Reglamentación del área de Ciencias Naturales y del componente de

Over the years the struggle to overcome poverty, the lack of means of livelihood (Lont and Hospes, 2004), and the underlying discourse of social reality (Bourdieu, 1977) has persisted with limited levels of success. A progress report on global poverty submitted by the World Bank at the G8 summit in Okinawa – Japan in the year 2000, indicated that although improvements in health and education levels had been witnessed in the previous century, an estimated 1.2 billion people were still living on less than US $1 a day and 3 billion lived on less than US $2 a day (World Bank, 2000). However for the period between 1990 to 2005, the number of people living on less than US $1.25 a day dropped from 1.8 billion to 1.4 billion (World Bank, 2008).

Further, following the recent (2008) global financial crisis, an estimated 55 to 90 million more people are likely to be living in extreme poverty than was previously anticipated (United Nations, 2009). In the words of Bourdieu this puzzling state of deprivation among the „dominated‟ is on display apparently amidst outstanding economic prosperity for the few - the „dominant‟ (Arch, 2005, Bourdieu, 1977).

Most poverty alleviation efforts emphasise the need for increased entrepreneurial activity among the poor in a bid to bridge „the dollar gap‟. According to authors (Cook and Belliveau, 2004a, Arch, 2005) and backed by views of economists using empirical

67 data, it is posited that a positive relationship between existence of SMEs and certain aspects of economic development, for example employment generation, exists. However it is worth noting that this expected positive impact may not be sustained without the necessary support in the form of either financial and/or technical skills required to run a business successfully. Lack of start up capital and access to quality BDS remain critical barriers to entrepreneurial activity among would-be entrepreneurs in most developing economies (Arch, 2005, Lont and Hospes, 2004, Akoten, 2007a).

The genesis of the microfinance movement can be traced back to the 19th century. Writing on microfinance and development Arch (2005) traces some form of microfinance operations back to the German credit union movement that was popular for the better part of the century. The movement was established on the basis of charity, reflecting a form of social development „logic‟ that underpins a significant proportion of microfinance programmes even to date. There were similar organisations in most parts of Europe as well as in parts of Sub-Saharan Africa-especially Kenya (Folwer and Kinyanjui, 2004) as previously reported in section 2.3.1 of chapter two. The bulk of microfinance activities had their humble beginnings in the non-governmental organisation (NGO) world, driven by the desire to alleviate poverty, a form of social structure (Bourdieu, 1990) that engulfs the livelihoods of poor people in nations all over the world (Remenyi and Quinones, 2000, Arch, 2005, Lont and Hospes, 2004, Khandakar and Constantine, 2004b).

As a practice, microfinancing has attracted various interpretations. The term microfinance has been coined to represent arguably a wide array of concepts and activities; including microcredit schemes, training and social empowerment programmes undertaken by, for example, NGOs and community based organisations (CBOs); village banking, networking and loan schemes of self help groups (SHGs) and rotating savings and credit associations (ROSCAs); and small and medium enterprises (SME) banking services offered by national and regional banks, among other related services. Seibel and Kumar (1998) offer a comprehensive definition, according to their view, of what microfinance means;

“Microfinance is defined as a sector of formal and nonformal financial institutions providing microsavings, microcredit and microinsurance services to the microeconomy, hereby allocating scarce resources to microinvestments… In a narrow sense, microfinance institutions are small local financial institutions. In a wider sense, they may also comprise national or regional banks with

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microfinance services for small savers and borrowers …The microeconomy includes such target populations as microentrepreneurs, small farmers and the landless, women and the poor.” (Seibel and Kumar, 1998, pg, 4)

It is clear from the foregoing that the concept of microfinancing is designed as a framework to promote entrepreneurial activity among poor people or the micro sector of a national economy. A typical microfinance institution provides a mechanism through which „poor‟ people can access small sums of money to enable them to take part in economic activities that would otherwise be unavailable to them (Arch, 2005). As Kibaara (2006) observes, the principal objective of microfinance programmes is to raise incomes and broaden financial markets by providing financial services to small-scale entrepreneurs who ordinarily would not have any access to established capital markets. However as Edward and Olsen (2006) note, although provision of microcredit and other forms of financial services intermediation underpin most microfinance programmes. However social empowerment of women, training and other forms of business development facilitation appear to be part and parcel of microfinancing as a broad mechanism of poverty alleviation (see Morduch and Haley, 2002, Armendariz and Morduch, 2010, Microcredit summit campaign, 1997). As later discussed in this section of the chapter, this mission appears to have changed significantly over the years.

