Micro-finance, Macro-challenges: An Analysis of the Effect of Political Instability on Microfinance Operations

Open Access
Ross, Laura Elizabeth
Area of Honors:
Political Science
Bachelor of Arts
Document Type:
Thesis Supervisors:
  • Gretchen Casper, Thesis Supervisor
  • Michael Barth Berkman, Honors Advisor
  • microfinance
  • political instability
  • cambodia
  • india
  • haiti
Microfinance has been highly lauded as an effective poverty reduction technique since Mohammad Yunus popularized the concept in the 1970s. Given that microfinance organizations often operate in countries with low political stability, this paper seeks to investigate how instability affects—or doesn’t affect—the ability of institutions to grow and succeed. Although the exact relationship between political instability and microfinance success is difficult to capture, this paper examines the microfinance industry in three countries—Cambodia, Haiti and India—with varying levels of political stability to attempt to drawn some conclusions and lessons that can be learned from their experiences. An in-depth examination of each country is offered, starting first with an overview of the political stability within the nation and proceeding to analyze how microfinance organizations have dealt with that stability in order to best succeed. After comparing the three cases, it appears that political instability in and of itself is not a direct determinant of microfinance success. However, success does depend strongly on the ability and dedication of the government to prioritize the passing of microfinance legislation in order to guide and regulate the industry. Lessons learned and best practices are drawn from each country in order to advise both governments and microfinance organizations on what steps they can take in order to facilitate the development of a strong microfinance industry in their country.