Effects of a Global Civil Society on Global Governance

Hii Dunia has in the past written extensively on the convergence of Civil Society and global governance.

Here we summarise with reference to the work of Jan Aart Scholte some of the main effects that the presence of Civil groups within global democratic structures can have.

Many high profile NGOs are based in close relation to governance apparatus. Because of the perceived changing nature of governance structures civil society organisations have shifted much o f their emphasis from the local (national governments) to supra national organisations.

Most writers acknowledge that there are both positive ways in which inter connected civil movements can act on a global scale, and negativities that may arise as a result of this. Jan Aart Scholte (left) a leading writer on Civil Society and Globalization, writing in his paper ‘Civil society and democracy in global governance’, identifies six possible contributions global civil society can make to a global discourse, as well as acknowledging some negative outcomes. It is perhaps useful to highlight Scholte’s main points in order to be able to critique them against existing transnational organisations and their democratic credentials.

• First Scholte identifies that civil society might enhance democracy in global governance through public education activities. He thinks that for democracy to be effective it must rely upon informed citizenry. Mass media right down to presentations and leaflets for schools and universities play a role.

• Giving a voice to stakeholders is, Scholte argues, a means by which civil society can pass on ideas and information from the lowest levels and those less empowered to government and trans-governmental agencies.

• The very intervention and presence of civil society fuels the debate about global governance and more diverse subjects are discussed and discussions about policy have become more critical.

• Scholte also argues that the involvement of civil society can increase the transparency of global governance. Many citizens are often not aware of which decisions are taken at the global level.

• Civil society can also hold to account such agencies as the IMF and the World Bank which otherwise may not be directly accountable to any citizens. Through an accountability function civil society can push authorities in global governance to take greater responsibility for their actions and policies.

• The final point Scholte makes is that of legitimacy. He argues that legitimate rule occurs when people acknowledge that an authority has a right to govern and that they have a duty to obey its directives.

For many of these positive outcomes to be achieved it seems that Civil societies such as NGOs need to have a sufficient amount of resources to be made available.

The growing acknowledgement that an emerging layer of government is forming because of the globalisation of politics has also led to the stark realisation that unfortunately the ordinary citizen has little or no way of controlling and influencing it. As Scholte argues;

“On the whole, current arrangements to regulate global communications, global ecology, global markets, global money and finance, global organisations and global production rest – at best- on the thinnest consent of the affected publics.”


Links & Resources:

Hii Dunia - Articles on Global Governance and Civil Society

openDemocracy - An interesting in-depth article on com contemporary Global Civil Society and it's relationship with the anti globalisation movement

London School of Economics - Homepage of the Centre for the Study of Global Governance

Warwick University - Profile of Jan Aart Scholte

In Pictures: Pro Tibetan protest near Home of Dalai Lama

On the day the Olympic torch was paraded through the streets of the Indian Capital Delhi, pro Tibetan rights protesters took to the streets of many Indian cities.

The following pictures show a peaceful demonstration in Mcleod Ganj, a suburb of Dharamsala, Himachal Pradesh home to the Tibetan Government in exile.

The peaceful protesters, including Monks, Nuns and even tourists marched down from McLeod Ganj to Dharamsala where they held a rally.

All pictures by Laura Stevens.


Links & Resources:

Laura Stevens Photography - Photographers site

Now Public - News coverage from demonstration and news of an earlier, less peaceful protest

Real Travel - Travellers account of protest and of travelling to McLeod Gaj

Tibet Online - Tibetan News resource

Wikipedia - Profile of McLeod Ganj

Views on the Proposed Inga Dam, Democratic Republic of the Congo

With relative stability returning to much of the Western portion of the Democratic Republic of the Congo, the long held ambition of some to tap the Congo River for its hydroelectric potential looks set on becoming a reality.,

With banks lining up to invest in a project that could dwarf even the Three Gorges Dam on China's Yangtze River campaigners have voiced doubts on it's viability and the benefits it will offer the people living in its shadow.

