Exploring the Political Economics of Microfinance: A Case Study of Uganda (East-Africa), 2000-2005

In the late 1990s and early 2000s, Uganda was widely recognized among development agencies and microfinance practitioners for its market-building approach to microfinance policy. However, the same government all but abandoned that approach in the middle of the decade.

This paper studies the two fundamentally different microfinance policy regimes that the Government of Uganda has been pursuing before and after 2005. It explores the reversal of policy direction, drawing on political economics. 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. Microfinance 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.