From Inclusion to Empowerment: The Political Implications of Microfinance

There has been extensive literature on the positive effects of microfinance in developing countries with regards to financial inclusion of the poor, economic growth and poverty reduction. This paper seeks to take these facts one step further, arguing that microfinance paves the way for the political empowerment of the poor because it creates social capital in developing economies. I make the case that a growth in social capital due to financial inclusion helps impoverished people realize their political potential by instilling a need for political awareness and increased participation in the political process. An analysis of the current literature concerning the various social effects of microfinance is presented with a focus on social capital growth and feelings of empowerment. Raw data collected from microfinance institutions in two Central Asian countries provide an appropriate case to evaluate the political effects of microfinance because of the growing microfinance industry in the region. Additionally, relevant qualitative data exists with regards to this topic in the region that helps to conceptualize the link between social capital, self-efficacy and political empowerment