Here Hii Dunia has collected and briefly quoted from a number of leading articles about the proposed dam and its likely impact on one of the world's least developed and thus far ungovernable nations.

International Rivers - "Grand Inga could produce up to 39,000 MW of electricity, over twice the power generation of Three Gorges Dam in China, and more than a third of the total electricity currently produced in Africa."

"...with a price tag of US$80 billion, concerns are growing that foreign companies will gain vast economic benefits from this mega-project, taking attention away from the development needs of Africa’s poor majority."


Afrol News - "The scheme, which will initially focus on the Inga Rapids near the river's mouth in western Congo Kinshasa (DRC), would generate more power than the giant power scheme's on China's Yangzi River. Previous plans have concentrated on the growing need for power and water in Southern Africa, but Eskom holds that the Inga Rapids plant will produce enough energy to supply southern Europe's growing demand of clean power."


The Guardian - "..environment groups and local people warned that it could bypass the most needy and end up as Africa's most ruinous white elephant, consigning one of the poorest countries to mountainous debts."

"Despite Congo having exported electricity for years from Inga 1 and Inga 2, access to electricity across the country is less than 6%, and in rural areas where nearly 70% of people live, it is only 1%."

"My village is 3km from Inga's power lines. They built a line almost 2,000km to the mines [in Katanga province] but in all of these years we have been left without electricity," said Simon Malanda, a community representative.

Doucet acknowledged that "there are huge social issues around Grand Inga that must be dealt with. Congo must benefit. If Congo is bypassed then the whole project fails," he said."


Reuters - "Big business, which for years shunned Africa, has suddenly developed a new interest, attracted by the rich pickings to be had in the new carbon emissions market and the credits they can get from investing in so-called clean development projects."


BBC News - "It is hoped it will boost Africa's electricity supply by a third, but opponents doubt it will help the poorest Africans without electricity."


Links & Resources:

African Energy - Detailed maps of exisitng and proposed Dams

AllAfrica.com - Article on current energy crisis in Africa

Hii Dunia - Article on the Three Gorges Dam

Peak Oil Debunked - Blog article highly supportive of the Dam and it's potential

Wikipedia - Reference article on exisitng Inga Dams and expansion plans

Microfinance: Regulation

In a final look at Microfinance Hii Dunia considers how regulation impacts on provision and uptake of schemes, with the focus again on Bolivia.

Financial NGO’s are commonly called private institutions with social objectives (Instituciones Privadas parael desarrollo Social). Financial NGO’s do not have to comply with banking regulations and a growing number of those involved with Microcredit are focusing solely on just that. Writing in 1998 Navajas and Screiner observed that;

“In their early years, most financial NGO’s offered both Microcredit and a gamut of non-financial services such as education, health services or technical assistance with business or agriculture. Financial and non-financial services are strong complements for the households that consume them and NGO’s thought they could efficiently link them to the production side. In practice, the multiple purposes wrecked many NGO’s. Non-financial services distracted NGO staff from financial services, NGO’s lost loads of funds to boot. This prompted some NGO’s to focus just on Microfinance”.

Regulation of NGO’s in Bolivia is quite lapse. This is indeed good in some ways as it means that the NGO’s are not halted by government bureaucracy. Also political intrusion into Microfinance is kept to a minimum. The laws in Bolivia are there in theory but because the regulatory body for Microfinance Institutions (MFI’s) the Contraloria General de la Republica is often busy with the longer established sector of finance in Bolivia it has little time or inclination to practice close supervision of the NGO/MFI sector.

BancoSol (Bolivia’s largest Microfinance lender) is the only commercial bank that is also an MFI. It is clear though that its status as a bank hinders its ability to be an effective MFI in certain respects. Things are complicated when applying BancoSol’s group lending practices to the requirements levied on an operating commercial bank. The success to some extent of the Microfinance scene in Bolivia has led to a proliferation of mainstream commercial banks lending to customers of Microfinance banks. Checks though are often poor and only credit checks are made. So the poor are able to have access to larger loans and if this coincides with an economic downturn it can leave many of the poorest in trouble.

