The European Journal of Development Research

, Volume 22, Issue 4, pp 529–545 | Cite as

Rethinking the Impact of Microfinance in Africa: ‘Business Change’ or Social Emancipation

  • Leo de Haan
  • Alfred Lakwo
Original Article


This article 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 the well-being of microfinance clients much, with only marginal well-being gains achieved by clients. However, a subsequent (gender) power relations analysis reveals that in spite of these marginal well-being gains, women clients achieved more emancipation. The article therefore calls for a rethinking of the microfinance outreach campaign in Africa, and of the controversy between the adoption of a business or welfarist approach to microfinance, suggesting that social emancipation should be pursued in its own right rather than waiting for poverty reduction to occur first.

Cet article remet en question l’idée préconçue selon laquelle les bénéfices de la micro-finance consistent tout d’abord en une réduction de la pauvreté, suite à laquelle s’opère une émancipation sociale. En se basant sur le cas de l’Ouganda, et en utilisant un test de pertinence consensuel qui se focalise sur les individus afin d’évaluer l’impact de la micro-finance sur l’atténuation de la pauvreté, cet article montre que les projets de micro-finance n’améliorent pas énormément le bien-être des clients, leurs gains de bien-être étant marginaux. Cependant, une analyse plus récente des rapports de genre révèle que malgré la faiblesse des gains de bien-être, les femmes clientes de micro-finance parviennent à s’émanciper davantage que les femmes non-clientes. Cet article propose donc de réexaminer la campagne d’information sur le micro-crédit en Afrique ainsi que la controverse entre l’adoption d’une approche welfariste ou commerciale à la micro-finance, suggérant que l’émancipation sociale devrait être un objectif à part entière et non pas dépendant d’une réduction préalable de la pauvreté.


