operations." Projects & Operations. The World Bank, n.d. Web. 18 Dec. 2014. <http://www.worldbank.org/projects>.

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BRAC, FINCA, and Kiva all currently have a presence in Uganda. Their individual policies may vary, so it is first important to detail each organization’s operational structure, programs, and number of impacted users in order to draw any analytic conclusions about approaches that work better or worse than others. Before however delving into what the World Bank Group and various microfinance organizations are doing with their projects in Uganda, it is useful to summarize the current economic landscape in the landlocked African country. Understanding the historical context of the nation is necessary to the design of impactful economic programs, as the problems that keep so many Ugandan citizens in poverty did not simply arise out of a vacuum, but are a direct product of history. World Bank in Uganda: National Context and Project Overview Uganda is a small, landlocked nation in central sub-Saharan Africa. It borders Sudan to the north, the Democratic Republic of Congo to the west, Kenya to the east and Rwanda to the south. The nation’s borders were an aftereffect of colonial boundary delineation and ultimately lumped together a wide range of ethnic and cultural groups. According to the Central Intelligence Agency, this prevented Uganda from creating an effective system of government after independence in 196217. The nation suffered through dictatorships and guerrilla wars, but has gained relative stability since 1986 under current president Yousef Musevini, even instating a multi-party system in the last decade. However, even this latest period has not been without conflict—it is nearly impossible to discuss Uganda’s recent growth without considering the effects of the Lord’s Resistance Army’s civil war in the south of the country throughout the late 1990’s. Many remember the staggering

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"Uganda." The World Factbook. Central Intelligence Agency, n.d. Web. 16 Dec. 2014. <https://www.cia.gov/library/publications/the-world-factbook/geos/ug.html>.

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effects of the genocide in Rwanda – this devastation was not contained to one nation but killed many thousands and displaces what the World Bank Group assesses as millions in Uganda. These disruptions greatly slowed down economic activity in a critical period and worsened conditions of poverty. The World Bank group notes that since 2005, “economic activity has resumed in Northern Uganda, and most internally displaced persons have returned to their land18.” In the World Bank Group’s most recent profile of their work in Uganda, they detail the many problems that continue to slow the nation’s growth and keep many of its citizens in poverty—as many organizations attempt to find a symptom of poverty, and by alleviating that symptom poverty rates will fall. Uganda faces high inequality rates, high disease risks and mortality rates (notably HIV/AIDS, tuberculosis, and malaria), high child mortality and labor rates, and a multitude of other factors contributing toward its high poverty rates. In order to combat these symptoms, the World Bank runs a series of extensive operations in Uganda that encompass a wide variety of projects. These projects are outlined by the Bank within the following four pillars of intended impact: “support government efforts to promote inclusive and sustainable economic growth; enhance public infrastructure; strengthen human capital development; and improve good governance and value for money19.” These efforts are all centered on what the World Bank Group calls “Uganda Vision 2040,” a 30 year plan that intends to transform the nation from a low income country to an upper-middle income country. Uganda has been employing pro-market, liberal policies since the late 1980’s, and while GDP growth was on an upward trajectory in the 1990’s and 2000’s it has since stagnated. The World Bank’s stance is to increase investment in construction as the Ugandan government invests in its 18

Ibid World Bank. "Uganda." Uganda Overview. Development Strategy, n.d. Web. 16 Dec. 2014. <http://www.worldbank.org/en/country/uganda/overview#2>. Page 2. 19

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infrastructure, though the majority of the population is employed in the agricultural sector. The World Bank Group is however projecting its next development plan beginning in 2016 to include agriculture, along with four other industries of interest (mineral production, tourism, infrastructure, and human development20).

BRAC in Uganda Program Summary: 104,086 clients, $14M loan portfolio, 130 outlets21 Comparatively, there are several microfinance non-governmental organizations also operating in Uganda. One of these is BRAC (coincidentally founded by a Georgetown alumna, Susan Davis). BRAC’s organizational mission is “to achieve large scale, positive changes through economic and social programmes that enable men and women to realise their potential22.” BRAC launched in Uganda in 2006 with a goal of reaching 12% of the population (4.2 million) by 2016. Their main focus in Uganda is on agriculture and food security, helping rural populations increase efficiency, become more productive and overall improve their livelihood. This effort is made possible by giving farmers access to information, providing microcredit and supplying seeds and other materials such as high-quality pesticides at an affordable cost. BRAC’s microfinance platform allows them to connect to a wide network of many rural communities, employing agents from the community to serve as “agriculture promoters” on their behalf. These entrepreneurs are in fact often women, empowering an often marginalized segment of the population to enter the economy. Another program within BRAC’s agriculture project is a

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World Bank, Uganda Overview. BRAC. "BRAC Uganda Annual Report." Uganda - Home. BRAC, 2012. Web. 16 Dec. 2014. <http://uganda.brac.net/>. Page 35. 22 Ibid. Page 3. 21

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community connector project that “improves food security and nutrition in rural, underserved communities in northern and south-western Uganda through agriculture training, nutrition education and behaviour change, and savings group and microfinance activities23,” mainly focusing on women and young children in the most vulnerable communities. This is only a small overview of BRAC’s microfinance-oriented programs; the organization has put a variety of other programs in place in Uganda targeting issues such as education and health.