An important aspect of regulation in the Microfinance sector in Bolivia is the role played by Apex Organisations. These act as a sort of intermediary whereby the organisation acts as an umbrella over many MFI’s. It receives the money from international and domestic donors or from government and transforms the resource in some way and then passes it on to the MFI’s. This way it helps develop the Microfinance sector in Bolivia.

“In theory the Apex Organisation is meant to perform the same functions as a donor but without the same constraints and at less cost.” Navajas & Schreiner, 1998

An Apex organisation can assist in providing support that simply an injection of cash does not, for example MFI’s may require financial support in their outreach to support to maintain their sustainability. Technical assistance to an MFI can be invaluable, the shared research and development of several already up and running MFI’s that fall under the umbrella of an Apex Organisation can greatly assist a new start-up.

Some authors however question their sustainability and argue that the most prosperous MFI’s developed without the assistance of such an organisation. Sergio Navajas writing in an Economics and Sociology Occasional Paper is critical of Apex organisations;

“Apex organisations have not improved the sustainability of MFI’s, in Bolivia much. The strong MFI’s now in place developed without the help of an Apex. Thus Apex organisations have not developed a market. Indeed, an Apex that intermediate funds might destroy its ability to develop a market since MFI’s would have fewer reasons to strengthen their sustainability through the pursuit of funds on the market (deposits and loans from commercial sources).”

As we have seen with the possible conflicts between programs run as private commercial banks and those still reliant on Donors and run primarily by NGO’s one of the most important considerations is that of managing trade-offs. A strong social performance is the key aim of most MFI’s but this can only be sustained by profitability. The fact remains that many micro lenders are still not returning a profit. The long term viability of this and whether or not Donors are prepared to indefinably keep up the supply of funds or whether they want MFI’s to look to long term sustainability is a question that surely must be faced at some point.

Repayment incentives have weakened in Bolivia largely down to the success of BancoSol itself. This increased competition from other NGO’s turning themselves into banks and from the formal sector itself providing some clients Microfinance loans. With this increase in what is on offer BancoSol, has in recent years seen its repayment rate drop.

Today with many Microfinance programs running across the world there are increasingly growing questions as to whether or not given the range of contexts with which Microfinance is now being practised it is very hard to affix rules and regulations and indeed measures of success. The size of BancoSol’s portfolio indicates a success at outreach, one of the major prerequisites of any MFI but like most it has work to do in reaching the very poor.

People will always make saving provision wherever possible. Their capital may be cattle or grain but access to the financial services of an MFI will has the potential to lift them from poverty through savings or Microcredit loans to a more sustainable and prosperous existence. It is clear that for example Bolivia’s still impoverished economy is very reliant on the work of MFI’s adapting to the in-country conditions and to the regulations that govern them.


Links & Resources:

Hii Dunia - Previous Microfinance articles from Hii Dunia

Microfinance.com - Apex Organisations and the Growth of Microfinance in Bolivia, Article by Sergio Navajas and Mark Schreiner

The Microfinance Gateway - Regulation Homepage

In Pictures: Indian PM's visit to Varanasi

In March Indian Prime Minister Manmohan Singh visted the Northern city of Varanasi for a two day visit. Here is a retospective account using news sources detailing the visit and reportage photography of the event by Laura Stevens.





The two-day visit of Prime Minister Manmohan Singh starting this evening has transformed the holy city where not even a single bull or cow could be spotted roaming on the roads. For the last two days, the animals, which were found roaming freely on the roads and narrow lanes near Vishwanath temple, Dashswamedh ghat and its adjoining areas are not to be seen.

WebIndia123.com

PM Manmohan Singh along with wife Gurudarshan Kaur flew into Benaras on Friday to offer prayers at Kashi Vishwanath Temple and watch ‘Ganga Aarti’ at Dashashwamedh Ghat during a visit billed as a journey down memory lane.