The primary target market for microfinance services has been the low income class of the economy or simply the poor, although there are criticisms about whether the truly poor are really being reached (e.g.Morduch, 1999, Khandakar and Constantine, 2004a, Lont and Hospes, 2004, Schmidt, 2010) . This low income category includes groups of people who run micro, small-scale and medium enterprises (Arch, 2005, Edward and Olsen, 2006, Hartungi, 2007, Argwings-Kodhek et al., 2004a). The sizes of the businesses may vary widely from one location/region to another and even among countries in the same region. As a result, most MFIs prefer to organise their clients in groups based on shared characteristics. More importantly however, group membership provides a form of social capital that serves as alternative collateral to cushion lenders against the risk of possible loan defaults. Additionally group lending has an economic principle behind it in that there are economies of scale that accrue when handling groups of people (representing several microenterprises) as opposed to serving directly each one of them. Group lending has been applauded arguably as the most successful way of handling MSEs all over the world, as evidenced by the mimetic isomorphic diffusion

69 (DiMaggio and Powell, 1983) referred to earlier in this chapter (see section 3.2.1) that has greeted the practice since the 1990s.

Over the years, various actors in the field of microfinance, including governments, donors, NGOs and other international development agents have come to realise the critical role microenterprises can play in both national and regional economic frontiers. Given this, these actors have time and again either formulated, or supported the formulation of, structures (for example microcredit and training schemes), to nurture entrepreneurial activity (Lont and Hospes, 2004, Khandakar and Constantine, 2004ab). For example in early 1980s, with the support of donor agencies, Professor Muhammad Yunus (Nobel Laureate 2006), established the now famous Grameen bank in Bangladesh, which is acclaimed as one of the most successful microfinance institutions (MFIs) in the field of microfinance (Khandakar and Constantine, 2004a). The bank was set up as a NGO offering relatively small loan amounts (e.g. $100) to poor rural women against social trust; an example of social capital, secured through peer group member guarantees.

Enhancing cultural capital – inclusion of BDS in microcredit programmes

As already alluded to, alongside microcredit schemes, BDS, a composite form of cultural capital, has emerged also as a structure that MSE support agents (e.g. MFIs) appear to emphasise as critical towards promoting entrepreneurship among the poor (Edward and Olsen, 2006). Since the birth of MSEs, traced back to the era of industrial revolution (Matlay, 2004), skill shortages or lack of access to training has been noted in many parts of the world to affect their survival rates, growth and performance (see detailed discussions in section 2.4.1 of chapter two) (Faoite et al., 2004). Many people, including academics, government agencies and business practitioners, recognise the importance of training in equipping entrepreneurs with the necessary skills to establish and manage their own businesses (Sievers, 2007). The term BDS is used as a representation of various concepts, all referring to non-financial services targeted at improving the performance and survival (institutionalisation) of MSEs. Some of the related concepts include; technical assistance/support, business counselling, business advisory services, training, and entrepreneurship education, among others (Faoite et al., 2004).

70 Since the 1960s, the focus of support initiatives for MSEs has experienced some major swings and turns. From the start, state governments and donor agencies, motivated by the desire to promote industrialisation through private enterprises, offered both credit and some form of BDS to MSEs (Sievers, 2007). For the better part of the 1970s and early 1980s, BDS was provided mainly by development banks, government departments and other development agencies, especially NGOs. At this stage the nature of BDS offered was mainly basic management training with particular emphasis on preparation of business plans. BDS was offered as a pre- or co-requisite for credit by a majority of micro-lenders or MFIs at that time26. Notably most development support agents encouraged MFIs to provide training to their clients to ensure profitable use of microcredit (Sievers, 2007, Goldmark, 2006).

Authors (e.g. Matlay, 2004, Faoite et al., 2004) observe a notable increase in the use of BDS by MSEs over the years. As alluded to in section 2.4 of chapter two, in addition to their credit providers, entrepreneurs are most likely to seek advice/support from a wide range of formal and informal sources. Some of these include trade associations, government agencies, professional service firms (consultants), third-level educational institutions, mentorship networks, clients, suppliers and even other individuals connected with the business. Bennett and Robson (1999), present a review of some 13 previous studies on sources of business advice in Britain and consider that sources of business advice can be grouped into six categories; Professional specialists, Professional generalists, Market contacts, Social contacts, Business associates, and Government agencies (Berry and Sweeting, 2006). The specific participants involved in the provision of advice to entrepreneurs include auditors/accountants, credit officers and bankers, legal advisers, business counsellors, marketing/management consultants, market contacts/business associates, friends and family, academics, and business support agencies (Boter, 2005). It is important to note that in the case of developing countries, many of these sources of business advice may not be accessible to MSE owner- managers (Hallberg, 2006, Suzuki, 2002).

