The political economy of microfinance: a Nicaraguan case study

This thesis eschews an econometric approach to the analysis of microfinance initiatives in favour of a wider, political economy approach. It paints a picture of the international financial and socio-economic environment in which microfinance as a practice has developed since the mid-1970s, and the introduction outlines the political agendas that fuel the theoretical debate over development, and the manner in which the self-proclaimedly objective scientific rationale that underlines the dominant neoliberal hegemony is in reality no such thing. The introduction is followed by a methodological explanation of the necessity to examine microfinance in such a context, and then deals with the combination of approaches included in the thesis, sources, and data-collection methods of the fieldwork in Nicaragua. The next three chapters comprise the body of theoretical and literary evidence in support of this methodology, from the international down to the sectoral level within Nicaragua. Having located the Nicaraguan microfinance sector within a theoretical, international and national context, the subsequent chapter moves to examine the local context. The fieldwork in Nicaragua culminates in a combined map- and questionnaire-based exercise set in Masaya, a city some 27 kilometres roughly south of Managua, the capital. The chapter examines the structure and functions of two local microfinance organisations, FAMA and ADIM, and conducts a close examination of the population amongst which these microfinance organisations operate. The survey of the socioeconomy of households within the Masaya area concludes by casting doubts on, traditional methods of microfinance impact assessment, and suggests a different approach to studying microfinance. The thesis concludes by suggesting that the current vogue for envisaging microfinance initiatives as purely financial operations to be analysed as an accounting phenomenon is not only mistaken, but has potentially damaging consequences. The thesis argues that microfinance must be seen within local, national and international political contexts, and that doing so will help avoid costly errors. The thesis also suggests that the demand for new client-orientated initiatives will be assisted by taking the political economic reality into account, and by using methods such as those suggested by this thesis.