It was on the historic Dashashwamedh Ghat that the PM's father Gurmukh Singh was rescued by a sadhu. Gurmukh Singh had travelled to Benaras on a trade visit and "disappeared" there — apparently mesmerized by the magic of the ghats.

He would spend long hours at the ghats and it was during one of these river visits he fainted in the heat and was rescued.

The Times of India

Since the roads will be closed from 5 pm, the students appearing at these examination centres will have to wait for an extra three hours.

“We will finish our three-hour paper at 5 pm and will only be able to come out of the examination centre at 5.15 or 5.20 pm. By then the roads will be closed,” said Krishna Bose, a commerce student of Sana-tan Dharma Inter College.

The announcement has the parents concerned. Some of them even visited the examination centres and asked the authorities about any effort made by them to allow the students to move on the roads during the restricted period by showing their admit cards.

“How will my daughter return to our home in Sunderpur, which is 7 kms from exam centre, when no vehicular traffic will be allowed on route,” said Amit Singh.

Expressindia.com

Senior Superintendent of Police S.B. Shiradkar said stringent security measures would be in place until Singh left Saturday afternoon.

'Even ambulances will not be permitted on the route to be used by the prime minister well before his arrival,' he said.

Admitting that the measures would cause much inconvenience to people, he said: 'Well it is beyond our control as security had to be beefed up to an unprecedented level essentially because of the two blasts in the town last year'.

India eNews

Links & Resources:

Laura Stevens Photography

Wikipedia - Profile of Manmohan Singh

Hunger and Despair in Haiti

As riots in the Haitian city of Les Cayes have recently demonstrated Haiti’s poor are at the sharp edge of growing world food insecurity.

Haiti is one of the poorest countries in the world and the most impoverished in all the Americas. 80% of the population live on less than $2 a day. The Haitian government headed by President Rene Preval has being for the past four years bolstered by a United Nations stabilisation mission. With a low income itself the government has being unable to shield its population from growing world food prices which have risen on average by 40% in the last year. This is a threat to the fragile democracy in the country.

Unrest has spread across Haiti with UN troops resorting to firing plastic bullets into a crowd attempting to storm the Presidential Palace in Port-au-Prince yesterday. BBC news has reported that;

“The demonstrators outside the presidential palace said the rising cost of living in Haiti meant they were struggling to feed themselves.

"We are hungry," they shouted before attempting to smash open the palace gates”.

Haiti like many other developing countries is finding the crisis in rising food prices difficult to stomach. People are hungry and the dangers of malnourishment are beginning to take their toll. Some have resorted to even eating biscuits made from a combination of cooking oil and mud.

Haiti, already a ghetto of organised crime and violence in the Caribbean threatens to spill over into more chaos; the food crisis may yet be the straw that breaks the camels back. The United Nations leads a large international effort in the country with its agencies including the World Food Programme also present. According to the Guardian newspaper;

“The World Food Programme (WFP) made an emergency appeal for donations for Haiti. It said on Monday it has received only 13% of the $96m (£48m) necessary for its Haitian programme.

"Riots in Haiti underline the additional need for lifesaving food assistance," said WFP executive director Josette Sheeran.

"At this critical time, we need to stand with the people of Haiti and other countries hardest hit by rising food prices."”

Links & Resources;

Foreign Policy - A look at the food riots in Haiti and around the world

Global Dasboard - 'Food riots: The case for democracy promotion'

Haiti Innovation - Haitian blog article looking at the country's food crisis

Sunday Herald - Lengthy article highlighting the possible looming global food emergency

World Food Programme - Overview of work in Haiti

A Point On Putnam

Few writers have contributed more on the topic of people engaging in the democratic process than American Political Scientist and academic Robert Putnam. His seminal book 'Bowling Alone' struck a powerful note especially in the United States, its often controversial contents being credited with affecting the policies of the Clinton administration and the British government under Tony Blair.