Delivery of BDS tends to adopt either a structured curriculum, as is the case in institutions of higher education offering entrepreneurship training, or an informal

26 _{Some examples of MFIs that claim to offer BDS as a complement to microcredit services include} Grameen Bank, Bangladesh Rural Advancement Committee (BRAC), and Kenya Rural Entrepreneurship Programme (K-rep).

71 arrangement. As Hisrich and Peters (1998) observed, in the case of structured training emphasis is on developing technical skills (for example operations and production abilities), business management and improving a person‟s entrepreneurial attributes (Faoite et al., 2004). Within this framework financial management, marketing and general business management topics are more popular than other subjects in entrepreneurship programmes (Faoite et al., 2004). The informal SME support initiatives are offered as a complementary package to the formal entrepreneurship training. Authors (Faoite et al., 2004, Berry and Sweeting, 2006) note that among MSEs, informal skill development initiatives often take the form of seminars/workshops, internships/mentorships, coaching, business counselling and general networking opportunities. Given the resource constraints among microfinance practitioners and their donors, it is likely that of the two arrangements noted above, the informal framework of BDS delivery is most commonly practised.

In view of the range of services and actors involved, BDS appears to constitute an important sub-field within the field of microfinance. This is the status accorded to BDS in this study. In short, BDS practices (within the field of microfinance) appear to represent a broad mechanism for building and enhancing both cultural capital and social capital among target MSE owner-managers, aspects that are later exchanged for economic capital – microcredit. While the development of cultural capital is arguably important in helping MSE owner-managers build essential skill sets in business management, social capital is of strategic interest to MFIs which use it as alternative collateral for loans.

Following the remarkable success of the Grameen bank, the concept of microfinance as a tool for social economic development for the poor has diffused mimetically among the developing economies in Asia, Sub-Saharan Africa and Latin America [for example, Bank Rakyat of Indonesia (BRI), Kenya rural entrepreneurship programme (K-Rep) Bank of Kenya, and BancoSol of Bolivia (Arch, 2005, Schmidt, 2010)]. The establishment of Grameen America in 2008 (Grameen America, 2010) is evidence that microfinancing has even permeated the developed world, targeting low-income people within that world.

The growth and development of the modern microfinance sector has depended to a large extent on aid. As a form of financial support, aid can be argued to be a form of symbolic

72 capital used coercively to shape relations among actors in the field of microfinance. As noted previously, most of the first generation MFIs (especially most of those set up either before or in the early 1990s) were NGOs, which received extensive financial support from governments and donors. The funds were then passed on to MSEs as small loans to be repaid, supposedly with minimal interest. NGOs by their very nature are mostly not-for-profit establishments. All their activities, including microfinance programmes, are geared to achieving a social objective. In the case of microfinance, the social objective is to alleviate poverty or simply to improve the standard of living of poor people by way of promoting entrepreneurship. It is likely that the pursuit of development, a social logic of improving the livelihoods of the poor, has won microfinance practitioners legitimacy among donors, poor MSE owner-managers (clients), and the general public at large. So strong has the appeal of microfinancing been that normative pressures and voices of critics (Schmidt, 2010, Khandakar and Constantine, 2004a, Morduch, 2000) appear to be ignored consistently.

Actors in the microfinance field

In broad terms and on account of their respective roles, actors in the field of

microfinance may be grouped into three categories as reflected in Figure 2. The first group represents support agencies which offer financial and/or institutional assistance to microfinance practitioners. Included in this category are state authorities, donor

organisations (e.g. USAID), international NGOs (e.g. Opportunity International, World Vision), and traditional development agencies (The World Bank‟s and UN‟s) through their affiliate organisations – Consultative Group to Assist the Poor (CGAP) and United Nations Capital Development Fund (UNCDF) respectively. In this category also are organisations established specifically to serve the microfinance sector, such as

Women‟s World Banking (WWB), Foundation for International Community Assistance (FINCA) and Americans for Community Co-operation in Other Nations (ACCION). Private investors, for example venture capital firms and hedge funds, are among other actors in this category (Arch, 2005, Schmidt, 2010).