microfinance livelihoods gender poverty alleviation Uganda 


  1. ABP. (2007) ABP Magazine. 9: 6.Google Scholar
  2. Baker, J. (2000) Evaluating the Impact of Development Projects on Poverty: A Handbook for Practitioners. Washington DC: World Bank.CrossRefGoogle Scholar
  3. Barnes, C., Gaile, G. and Kibombo, R. (2001) The impacts of three microfinance programmes in Uganda,
  4. Bebbington, A. (1999) Capitals and capabilities: A framework for analysing peasant viability, rural livelihoods and poverty. World Development 27 (12): 2021–2044.CrossRefGoogle Scholar
  5. CGAP. (1995) Micro and Small Enterprise Finance: Guiding Principles for Selecting and Supporting Intermediaries. Washington DC: Consultative Group to Assist the Poor,
  6. CPC. (2009) Escaping Poverty Traps. Chronic Poverty Report 2008–09. Manchester, UK: Chronic Poverty Research Center.Google Scholar
  7. Daley-Harris, S. (2007) State of the Microcredit Summit Campaign Report. Washington DC: Microcredit Summit Campaign.Google Scholar
  8. de Haan, L. and Zoomers, A. (2005) Exploring the frontier of livelihood research. Development and Change 36 (1): 27–47.CrossRefGoogle Scholar
  9. Ditcher, T. (1997) Appeasing the gods of sustainability: The future of international NGOs in microfinance. In: D. Hulme and M. Edwards (eds.) in association with Save the Children Fund, NGOs, States, and Donors: Too Close for Comfort? London: Macmillan Press, pp. 128–139.Google Scholar
  10. Dunford, C. (2003) The holy grail of microfinance: ‘Helping the poor’ and ‘sustainable?’ In: M. Harper (ed.) Microfinance: Evolution, Achievements and Challenges. London: ITDG Publisher, pp. 37–51.Google Scholar
  11. Dzingirac, V. (2002) Saving to death: A study of group based and other saving arrangements in rural Chivic district, Zimbabwe,
  12. Edgecomb, E. and Barton, L. (1998) Social Intermediation and Microfinance Programs: A Literature Review. Washington DC: Microenterprise Best Practices Project USAID.Google Scholar
  13. Fitch, B. and Sorensen, L. (2007) The case for accelerating profit-making at the base of the pyramid: What could and should the donor community be seeking to do, and what results should it expect? Journal of International Development 19: 781–792.CrossRefGoogle Scholar
  14. Goodwin-Groen, R. and Latorture, A. (2004) Uganda Microfinance Effectiveness Review. Washington DC: Consultative Group to Assist the Poor.Google Scholar
  15. Gorelick, S. (1991) Contradictions of feminist methodology. Gender and Society 5 (4): 459–477.CrossRefGoogle Scholar
  16. Grimpe, B. (2002) Rural Microfinance Clients in Uganda: FINCA Client Analysis, FSD Series 6. Kampala, Uganda: Financial System Development Project, Bank of Uganda-GTZ.Google Scholar
  17. Guion, L. (2002) Triangulation: Establishing the Validity of Qualitative Studies. Gainesville, FL: Institute of Food and Agricultural Sciences, University of Florida.Google Scholar
  18. IFAD. (2001) Rural Finance: From Unsustainable Projects to Sustainable Institutions for the Poor. Rome: GMS Grafiche.Google Scholar
  19. Kabeer, N. (2001) Conflict over credit: Re-evaluating the empowerment potential of loans to women in rural development. World Development 29 (1): 63–84.CrossRefGoogle Scholar
  20. Kabeer, N. and Rajasekhar, D. (1997) Micro Credit and its Impact on Poverty, Well-Being and Gender Equity: Some Evidence from Bangladesh and India. Kerala: International Workshop on ‘Gender, Poverty and Well-being: Indicators and Strategies’ UNRISD, UNDP, CDS.Google Scholar
  21. Lairap-Fonderson, J. (2002) The disciplinary power of microcredit. Examples from Kenya and Cameroon. In: J. Parpart, S. Rai and K. Staudt (eds.) Rethinking Empowerment. Gender and Development in a Global/Local World. London and New York: Routledge, pp. 183–198.Google Scholar
  22. Lakwo, A. (2003) Access to Financial Services in Nebbi District, Uganda. Nebbi, Uganda: Unpublished Reconnaissance Inventory.Google Scholar
  23. Lakwo, A. (2007) Microfinance, Rural Livelihood and Women's Empowerment in Uganda. Leiden, the Netherlands: African Studies Centre.Google Scholar
  24. Lont, H. and Hospes, O. (2004) Introduction. In: H. Lont and O. Hospes (eds.) Livelihood and Microfinance. Anthropological and Sociological Perspectives on Savings and Debts. Delft, the Netherlands: Uberen Academic Publishers, pp. 3–24.Google Scholar
  25. Mayoux, L. (2001) Tackling the downside: Social capital, women's empowerment and microfinance in Cameroon. Development and Change 32 (3): 435–464.CrossRefGoogle Scholar
  26. Mayoux, L. (2002) Women's empowerment versus sustainability? Towards a new paradigm in microfinance programmes. In: B. Lemire, R. Pearson and G. Campbell (eds.) Women and Credit: Researching the Past and Refiguring the Future. Oxford/New York: Berg Publishers, pp. 245–269.Google Scholar
  27. Morduch, J. (1999) The microfinance promise. Journal of Economic Literature 37 (4): 1569–1614.CrossRefGoogle Scholar
  28. Morduch, J. (2000) The microfinance schisms. World Development 28 (4): 617–629.CrossRefGoogle Scholar
  29. Mosley, P. (1997) The Use of Control Groups in Impact Assessments for Microfinance. Working Paper No. 19. Geneva, Switzerland: ILO, Enterprise and Cooperative Development Department, Social Finance Unit.Google Scholar
  30. Mutesasira, L., Sempangi, H., Hulme, D., Rutherford, S. and Wright, A. (1998) Use and Impact of Savings Services among the Poor in Uganda. Kampala, Uganda: Microsave.Google Scholar
  31. Osmani, L. (2007) A breakthrough in women's bargaining power: The impact of microcredit. Journal of International Development 19: 695–716.CrossRefGoogle Scholar
  32. Otero, M. (1994) The Evolution of Nongovernmental Organizations toward Financial Intermediation. In: M. Otero and E. Rbyne (eds.). The New World of Microenterprise Finance: Building Healthy Institutions for the Poor. West Hartford, CT: Kumarian Press, pp. 94–104.Google Scholar
  33. Richardson, D. and Lennon, B. (2001) Teaching Old Dogs New Tricks: The Commercialization of Credit Unions. Washington DC: Microenterprise Best Practices Project USAID.Google Scholar
  34. Rosenberg, R. (2007) CGPA Reflections on the Compartamos Initial Public Offering: A Case Study on Microfinance Interest Rates and Profits. Focus Note No. 42. Washington DC: CGPA.Google Scholar
  35. Rowland, J. (1997) Questioning Women's Empowerment: Working with Women I Honduras. Oxford: Oxfam UK and Irelands.CrossRefGoogle Scholar
  36. Schicks, J. (2007) Development impact and coexistence of sustainable and charitable microfinance institutions: Analysing Bancosol and Grameen Bank. The European Journal of Development Research 19 (4): 551–568.CrossRefGoogle Scholar
  37. Schreiner, M. and Yaron, J. (2000) Ways donors can help the evolution of sustainable microfinance organisations. Savings and Development 24 (4): 423–437.Google Scholar
  38. Sievers, M. and Vandenberg, P. (2007) Synergies through linkages: Who benefits from linking microfinance to business development services. World Development 35 (8): 1341–1358.CrossRefGoogle Scholar
  39. UBOS. (2001) Socio-Economic Survey Report of Nebbi District. Kampala, Uganda: Uganda Bureau of Statistics.Google Scholar
  40. Varley, A. (1996) Women heading households: Some more equal than others? World Development 24 (3): 505–520.CrossRefGoogle Scholar
  41. Wright, K. (2003) Problems? What problem? We have none at all. Qualitative data collection for impact assessment. Getting the questions right. Journal of Microfinance 5 (1): 115–138.Google Scholar
  42. Wright, K. and Copestake, J. (2004) Impact assessment of microfinance using qualitative data: Communicating between social scientists and practitioners using QUIP. Journal of International Development 16: 355–367.CrossRefGoogle Scholar
  43. Zeller, M. (2001) Promoting institutional innovation in microfinance. Replicating best practices is not enough. Development and Cooperation 1: 8–11.Google Scholar

Copyright information

© European Association of Development Research and Training Institutes 2010

Authors and Affiliations

  • Leo de Haan
    • 1
  • Alfred Lakwo
    • 2
  1. 1.Institute of Social Studies – Erasmus University RotterdamThe Hague.
  2. 2.Uganda Martyrs University – Institute of Ethics and Development StudiesNkozi

Personalised recommendations