However Putnam's earlier work, especially stemming from his work in Italy in the 1970's still has important connotations for struggling and emergent democracies today.

A central point in his book ‘Making Democracy Work: Civic Traditions in Modern Italy’ asks what are the conditions for creating strong, responsive, effective, representative, institutions? In other words how does a what can be defined as a Civil Society come into being? Many would argue in response to his point that Civil Society comes about at a grass roots level in response to conditions. The Zapatista movement in Mexico for example through harnessing and articulating the concerns of the indigenous populations outlines some of the conditions as put by Putnam.

Putnam’s work during the 1970’s in Italy focuses primarily on making democracy work by means of recognising the regional nature of the Italian state. The role Civil Society played in some regions and not in others is recognised by Putnam when he says;


“Some regions of Italy are blessed with vibrant networks and norms of civic engagement, while others are cursed with vertically structured politics, a social life of fragmentation and isolation, and a culture of distrust. These differences in Civic life turn out to play a key role in explaining institutional success.” Robert Putnam, 1993


Putnam’s analysis of Italy’s regionalized structure at the beginning of the 1970’s before the government recognised the need for decentralization from Rome has parallels perhaps with modern day Mexico, India and even non democratic China.

Mexico’s democracy has to work with the combination of regional diversity borne of internal population shifts and the contrasting nature of its ethnic make-up where indigenous Mexicans are largely disadvantaged and under privileged.

Putnam recognised that the top down means of governance as practised in Italy before the 1970’s suppresses to an extent the role which can be played by Civil Society and thereby weakens democracy.

Civil Society as that which represents the issues and concerns of local communities, villages, towns or states is able to work more effectively and more inclusively the closer that government representation is towards the people. In short the process of bringing democracy closer to the people.

The notion of ‘Closer democracy’ as recognised as important to the still centralized government of Italy during the late 1960’s and early 1970’s was not it can be argued recognised by the governments such as Mexico's even up until the early 1990’s. Therefore as in Italy places that are perhaps distant or less economically important can find themselves disadvantaged. This has led to widespread problems in Mexico, even open rebellion in the 1990's.

Though non democratic, China is facing growing resentment from its regions. Its civil society structures are vastly under developed and people rely mostly on still powerful trade unions for any form of political representation.

Any process of greater representation for the people in China or anywhere else could do far worse than heeding Robert Putnam's work and giving greater regional representation and planting the seeds of a vibrant Civil Society.


Links & Resources:

BNET - Overview of Putnam's 'Making Democracy Work: Civic Traditions in Modern Italy’

Hii Dunia - Articles on the Zapatistas. Part 1 & Part 2.

My Heart's in Accra - Ethan Zuckerman's view on some of Putnam's more recent work

Zimbabwe - One Crisis Amongst Many

Why does the Developed World care about the flawed election in Zimbabwe when such occurrences are quite common in Africa and seemingly go unnoticed?

The current crisis of governance in Zimbabwe has held the World’s attention for the past week as the government and its puppet institution, the Zimbabwean Electoral Commission, prevaricate over how to stall the accession to power of the country's opposition.

The West in particular has being quick to criticise the failure of good governance that has long been associated with the regime in Harare and which has in the past rigged and intimidated its way through elections in order to remain in power.

Crisis's due to poor governance occur frequently in the Developing World yet receive little or no media attention. Why then does Zimbabwe at present attract the attention that it does? Here are some possible explanations;

• The historical links of countries because of past colonial ties remain strong. This is largely due to several reasons. White migration to Rhodesia during the 19th and 20th Centuries was comparatively higher than to most other African colonies. Therefore the large number of settlers of European dissent remains high, despite many taking advantage of dual citizenship and fleeing. Many of these colonists will still have considerable links back to their countries of origin.

