Sunday, April 24, 2011


For all the hype that surrounds microfinance, one can be excused for believing that it will save the world. There is an initiative by the Ugandan government called "Bonna bagaggawale" which, loosely translated from Luganda means "Prosperity for all". Few appear to take it as a serious policy statement, but as a long term vision it is laudable. Bonna Bagaggawale could, however, be the manifesto for the microfinance movement, the latest cure-all in a long sequence for the world's woes.

I've recently finished reading the provocatively titled book "Why Microfinance doesn't work" by Milford Bateman, which should be compulsory, if uncomfortable, reading for microfinance believers everywhere. Bateman poses the question of why countries that have achieved microfinance saturation over the last decade (for example Peru, Bosnia and Cambodia) do not demonstrate obvious and substantive poverty reduction and "bottom-up" development gains. While the book deals less with African countries (where the microfinance movement is younger and, presumably, reliable statistics are harder to come by), Bateman supports his arguments with impressive statistics and qualititative observations. His conclusion is simple: that most independent evaluations are unable to show concrete evidence that microfinance has had a significant impact on poverty alleviation.

Indeed, Bateman goes further. He asserts that, contrary to the major premise of the microfinance movement: that it promotes poverty reduction by enabling the poor to borrow and invest in income-generating activities (and create a kind of virtuous spiral of wealth creation by micro-entrepreneurs), that in fact the vast majority of microfinance loans are taken out for short term expenses like school fees, health care, funeral expenses or other consumption requirements. So, far from creating wealth, microfinance adds a new item to many household monthly budgets: repayments to the microfinance institution (MFI).

No doubt microfinance supporters can (and will) produce powerful statistics of their own in support of the developmental thesis rubbished by Bateman. So far, at least in my experience, their rebuttals have been feeble. Recently, on quoting from Bateman's book, a MFI Chief Executive responded to me that "poor people also have a right to credit". Well, I can't remember seeing that particular right enshrined in the Universal Declaration of Human Rights.

A few years ago, at the onset of the credit crunch, my brother remarked to me, after having lived for a year or so in Nairobi, that while there wasn't a great deal of money around, at least personal indebtedness was very low. After the consequences of the sub-prime mortgage crisis, this seemed to him to be an entirely positive aspect of African economic life. What he didn't appreciate was the colossal demand for short term debt to meet essential consumption requirements. Now, better by far to have this demand met by properly regulated MFIs than by the Tallyman with extortionate interest rates and brutal enforcement methods (hence the classic movie poster above), but to represent this as poverty alleviation? To me, that's a bit like saying that credit cards and other unsecured lending are the solution to the world's economic problems. I don't think so.

The trouble with walking to work......, of course, that you have to walk home again.

Or at least, under normal circumstances, it is difficult to think of any other possible objection against this carbon-friendly and healthy alternative to Kampala morning traffic jams. But in Uganda, the "walk to work" campaign has taken on a whole new significance. Led by a loose alliance among the leaders of opposition parties, this apparently innocuous campaign, ostensibly against high food and fuel prices, has provoked a powerful, many say disproportionate, reaction by the Ugandan government. Here's a little piece of visual evidence from the Monitor newspaper. It's certainly a deterrent to leaving the car keys at home.

But leaving aside the muscular response, what's driving the underlying problem of increasing food prices? Global commodity prices, especially oil, are one factor. Increasing regional demand, in particular from South Sudan, is also cited. But the fundamental law of supply and demand is the real driver. Quite simply, there is a supply-side problem, fanned by the increasing demand of a growing population. There's not enough production and, in Uganda at least, there certainly isn't enough storage capacity. I've written before about the remarkable informality of Uganda's food distribution systems and the reliance on fresh products for food - and the lack of buffer stocks of maize and rice in particular - mean that there are no smoothing mechanisms in times of plenty or scarcity

And prices are rocketing upwards, across the board. Matooke, potatoes, maize and beans have all seen increases of between 20-40% in recent months. Not surprisingly, increases in staple foods are also driving up the cost of dairy products, poultry and pork. Fish prices have doubled in the last two years or so, as a result of the depletion resulting from over-fishing in Lake Victoria and Uganda's other major lakes. It's at the bottom of the pyramid, where food costs make up the major part of the household budget, where the impact of inflation is felt the most. When the Ugandan President said, a few weeks ago, that increasing food prices were good for the farmer, he was right, up to a point. Commercial farmers may well make some hay while the sun shines, but the truth is that most small-scale farmers are net consumers, not suppliers, of agricultural products.

"It's the economy, stupid" was Bill Clinton's slogan in his successful campaign against George Bush in the 1992 presidential elections. It's a phrase that could apply to a number of the popular uprisings that have sent shivers down the spines of many longtime autocratic leaders across Africa and the Middle East.

The best response for the nation to the "walk to work" campaign is investment in the agriculture sector. Big fists will only make things worse.

Wednesday, April 13, 2011

A green and yellow melancholy

It's always a wrench, coming to the end of a play. This will be my last post about Twelfth Night, by some distance my most successful production so far. And while I couldn't have asked for a better cast, the real star was the English language, in Shakespeare's incomparable hands. Here are just a few of my favourites quotes from the play:-

This fellow is wise enough to play the fool.

You are now sailed into the north of my lady's opinion, where you will hang like an icicle on a Dutchman's beard.

You are all idle, shallow things. I am not of your element.

Let us draw the curtain and show you the picture.

Madam, I will.

A very dishonest paltry boy.

And thus the whirligig of time brings in his revenge.

Get him to say his prayers Sir Toby, get him to pray.

She sat like Patience on a monument, smiling at grief.

Virtue is beauty, but the beauteous evil ... are empty trunks o'erflourish'd by the Devil

And it is with a green and yellow melancholy that I say goodbye to the characters and the words. Plays are labours of love: maybe one day I'll be brave enough to choose the wonderfully-named Love's Labour's Lost.