Entreprenuership and Microfinance
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ENTREPRENUERSHIP AND MICROFINANCE: ECONOMIC DEVELOPMENT AND WOMEN'S EMPOWERMENT IN KYRGYZSTAN by AIDA A. JOLOSHEVA A THESIS Presented to the Department ofInternational Studies and the Graduate School ofthe University of Oregon in partial fulfillment ofthe requirements for the degree of Master ofArts June 2010 11 "Entrepreneurship and Microfinance: Economic Development and Women's Empowerment in Kyrgyzstan," a thesis prepared by Aida A. Jolosheva in partial fulfillment ofthe requirements for the Master ofArts degree in the Department of International Studies. This thesis has been approved and accepted by: Anita M. Weiss, Chair ofthe Examining Committee Committee in Charge: Dr. Anita M. Weiss, Chair Dr. Laura Leete Dr. Shankha Chakraborty Accepted by: Dean ofthe Graduate School 11l An Abstract ofthe Thesis of Aida A. Jolosheva for the degree of Master ofArts in the Department ofInternational Studies to be taken June 2010 Title: ENTREPRENUERSHIP AND MICROFINANCE: ECONOMIC DEVELOPMENT AND WOMEN'S EMPOWERNIENT IN KYRGYZSTAN Approved: Dr. Anita M.Weiss This thesis focuses on microfinance in Kyrgyzstan as a response to the initiation ofeconomic, social and political reforms following Kyrgyzstan's independence in 1991. These reforms accelerated Kyrgyzstan's transition from a centrally-planned to a liberal market-based economy. Microfinance became a favored mechanism for encouraging individual entrepreneurship and thus economic development. Based on field research I conducted in Kyrgyzstan during the summer of2009, this thesis examines the economic impact ofthese reforms on women entrepreneurs, as women were particularly vulnerable to the social fallout from such reforms. Through participatory observation, small focus groups and semi-structured interviews, I analyze myriad aspects ofthe lives ofwomen entrepreneurs who have participated in a microfinance project. I argue that microfinance provides an empowering, sustainable path for them. However, the historical occupational divisions encouraged by the Soviet Union affect how people use microcredit. I conclude with suggestions on improving microfinance practices in Kyrgyzstan. IV CURRICULUM VITAE NAME OF AUTHOR: Aida A. Jolosheva PLACE OF BIRTH: Bishkek, Kyrgyzstan DATE OF BIRTH: January 27, 1984 GRADUATE AND UNDERGRADUATE SCHOOLS ATTENDED: University of Oregon University ofMaine DEGREES AWARDED: Master ofArts in International Studies, 2010, University of Oregon Master ofArts in Public Administration, 2010, University of Oregon Graduate Certificate in Non-Profit Management, 2009, University ofOregon Bachelor ofArts in Financial Economics, 2006, University ofMaine Bachelor ofArts in International AffairslEconomics, 2006, University ofMaine AREAS OF SPECIAL INTEREST: Comparative Development Microfinance Entrepreneurship Gender in Development Planning PROFESSIONAL EXPERIENCE: Graduate Teaching Fellow, Department ofInternational Studies, University of Oregon, September 2008 - June 2010 Intern, United Nations Peace and Development Programme, Bishkek, Kyrgyzstan, July 2009 Development Lending Group Intern, Mercy Corps, Bishkek, Kyrgyzstan, July September 2008 GRANTS, AWARDS AND HONORS: Center on Diversity and Community, University of Oregon, 2009 PPPM Travel Grants, University ofOregon, 2009 v Carlton & Wilberta Ripley Savage Endowment for International Relations and Peace Fellow, University of Oregon, 2009 Clancy Thurber Award, University of Oregon, 2008-2009 Fighting Fund Fellowship, University of Oregon (2007-2008) Full International Tuition Scholarship, University ofMaine, 2002-2006 VI ACKNOWLEDGMENTS I express my sincere gratitude to my thesis committee chair Dr. Anita M. Weiss for providing me inspiration, a tremendous amount ofguidance, personal and academic support throughout my studies at the University of Oregon. I thank to Dr. Shankha Chakraborty and Dr. Laura Leete for their encouragement and their invaluable advice, which greatly improved my thesis. I am grateful to my friends in the International Studies Department, especially Aditi, Eli and Lia, who were there for me when I needed them the most through thesis chapter edits, suggestions, and moral support. I am extremely grateful to women and men who took time offto participate in my research and help me understand their struggles in building and expanding their entrepreneurships. This study would not have been successful without the love and support ofmy family. I am grateful to Sadyrova Ainakan Alymbekovna for being the most supportive mother, true friend, mentor, and for accompanying me to Osh, Uzgen and Talas (Pokrovka) for fieldwork. I am grateful to Sadyrova Gulnara Alymbekovna and Eshimbetova Kadicha Turganbaevna for helping me contact interviewees in their communities. VB I dedicate this thesis to my mother and to the women ofKyrgyzstan, whose courage and hard work continues to be a source ofstrength, admiration and inspiration for me. Vlll TABLE OF CONTENTS Chapter Page I. INTRODUCTION . Research Questions................................................................................................ 