• Migration from Zimbabwe since the economy began its free fall in the late 1990s has been very high. Many have managed to move to Europe and neighbouring South Africa and have become involved in advocacy organisations in order to campaign for change back home, thus helping to keep awareness high.

• The Zimbabwean economy, though seemingly ruined by the neo-Marxist policies of Mugabe and his Zanu-PF party is still one of the more developed in Africa. Its total collapse would increase the strain felt by neighbouring South Africa, but would more seriously have disastrous effects for the emerging economies of Botswana to the west and Mozambique to the East.

• Mugabe himself has attempted to engineer his mismanagement of the Zimbabwean economy to appear - to his loyalists at least - as a foreign conspiracy. He has raised his profile by making it personal, with particular venom saved for former British Prime Minister Tony Blair, whom he has accused of orchestrating neo-colonialist policies targeted at Zimbabwe. Mugabe’s transition from respected freedom fighter to archetypal African dictator has, in the West at least, been traced through such stories such as the invasion of white held farms, numerous corruption cases and even the portrayal of his young wife as some sort of Imelda Marcos figure complete with vast shoe collection.

Many more factors figure into Zimbabwe’s high profile. Though in a week where elections in Egypt are to be carried out with only limited participation by the country’s main opposition (due it being able to field a small number of candidates) Zimbabwe at least can count on international scrutiny. This though is partially down to the reasons listed above.

A prerequisite of fair and sustained development is good governance and yet the International Community is persistently wholly inconsistent and often hypocritical in selecting those governments it criticises in whose states corruption and poor governance are present.

It is important that the maximum amount of sustained yet transparent pressure be put on those involved in the Zimbabwe election to ensure a fair result, but the world must work much harder in ensuring that this same pressure towards good governance be applied to all states, fully democratic, emerging democratic, developed, developing or otherwise as a vital platform from which the lives of their respective peoples can be made better.

Links & Resources:

Hii Dunia - Zimbabwean News Sources

Microfinance: Reaching Out

Continuing the series of articles on Microfinance, Hii Dunia using the case study of the Bolivia, the poorest country in South America and its principle Microfinance Institution BancoSol looks at the challenges facing such organisations as they begin to expand and grow.

There are both positive and negative implications of the rapid growth seen by many Microfinance Institutions (MFI's) in recent years. The growth of Microfinace projects can certainly have positive implications. The first and foremost is that growth is the main mechanism for improvement of one of the key criteria for success in Microfinance: Outreach.

Using the example of the Bolivian Bank BancoSol (as discussed in the article here) outreach potential can be seen to vary. Many think that because of its more recent status of that of a regulated financial institution it is forgetting its primary goal, that of poverty alleviation. That it has in effect succumbed to what can be described as ‘mission drift’. Though the bank is in a period of consolidation, the growth in its portfolio has been remarkable.

It is important to bare in mind while considering Outreach the full spectrum of potential that Microfinance has. It is more than just the lending of money in the hope of the client receiving higher rates of return with which he is able to pay back and then keep a profit for himself. Microfinance can give access to education and health and can provide services and loans for events like funerals and weddings.

The average size of a loan from BancoSol is just over one half of the Bolivian per capita Gross Domestic product. However some observers argue that the ‘poorest of the poor’ are still not reached. This may require changes in the loaning technologies of the bank if this situation is to change. BancoSol stipulates that as a precondition a potential client is running an established business for at least a year.

The quality of Outreach with many MFI’s is affected by group lending technologies, there are additional transaction costs that do not exist when a client applies for an individual loan. The monitoring also required for group loans increases the costs. This then is felt by all the group members, however it is still better value for them than many of the established banks in Bolivia.

Incentives offered to clients also have an effect on the outreach and the take up of financial services. Punctuality incentives for example are a common incentive offered by MFI’s. Those in Bolivia are no exception with BancoSol monitoring the clients repayment schedules. Therefore there is no need for a representative from the bank to visit a client if he or she or indeed a group of borrowers have been punctual with their repayments. Someone need only be dispatched if a problem has been detected. These simple procedures practised by the bank have the effect of lowering transaction costs.

