Networking against poverty? Mechanisms of participation in village savings & loans associations in Northern Malawi

Abstrakt

‘Access for All’ often sounds as the goal of microfinance, but financial exclusion of particularly the poorest groups is a recurrent issue. Social capital, understood as the possibilities of individuals to take advantage of social relations, is often viewed to carry huge potential for poverty alleviation through group-based development methodologies such as microfinance. This assumption has recently been questioned by scholars, who claim that the poorest are structurally hindered from group participation. While much literature exists on participation after group formation within microfinance, little investigation focuses on the access to groups. This thesis investigates the potential of social capital to secure financial inclusion of the poorest through participation in Village Savings & Loans Associations (VSLAs) in the particular context of Northern Malawi. It thus aims at contributing to the debate on financial inclusion of the poorest through group-based development. Through a qualitative case study, inspired by participatory approaches, investigating four case VSLAs through interviews, group sessions and key informant meetings this paper has identified constraints to participation of the poorest in the particular setting of Northern Malawi. A conceptualization of poverty based on a goods-based and a capability-based approach constitutes the definition of the poorest. The issue of participation is investigated through the theoretical lens of social capital and the particular framework of structural and cognitive forms of. Participation is explored through seven dimensions: Rules & Roles, Social relations, Cooperation, Solidarity, Generosity, Trust & Reciprocity and Reputation. The latter is an addition to the original frame work of Norman T. Uphoff. Its importance emerged during the field work. The extent to which these dimensions provide for collective action for mutual benefit (social capital) has implications to the success of group-based development. The paper thus studies the implication of these dimensions on participation of the poorest in VSLAs, a group-based development methodology. This study concludes that the structural features of social capital are present to provide for collective action for a mutual benefit, and that especially social relations are essential and have positive implications for participation of the poorest. From the perspective of cognitive dimensions there are general motivations towards cooperation, solidarity and, to some extent, generosity, providing evidence of direct appreciation of the poorest inclusion in the VSLAs. Alternatively, trust and reciprocity display a lack of trust in the poorest’ abilities (physical and educational) to participate and possible self-exclusion due to lack of trust in underlying motivations and obligations to reciprocity. Reputation seemingly has ambiguous effects on this group’s participation. Social capital theory maintains its importance as a conceptual frame, but as for its potential to provide financial inclusion in group-based development particular sensitivity to different dimensions and context is essential. The implication for microfinance (based on group methodologies) is a call for careful contextual investigation of the conditions for creating social capital, from a multidimensional view, prior to establishing microfinance services. It may also aid subsequent impact assessment. The particular demands for physical and educational competences imply that capacity limitations rather than socio-cultural factors are at play. This requires more traditional development aid that builds on provision of health care and educational offers. A cross-sectoral effort between development agencies within different fields may create the underlying structures for financial inclusion of the poorest as well as provide the financial services they demand.