The second category of actors in the field of microfinance comprises the practitioners themselves. Although the nature of services and extent of formality varies, the unifying factor among these actors is the fact that most of them claim to be serving the MSE sector in one respect or another. Broadly the practitioners may be grouped into two categories, i.e. financial service and non-financial service, providers. As previously

73 reflected (see section 2.3.2 in chapter two) and according to Ledgerwood (1999), actors providing financial services to MSEs may further be grouped into formal institutions (e.g. development banks, commercial banks, and MFIs), semiformal institutions (e.g. NGOs, credit unions, and savings and credit co-operative societies (SACCOS ), and informal providers (e.g. rotating savings and credit associations (ROSCAs), self-help groups (SHGs), and moneylenders) (CBK, 2009). It is important to note that some of these practitioners, for example NGOs and some MFIs, provide both financial and non- financial services (Schmidt, 2010, Sievers and Vandenberg, 2007). The last group of actors represents the clients. As a target market for microfinance services, clients may constitute MSE owner-managers both as individuals and in groups, medium to large- sized private businesses, private persons, and households. The next section examines the forces behind the divergence in practice among microfinance providers.

3.3.2 Practice variation in the field of microfinance: logic and capital struggles

This section explores two contending logics; that is, the social and commercial approaches to microfinancing that appear to shape operations in the field of microfinance. The social development logic is first examined. Discussions in this section are aimed at eliciting the forces behind variations in the practice of

microfinancing; i.e. the rationale driving either social or commercial logic as well as the various forms of capital contestations amongst actors in the field of microfinance.

As mentioned previously, NGOs have played host to the modern view of

microfinancing driven by the mission of poverty reduction in the developing world. The habitus of NGOs, their history of commitment to development, especially in the

developing world, informs their embrace of an integrated approach to microfinancing (see discussions in section 2.3.3 of chapter one) in the pursuit of poverty alleviation. Firstly, in line with observations made in chapter two section 2.4, the rationale behind the approach is that improved access to microcredit without the requisite technical support is unlikely to contribute significantly to growth and performance of MSEs owned by the poor, a position hypothesised and tested in this study. Secondly it could be argued that entrepreneurship (as an instrument of poverty alleviation) is a

multifaceted phenomena which calls for a broad, but coordinated, mechanism of intervention if the situation of the poor is to improve. For example, the survival of the poor (and especially their enterprises) depends not only on their access to various forms of capital including economic (credit), social (networks), and cultural (know-how), but

74 is determined indirectly also by their access to a functioning communications

infrastructure and health, and education facilities.

As a result, microfinance programmes designed by most NGOs, following mimetically the lead from Grameen Bank‟s original model, usually incorporating training and other forms of social empowerment (predominantly for women) within their microcredit schemes (Gobbi, 2005, Hartungi, 2007). More often than not MSE owner managers are permitted to apply for and access microcredit after undertaking some preliminary training (Goldmark, 2006). Thereafter, MSE owner–managers, driven by the specific needs of their enterprises, are encouraged to draw on various BDS aspects which are available either from the host MFI (as is the case for Grameen bank clients) or its affiliate institutions.

The salient features27 that distinguish microfinancing, as a restricted field, from traditional commercial banking (representing widespread production) are reflected in differing proportions across practitioners in the microfinance field. For example, MFIs that offer BDS appear to encourage their clients to pursue self-employment by

undertaking income generating activities (Khandakar and Constantine, 2004a). It is these income generating activities-MSEs that the MFIs then target with both microcredit and BDS services. The MFIs go to great lengths to discourage clients from using credit for household consumption purposes amongst other diversionary tendencies. For example, during regular meetings with clients, field staff lead members to recite citations to the effect that they will not waste money but instead collectively undertake bigger investments for higher incomes, one of the „sixteen decisions‟ of the Grameen Bank (Shakya and Rankin, 2008, Grameen, 2010). This issue is examined through in- depth interviews with MFI representatives in this study, but such actions may be reflective of MFIs‟ attempts to influence their clients‟ habitus to bring it in line with economic rationality.

27 _{Unlike conventional banks, MFI‟s credit schemes are characterised by; small loan sizes (averaging US$} 100), primarily to poor rural women who constitute the primary target market; promote self-employment activities; loans are collateral free; and savings mobilisation is encouraged (Khandakar and Constantine, 2004a; 2004b).

75 Even within the socially oriented MFIs, there are two variants to service delivery. First,