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Uganda's microfinance policy regime: An exploratio through a political-economy framework

Schmidt, Oliver (2012): Uganda's microfinance policy regime: An exploratio through a political-economy framework.

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Abstract

In 2005, Uganda’ government fundamentally shifted the direction of its microfinance (MF) policy. Hitherto it had focused on integrating MF institutions into the financial sector, allowing them to take deposits. Since 2005, it focuses on savings and credit cooperatives (SACCOs); with government funding of and ostensibly interfering in the SACCOs’ operations. This paper explores the reversal of policy direction, drawing on public choice theory. It finds that the shift of policy direction served the objectives of Uganda’s politicians to maintain political power, as it offered them an avenue to create loyalty through patronage. MF special interest groups – particularly development agencies – had chosen a strategy based on information and financial contributions that failed to incite politicians and to maintain univocal support from technocrats and MF practitioners.

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