The Political Impact of Microfinance in Senegal
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Economic Empowerment and Political Participation: The Political Impact of Microfinance in Senegal Patrice Z. Howard Submitted in Partial Fulfillment of the requirements for the degree of Doctor of Philosophy in the Graduate School of Arts and Sciences COLUMBIA UNIVERSITY 2013 ©2012 Patrice Z. Howard All Rights Reserved ABSTRACT Economic Empowerment and Political Participation: The Political Impact of Microfinance in Senegal Patrice Z. Howard In recent years there has been significant attention paid to microfinance not only as an anti-poverty and economic empowerment tool, but also as a socially transformative process by which poor and marginalized men and women can become empowered to change the social landscape and power structures in the societies in which they live. More technically, Microfinance refers to an industry that offers a range of financial services including small loans (micro-credit), savings, insurance products and more to markets not previously serviced with banks or other formal lending institutions. In an era in which international development is linked to transforming undemocratic societies, an important question for social scientists is how and whether economic development programs affect the political behavior and attributes of program participants. This study addresses that question in the context of microfinance and explores whether participation in microfinance programs has affected the political behavior and opinions of microfinance recipients. Microfinance is oft associated with Muhammed Yunus and the Grameen Bank and both became well known when they were awarded the Nobel Peace Prize for their work with the rural poor in Bangladesh in 2006. As a result, many people believe that microfinance began with the Grameen Bank and that most microfinance programs follow the Grameen Bank model of lending to women’s groups who must meet regularly and adhere to a set of stringent rules and requirements set forth by a lending organization. The positive, non-economic externalities of microfinance are thus often credited to the social capital generated within the group borrowing experience. This project explores the political impact of microfinance on individual clients by investigating the political attitudes and behaviors of microfinance clients and non-microfinance clients alike. It makes a case for taking into consideration the significant variation of lending and borrowing practices within the micro-credit component of the microfinance industry by exploring the microfinance industry in Senegal, West Africa were microfinance has been operating in both the formal and informal economies for decades. This study joins the growing research in social science centered on exploring the political implications of individual-targeted development programs by empirically examining the political behavior and attitudes of program participants. It also joins the established literatures in political theory and political science on what motivates individuals to become politically active, and the effect of economic inputs on an individual’s propensity to engage in political activities. Using an original survey of more than 700 Senegalese citizens in the administrative department of Guediawaye, Senegal, the study finds that microfinance in Senegal is vastly different from more popular notions of microfinance. The overwhelming majority of microfinance clients in Senegal borrow as individuals, and not as members of groups. Both men and women are active in the micro-credit industry and more than 18% of adults in Senegal have experience with micro-credit loans. By using econometric analysis to compare the political activities of microfinance borrowers and non-microfinance borrowers, group and individual microfinance borrowers, and pre-microfinance borrowing political participation to post-microfinance political participation, this study offers a more nuanced and accurate understanding of the relationship of microfinance to political participation. It explores how ideas of political and economic empowerment and what motivates people to become politically active translates across different contexts. The study concludes that microfinance is positively and significantly associated with political participation, and social capital, that microfinance and the various forms of social capital matter more for some forms of participation than for others, and that microfinance experience does not systematically cause an increase in political participation, through social capital or any other mechanism. Chapter One provides an overview of the project, its research questions, hypotheses and fundamental motivations. It introduces the concept of microfinance and offers a brief discussion of the theoretical contributions of the study. Microfinance is part of a development paradigm that places the economic development program at the level of the individual, rather than aid to the state. Due to the popularity of Muhammed Yunus and the Grameen Bank, a singular conception of microfinance is often at work in narratives on microfinance and economic empowerment, which includes a group-lending structure. That microfinance programs should politically empower program participants has been attributed to the dual processes of economic empowerment and social transformation embedded in the Grameen Bank model. The wide variation in the microfinance industry and the research on political participation in the field of political science call into question the current assumptions about the affect of individual-focused economic empowerment programs and individual-level political participation. Chapter Two reviews the literatures on microfinance and political participation, social capital and political participation, and individual characteristics and attitudes towards political participation. This chapter emphasizes that the current literature and policy attitudes towards microfinance and political participation focus mainly on the group-borrowing model and its potential for generating increased trust and mutual cooperation among members of the same borrowing group. It demonstrates that both small and large-scale studies have neglected to consider the diversity of organizational and lending structures within the microfinance community as well as what political scientists and political theorists have said (and established) about individual characteristics that affect a person’s propensity and attitude toward political participation. This chapter lays out those theoretical arguments and relates them to microfinance and political participation. This chapter also presents empirical evidence concerning relevant individual indicators of political participation in the context of Senegal, West Africa, which were heretofore understudied. Chapter Three provides an explanation of Senegal as the setting for the research project. It presents relevant background information on political, social and economic features of life in Senegal and on the department of Guediawaye where the survey for the study was implemented. This chapter also includes the existing theoretical arguments and hypotheses about the relationship between microfinance and political participation and outlines my own argument about how microfinance may affect political participation in the Senegalese and other contexts. Chapter Four details the survey methodology and describes the data collected for the research project. Using random, multi-stage cluster sampling, the data collected for the survey is close to national census demographic data. The data reveal that microfinance borrowers in Senegal overwhelmingly borrow as individuals and not in groups, which affects the ways we think about the relationship of microfinance to social capital and microfinance to political participation. Microfinance borrowers are more likely to take part in political activities than are non-microfinance borrowers. Microfinance borrowers are also more likely to be employed and have, on average, higher levels of income than non-microfinance borrowers. The data in this chapter reveal that there are grounds for drawing a positive association of microfinance to political participation, but that further analysis is necessary to develop a causal story. The sections in Chapter Five include tests of the current hypotheses about the nature of the relationship of microfinance to political participation using the dataset compiled for this research project. Recall from previous chapters that the current literature on microfinance and political participation emphasizes social capital as the exclusive mechanism by which microfinance and political participation are linked. As a result, higher participation rates seen among microfinance borrowers are attributed to improved attitudes of trust and mutual cooperation among microfinance borrowers. The data reveal that only certain forms of social capital are linked to microfinance and political participation. The data also show that the extent to which microfinance and certain dimensions of social capital increase the likelihood of participation depends on the activity in question. Microfinance matters more for some activities than others, and certain forms of social capital matter more for some political activities and less for others. This chapter also includes tests of other explanations of political participation from the political science literature including the role of individual characteristics such as age, gender, income, education and employment status as well as the effect of political party