Susan Johnson

Assessing the Impact of Microcredit: A Zambian Case Study

Expectations are high, but evidence of the impact of microcredit remains in short supply. This article estimates the impact of an urban credit programme in Zambia on business performance and on a range of indicators of wellbeing. Borrowers who obtained a second loan experienced significantly higher average growth in business profits and household income. Inflexible group enforcement of loan obligations resulted in some borrowers, especially amongst those who had taken only one loan, being made worse off. Our methodological investigations suggest that the supply of rigorous impact studies can be increased by basing them on data collection that serves a wider range of purposes, including market research.

Financial access and exclusion in Kenya and Uganda

Abstract Policy emphasis has recently shifted to ‘Finance for All’ given evidence that financial sector development contributes to growth but effects on poverty do not arise from pro-poor provision. We argue that, given this policy goal, analyses of barriers to access must be country specific and go beyond the emphasis on transactions costs to incorporate the effects of social institutions since these contribute to discrimination. This paper uses data from Financial Access Surveys carried out in 2006 in Kenya and Uganda to investigate the socio-economic, demographic and geographical factors influencing access to and exclusion from formal, semi-formal and informal financial services.

Rural Financial Markets

In this valuable new book, a distinguished group of authors takes stock of the existing state of knowledge in the field of finance and the development process. Each chapter offers a comprehensive survey and synthesis of current issues. These include such critical subjects as savings, financial markets and the macroeconomy, stock market development, financial regulation, foreign investment and aid, financing livelihoods, microfinance, rural financial markets, small and medium enterprises, corporate finance and banking.

The managed ASCA model – innovation in Kenya's microfinance industry

A model of microfinance has been operating in the Central Province of Kenya since the early 1990s largely unnoticed by donors. The model involves the mobilization of women into accumulating savings and credit associations by local NGOs that assist in the management of the fund in return for a management fee. The approach was developed in the early 1990s as a result of the withdrawal of donor support to traditional womens group activities and the local NGOs are now entirely self-supporting. The outreach of the services is comparable to the main donorfunded initiatives and evidence suggests that depth of outreach to poorer people may in fact be better. This paper describes the model and explains its apparently successful performance. However, the analysis also suggests that the model has inherent weaknesses, especially in default management, that need to be addressed if its success is to continue.

Inclusive Financial Markets: Is Transformation Under Way in Kenya?

Policy emphasis on financial-sector development has shifted away from microfinance and towards the development of ‘inclusive financial markets’. But, for inclusion to take place, policy must address barriers to access. This article analyses the socio-economic, demographic and geographical factors associated with financial-service use across formal, semi-formal and informal financial services in Kenya between 2006 and 2009, including the new and rapidly growing mobile-phone-based payments service – M-PESA. It finds that, despite an expansion of services, evidence of access barriers is now clearer than it was in 2006. However, there is some evidence that M-PESA is reversing age as a barrier to inclusion, but, as yet, it is more of a complement than a substitute for formal services.

From Microfinance to Inclusive Financial Markets: The Challenge of Social Regulation

Policy towards microfinance has undergone a shift away from building financial institutions focused on serving poor people to an “inclusive” agenda for financial sector development, operationalized by some donors in an approach entitled “Making Markets Work for the Poor”. This approach is located in New Institutional Economics and the enabling environment focus of the post-Washington Consensus. Despite the way in which this inclusion agenda echoes social exclusion discourse, it engages with a residualist rather than relational understanding of poverty. This leads to an analytical disjuncture between its discourse and analysis, overlooking the root causes of poverty and exclusion in relational processes. Arising from this is the failure to recognize that developing institutions and “enabling” environments require an understanding of social institutions and their influence as social regulatory structures. The author illustrates how analysis can proceed to address this disjuncture using the example of gender relations.

Fragmentation and Embeddedness: An Alternative Approach to the Analysis of Rural Financial Markets

Political economy approaches to analysing the efficiency of rural financial markets have focused on the role of power and social relations. Neo-classical institutional economics, on the other hand, has used information and transaction costs to explain performance. Recognizing the limitations of both approaches, this paper presents an alternative that focuses on the institutional form of financial intermediaries, that is, the governance structure of rules, monitoring and enforcement mechanisms that enable them to operate. This structure is supported by both formal and informal rules, norms and sanctions. As a result, the ways in which transaction costs are affected by governance structures can be identified and the embeddedness of financial intermediaries in social relations can be theorized. The application of this approach in Central Kenya demonstrates the insights that it offers into explaining borrower preferences in the financial market.

Microfinance and gender: issues, challenges and the road ahead

Abstract This special collection examines the claim that microfinance promotes gender equality. The focus is on three areas of the debate: first, the question of how successful microfinance has been in empowering women; second, whether and how negative gender discrimination operates within the sector; third, how power relations within and beyond the household shape the context and outcomes of microfinance initiatives. The papers in this collection demonstrate the divergence of circumstances and emphasise the need to go beyond the past searches for a simple narrative regarding the impact of microfinance. Rather, as the sector evolves and is incorporated into the mainstream financial system, the challenge ahead for researchers is to marshal the evidence on gendered dynamics to ensure that the gains made are built on through deeper understanding of why impact outcomes and processes differ and use this to inform new initiatives to further gender equality.

Competing visions of financial inclusion in Kenya: the rift revealed by mobile money transfer

ABSTRACT Financial inclusion policy has been ignited globally by the rise of money transfer services over mobile phones led by the example of Kenya. This article examines the financial practices of low-income people and the social relational dimensions of debt that underlie these transactions, and contrasts these with widely used services of informal groups and banks’ services. This highlights a “fiduciary culture” where relationships of equality and “negotiability” dominate in contrast to a tendency towards hierarchical relations with banks. This questions policy-makers’ expectations that mobile money transfer will seamlessly facilitate engagement with the formal sector for savings and credit.

‘We don’t have this is mine and this is his’: managing money and the character of conjugality in Kenya

Abstract In the context of calls for more nuanced understanding of marriage as a dynamic institution, this paper addresses a gap in the literature on intra-household financial management. It examines financial management systems and levels of cooperation among 51 married couples in Kenya. It first presents a typology of intra-household financial management arrangements and then examines how this relates to the nature of cooperation between couples. It reveals a wide spectrum of cooperation which highlights the neglected case of strong cooperation, which is found to be more frequent among younger couples. There is some evidence that this is the result of changing ideologies towards companionate marriage but there is also evidence of life-cycle influences which result in declining cooperation over time.