The Grameen Foundation in Uganda Program Summary: clients, loan portfolio, branches undisclosed online24 The aforementioned Grameen Bank was among the first of its kind to pioneer microcredit as a tool to enable the poorest sector of an economy. The Grameen Foundation, taking inspiration from Professor Yunus, (a founding director of their board), founded an organization with poverty alleviation as its goal, that however has no formal ties to the Grameen Bank. The Grameen Foundation’s work in Uganda is focused on a mobile technology project that provides cocoa farmers with the tools to connect to mobile technology networks in order to receive “accurate, timely information that helps them protect their crops and animals, improve their yields and get better market prices25,” called the Community Knowledge Worker program. These farmers are often in the most rural and isolated communities, and serve both as providers of information and beneficiaries thereof. Community Knowledge Workers are elected by their peers to provide weather and market price information via mobile app, as well as advice on agricultural processes pertaining both to crops and animals. 23

Ibid, Page 11. Grameen Foundation. “About Us.” Grameen Foundation. Web. 16 Dec 2014. <http://www.grameenfoundation.org/about>. 25 Grameen Foundation. “Uganda.” Grameen Foundation. Web. 16 Dec 2014. <http://www.grameenfoundation.org/where-we-work/sub-saharan-africa/uganda>. 24

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The Grameen Foundation here collaborates with the TECA initiative in the Food and Agriculture Organization within the United Nations. The TECA initiative serves as a platform to connect producers and experts on topics within agricultural technologies and practices, mainly to help the small producers on the ground26. The main work of the TECA initiative is to build a network of rural agricultural producers with the help of technology, which the Grameen Foundation builds out specifically in Uganda. The information collected by the Grameen Foundation’s project on traditional farming practices is invaluable as it allows vetted practices to be added to a digital library for farmers throughout a region to access a network of experts. As referenced above, the majority of the Ugandan population relies on farming as their main source of income. A significant percentage of this majority in fact relies on subsistence agriculture, meaning their entire livelihood relies on the success of their crops, and they are not able to develop an enterprise beyond their own survival27. The program in Uganda has been successful enough that it has expanded to rural Colombia, where many farmers are in similar situations to those in Uganda. FINCA in Uganda Program Summary: 145,449 clients, $26M loan portfolio, $567 average loan size, 27 outlets28 FINCA’s presence in Uganda also focuses directly on lowering the poverty levels in Uganda. The organization has had a presence providing small amounts of credit in Uganda since 1992, and in doing so has seen the nation’s poverty level drop by more than half, to 24.5%. Their main concern is that even of those who are above the poverty line, 80% of the Ugandan 26

TECA. “Technologies and Practices for small agricultural producers.” Food and Agriculture Organization of the United Nations. Web. 16 Dec 2014. <http://teca.fao.org/> 27 World Bank. "Uganda." Uganda Overview. Development Strategy, n.d. Web. 16 Dec. 2014. <http://www.worldbank.org/en/country/uganda/overview#2>. 28 FINCA. "Uganda - FINCA International." FINCA International. N.p., n.d. Web. 16 Dec. 2014. <http://www.finca.org/where-we-work/africa/uganda/>.

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population remains excluded financially. Financial exclusion simply means not having an account at a formal banking institution. In order to bridge this gap and connect excluded citizens to the broader financial network of the country, in the hopes that they will then be able to contribute more broadly to this network and the economy overall, FINCA provides a regulated, deposit-taking institution to serve as a banking system to the financially excluded 80%29. FINCA provides a range of services geared towards a lower-income client base. They provide “working capital, business and home improvement loans; savings products; money transfers; health insurance.” The organization also provide a solar energy loan product through FINCA that allows businesses to provide longer, safer hours of operation (by no longer having to depend on kerosene for fuel) and even providing new entrepreneurship opportunities such as mobile phone charging stations30. FINCA signed a partnership deal with a Ugandan business entity, aBi Trust, to provide these renewable energy components that are an essential part of the solar energy loan program. The aBi Trust group provides private sector agribusiness development in Uganda, as a part of the government’s Competitiveness and Investment Climate Strategy (CICS)31. FINCA is thereby partnering with existing Ugandan institutions in order to connect citizens with the necessary tools to grow their business. While FINCA allows for the general donation model, in which funds go towards its entity as a whole, or perhaps a specific regional program, a model of donor funding that most microfinance institutions depend on. FINCA however also allows direct online (also called crowdsourced) microfinancing of specific regional loans32. For example, a user can browse through profiles of borrowers that detail their needs and projects and provide small sums that go 29

