Microcredit and political empowerment in Azerbaijan and Kazakhstan

The purpose of this paper is to analyze the political effects of microcredit. The author provides the theoretical connections between microfinance and political empowerment and tests them in the context of Central Asia and the Caucasus, a region that is significantly lagging in political development and yet has a growing microfinance potential.

The author conducted a total of 100 in-depth interviews with microcredit clients in Kazakhstan and Azerbaijan in June 2010 and January 2011, respectively. The author chose my client samples randomly from two of the largest non-governmental microfinance institutions in these countries.

The findings of the survey reveal that microloans have only led to modest improvements in the socioeconomic status of the clients and had almost no effect on their political empowerment. Disaggregating the data further in terms of gender, type of loan and location of credit does not change the overall trends but reveals that to the extent that any political empowerment took place, group clients (mostly women) in urban settings were more aware and involved in political issues than individual clients in the villages.

Even with a carefully thought-out design, it is not clear how much the responses reflect the true and complicated impact of microfinance on the clients’ lives, a challenge that may be overcome in future research with focus group analysis or an ethnographic analysis of microcredit clients over a long period of time.

Notwithstanding these shortcomings, these observations can help inform microfinance institutions, donor organizations and governments about the true potential of microfinance. A realization of the limits of this unique development tool may prove useful in reorienting the goals of foreign aid and designing a more effective approach to development.

Despite the extensive literature on the economic and social effects of microcredit, very little attention has been given to how economic empowerment generated by microcredit can translate into political empowerment at the individual level. This paper lays out the theoretical reasons for why such a relationship might exist and tests these hypotheses systematically in two countries, taking into account gender, type of loan instrument and location of the loan.