With the example of BancoSol it is able to increase Outreach because of reducing 'red tape ' surrounding the issuing of a loan. The joint liability that is enacted when a group loan is taken does not however guarantee repayment.

The strength of the relationship amongst those taking a loan is paramount. Loan arrears with BancoSol remain low but as the successful outreach of the bank demonstrates the constraints of the group lending technology on which much of it has relied up to this point. As clients stay with the bank and they progress with the loan taking and repayment they may begin to expect or demand a quality of service that is not present in the group lending framework. This though is perhaps a sign that they have progressed far enough to transfer their business to some of Bolivia’s mainstream financial institutions.

The role BancoSol plays in its clients lives must not be overlooked when assessing its outreach potential. The personalised service and long term connections represent a powerful incentive for the repayment of loans. Importantly there are also a number of mechanisms employed by MFI’s the world over. The most common is one that is used a great deal in Bolivia, ‘group lending’ and is tried by many MFI’s in slightly different guises.

Though not thought of as being significant enough by some;

“Its role has been exaggerated: group lending is not the only mechanism that differentiates Microfinance contracts from standard loan contracts”. Jonathan Morduch

‘Dynamic incentives’ is another mechanism whereby loans made to borrowers increase as the borrower proves himself or herself able to repay. Because there remains the risk of defaulting, it is best to offer Dynamic incentives in rural areas where people are less likely to be transient and where households don’t simply come and go. This then is an important possibility for the lending of Microfinance in Bolivia. Though the focus is often on urban areas because of the build up of population it is important to consider that the potential impact of credit access to those in rural areas could be very large indeed. This would no doubt have positive repercussions on those who have relocated to the cities and may start to have the effect of reversing some of the migration that has been observed in Bolivia for example in recent years.

Concern over ‘mission drift’ is identified by many authors as a prime factor in preventing MFI’s from reaching the poorest of the poor. Mark Shreiner whilst writing in the Journal of Development points to three reasons why mission drift may occur.

1) Banks can prevent repayment and then hinder social effectiveness.

2) Without subsidised costs, wider scope of clients cannot be served to the resulting wider costs. This then in turn hinders growth in the banks portfolio.

3) Private stakeholders in the bank may simply be unconcerned with the Social Mission of any NGO/Bank.

The group loan feature of BancoSol’s financial practice ensures that loyalty to the bank stands strong and it can face much competition. This may not be the case for many smaller MFI’s operating in Bolivia, who lacks the infrastructure of BancoSol.

BancoSol cannot any longer call upon subsides if needed. However the depth of its outreach seems to so far ensure higher interest rates.

BancoSol is still largely owned and administered by NGO’s and overseas based development banks. 75% of the shares in BancoSol are in the hands of NGO’s and Donor organisations, Bolivian businessmen with significant political clout make up most of the remaining 25% and so it has of yet not had to adhere to any proponents of stringent market forces.

The growth and outreach of BancoSol much like that of the Grameen Bank can be viewed as a logical evolution. An adaptation of a financial institution to the context in which it found itself. In this case it is Bolivia, a country that despite economic setbacks had at least a established banking system and one which adhered to internationally recognised financial practice. For MFI’s in Bolivia and for BancoSol in particular the change from NGO status is compliant in many ways to their social aim of providing an effective tool in the fight against poverty. They are on balance as we have seen a more effective weapon than a regulated bank.


Links & Resources:

Economics and Sociology - Claudio Gonzalez-Vega et al - 'BancoSol: The Challenge of Growth for Microfiance Organizations' (Full Paper)

Hii Dunia - Previous articles on Microfinance.

Journal of Economic Literature - Jonathan Morduch - 'The Microfinance Promise' (Full Paper)

Journal of International Development - Mark Schreiner - 'Aspects of Outreach: A Framework for Discussion of the Social Benefits of Microfinance' (Full Paper)

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