Ibid FINCA. “FINCA Uganda partners with aBi Trust for Solar Power.” FINCA News. Web. 16 Dec 2014. <http://www.finca.ug/news/finca-uganda-partners-abi-trust-solar-power/>. 31 Agri Pro Focus. “Agribusiness Initiative (aBi) Trust.” Agri-Hub Uganda. Web. 16 Dec 2014. <http://apfuganda.ning.com/group/agribusiness-initiative-abi-trust>. 32 FINCA. “How It Works.” Lend a Hand. Web. 16 Dec 2014. <http://lendahand.finca.org/>. 30

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towards the borrowers’ small loans. This crowd-sourced funding is a new phenomenon in the social web. More detail on the theory and impact of the crowd-sourced model of microfinance will be given in the following section that focuses on Kiva, an organization that exclusively raises funds through this manner, but it is important to note that they are not alone in this fundraising model. Kiva in Uganda Program Summary: 5,300 clients, $3M loan portfolio, 9 outlets33 Kiva’s presence in Uganda is similar in structure to the above detailed microfinance groups, and is considered a peer group when discussing microfinance. However, Kiva works under a slightly different model: in Uganda they partner with a local microfinance group, UGAFODE, and in this partnership provide a variety of loan products focusing on rural customers, particularly lower income. However, Kiva itself does not actually provide these services on the ground, but simply act as the income generator to fund the microloans. Capitalizing on recent successes in crowdsourced funding, crowdsourced charity fundraising is a natural fit. Anyone browsing their website is able to contribute to the project of their choosing, and upon providing funding has access to the success of their portfolio and the projects they have supported. The success of Kiva’s model suggests it could be adopted by a variety of organizations. Crowdsourcing microfinance organizations “are not only better at extending credit to more people in need of loans, but that they can do so with impressive

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Kiva. "Kiva - UGAFODE Microfinance Limited." Kiva. N.p., n.d. Web. 16 Dec. 2014. <http://www.kiva.org/partners/222>.

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speed34.” Crowdsourced microfinance works within neoliberal motivations to expand the market while engaging the lowest rungs of a nation’s economy.

Case Analysis & Comparison Organization

Clients

Loan Portfolio

Branches

Grameen Foundation

undisclosed

undisclosed

undisclosed

FINCA

145,449

$26 million

27

BRAC

104,086

$14 million

130

Kiva

5,300

$3 million

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Having considered the work of the World Bank in Uganda in comparison to the work of BRAC, The Grameen Foundation, FINCA, and Kiva, some conclusions jump out immediately. One important consideration when comparing the work the microfinance institutions is the fact that none of them partner together on any Ugandan-based projects. When there are four very similar programs running in the same country, with similar missions, not to mention a UN mandate and massive World Bank Group funding also running massive projects in the country, why is there no cohesion among all these approaches? For example, BRAC and the Grameen Foundation have very similar programs in which they enable members of a community to become agents of an agricultural knowledge network, respectively called “agricultural promoters” or “community knowledge workers,” in programs that are so similar in structure and function that they are almost identical. Even if corralling all these organizations together would be difficult, it seems to be true that they are all working towards one common goal, and could collaborate even on specific initiatives. 34

Campbell, Gregor. "Microfinancing the Developing World: how small loans empower local economies and catalyse neoliberalism’s endgame." Third World Quarterly, Vol. 31, No. 7, pp 1081–1090. 2010. Print. Page 1082.

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As for the initial consideration of neoliberalism and alternate theoretical models, all the institutions show they are still working within the frame of neoliberalism. However, the microfinance aspect can prove to improve upon the social negatives accompanying neoliberal policies while still working within its frame: “the spreading of and innovation within the microfinance sector demonstrates a successful neoliberal initiative that is both socially conscious and economically beneficial. By connecting groups of poor individuals to lending institutions or affluent individuals in developed countries, microloans have been able to foster the strengthening of local economies, necessary for consuming life-improving technology, while incurring minimal risk to the lending party35.” Microfinance organizations help to increase the absorptive capacity in rural communities, allowing them to connect into their local economies and infrastructure. Their approach shows that it is possible to work within neoliberal global markets in ways that allows the poorest to become players in the economy. Another conclusion would be to consider the success of microfinance as a model for similar projects across organizations. A 2006 Harvard Business Review article noted that while microfinance projects have achieved great success in Uganda, other organizations should add it to their services and even suggests that microfinance be “promoted in a global campaign for microfinance heralded by the United Nations36.” To have a UN-mandated microfinance component in international aid would ensure that the poorest sector of the economy is able to plug into other aid flows, including the larger UN and World Bank aid. While adding microfinance to the range of services offered by aid organizations, considering the crowdsourcing model as a broad tactic is another conclusion that arises from comparison of Kiva and FINCA, which utilize crowdsourcing, and BRAC and the Grameen 35