4 Methodology 8 Methodological Notes: Validity and Other Issues 13 Choosing Research Sites........................................................................................ 14 Significance ofthe Study....................................................................................... 16 II. BRIEF ECONOMIC HISTORY OF KyRGyZSTAN........................................... 17 Country Profile....................................................................................................... 18 Historical Background: Kyrgyz Nomads............................................................... 20 Economic Reforms: During the Soviet Union 22 Economic Reforms: After Independence 27 Power Shift: the Tulip Revolution of2005............................................................ 30 Power Shift: April 7, 2010 Events.................................................... 31 What Lies Ahead? 33 IX Chapter Page III. MICROFINANCE AND THE PROMISE OF SOCIAL CHANGE 36 Microcredit and Development 36 Microfinance Models......................................... 40 Critiques ofMicrocredit......................................................................................... 44 Microcredit and Entrepreneurship 47 Microfinance in Kyrgyzstan: History and Actors 54 IV. CASE STUDIES: REGIONAL DIFFERENCES.................................................. 64 Case Study I: Osh and Uzgen, Multi-Ethnic Mixes............................................... 64 Overview ofOsh and Uzgen............................................................................ 64 Issues Addressed.............................................................................................. 67 Interview Details.............................................................................................. 69 Case Study II: Pokrovka, Border Issues 76 Overview ofPokrovka and Talas..................................................................... 76 Interview Details.............................................................................................. 78 V. INTERPRETATIONS AND CONCLUSION 85 APPENDICES 94 A. FOCUS GROUP ACTIVITY RESULTS 94 B. SEMI-STRUCTURED INTERVIEW QUESTIONS 97 BIBLIOGRAPHy........................................................................................................ 99 x LIST OF FIGURES Figure Page 1. Map ofKyrgyzstan 15 2. Kyrgyzstan in the world......................................................................................... 19 3. Map ofCentral Asia............................................................................................... 22 Xl LIST OF TABLES Table Page 1. Macroeconomic Indicators in Kyrgyzstan, 1991-1997.......................................... 29 2. Microcredit Institutions Client and Loan Portfolio Information............................ 58 3. Microfinance Organizations and their Loan Portfolios......................................... 61 1 CHAPTER I INTRODUCTION The old Soviet education did not prepare us to the market-driven world. Many people who I studied with lost their jobs after the Soviet Union broke up. My wife and I were lucky we did not lose ourselves in chaos that was happening immediately after the independence. We secured a combination ofloans from private banks, nonprofit organizations and relatives to buy machinery from the local Soviet plants. The government was dismembering machinery and selling parts to private investors in and mostly outside ofthe country. We wanted to keep the machinery in the country. Later, I was part ofthe training program initiated by the USAID through Consulting & Co. I attended workshops in California, USA where I learned ways of organically growing and fertilizing crops. In 2008 we had American farmers as guests in our house. They showed lis techniques ofcanning tomatoes. The USAID program has been helping us to market and sell our products (Arnan Aliev' and Bubusara Alieva, interview notes, Uzgen, 2009). Kyrgyz entrepreneurs lack knowledge oftheir individual rights. They should learn about local and national laws, different roles and responsibilities ofvarious government agencies. I noticed that even people with advanced education and degrees can become victims ofexcessive "check-ups", taxes and unnecessary procedures (Clara Balykchieva, interview notes, Osh, 2009). 2 3 Entrepreneurs like Aman baike , Bubusara eje and Clara eje are a few examples ofmany struggling business owners in Kyrgyzstan. In the summer of2009 I set out to 1 Please note