Campbell. Page 1081. Hertz-Bunzl, Noah. "Financing Hope: Improving Microfinance." Harvard International Review. Vol. 27, No. 4, pp 32–34. 2006. Print. Page 33. 36

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Foundation, which as of yet do not. Kiva in particular has been able to raise funds and deliver them directly to their target populations much more quickly than the traditional microfinance organizations. Crowdsourcing is a gaining legitimacy and utility, with entire business and movie projects being financed directly through incremental donations. Kiva even breaks down an individual’s loan into small pieces, allowing multiple donors to commit even smaller amounts to a small loan. These models allow many individuals in developed economies to have the ability to donate feasible sums in a meaningful way, creating a unique online environment of cooperation where geographically disparate individuals donate at no financial return37. Online cooperative behavior is a largely unresearched topic, but it proves to have positive externalities in the example of Kiva. Another advantage that microfinance organizations have is that they are able to ensure that the money provided as aid reaches the intended source (an individual requiring a small amount of credit) directly. The World Bank’s focus in Uganda is on major infrastructure and growth projects. However, Uganda reportedly faces systemic corruption in governmental and public projects. In 2012, the World Bank Group issued a formal statement on recent allegations of misuse of public funds and stated that there needed to be better public management of resources in the Ugandan government38. When allegations of corruption arise, development partners such as the World Bank have to review their projects in a nation and consider whether additional resources should be committed if they run the risk of not reaching their intended goal. Microfinance institutions are evidently not free of corruption in entirety, but each has an extensive vetting process in place for their small loan recipients, and with small loans each risk is 37

Hartley, Scott. “Kiva.org: Crowd-Sourced Microfinance & Cooperation in Group Lending.” Digital Access to Scholarship at Harvard. March 2010. Print. 38 World Bank. “World Bank Group Statement on Recent Corruption Cases in Uganda.” News. Web. 16 Dec 2014. <http://www.worldbank.org/en/news/press-release/2012/11/14/world-bank-group-statement-on-recent-corruptioncases-in-uganda>.

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relatively minimal. Large injections of capital are by nature more risky where corruption is prevalent, putting the World Bank at a natural disadvantage in this comparison. When comparing all the microfinance organizations, the easy conclusion is that their model is successful, and this is not a false assumption. However, certain critiques of microfinance have arisen, and should be taken into account by organizations to continue to reach as many individuals in the most significant way possible. Suggestions that microfinance organization do not reach the “core poor” and that they are increasingly turning to commercialization in their services rather than focusing on providing credit are valid39. Microfinance is of course relatively new as a widespread technique in international development, and organizations looking to expand their services accordingly can take these criticisms into account when designing their programs. It is also important when analyzing increased network capacity in rural communities to consider the potential effects of information technology and whether there are any negative externalities. While communication technology, like that provided by many microfinance organizations, allows rural areas to bypass traditional industrial processes, these technologies “can foster a net outflow of resources from rural areas, these technologies often serve to undermine the long-term economic viability of rural communities40.” Awareness of these patterns is necessary to ensure that once the recipient of a small loan has established their enterprise, they do not feel compelled to leave their community for a metropolitan area.

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Hermes, Niels and Robert Lensink. "Impact of Microfinance: A Critical Survey." Economic and Political Weekly. Vol. 42, No. 6, pp 462–465. 2007. Print. Page 464. 40 Garcia, D. Linda. “Cooperative Networks and the Rural-Urban Divide.” Print.

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Conclusions In conclusion, international development aid programs and policies that deliver loans directly to impoverished citizens in a nation and programs and policies that provide large injections of capital into a governmentâ&#x20AC;&#x2122;s infrastructure are arguably both equally necessary to achieve the global goal of decreasing poverty rates. Both approaches should, however, start to work more in tandem. Projects that the World Bank sponsors that develop infrastructure, improve governance, improve overall economic stability, and so on, are not in fact useful to the most impoverished in a nation if its citizens cannot even access this infrastructure. The subsistence farming community that represents a large portion of the populations served by microfinance institutions can benefit greatly from services that allow them to extend their network and connect to the national infrastructure. Addressing global poverty from multiple dimensions, including both economic and social capital flows, as well as taking advanced communication technologies into consideration, will prove to be crucial in the next decades of international development.

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