“Financial inclusion does not come easily”
: An institutional analysis of the development of the microfinance markets

  • Ruth Goodwin-Groen

Student thesis: Doctoral ThesisPhD


Microfinance has grown from a niche development intervention in the 1990s to one that commands global influence and donor support. By 2006 microfinance had become part of financial sector development policy through the concept of financial inclusion. At the same time theoretical analysis of economic development increasingly focused on the role of institutions and getting institutions right - including for the financial sector – which has given rise to attempts to theorize gradual institutional change.This convergence of policy, and theoretical emphasis on institutions, raises the central question as to what institutions and institutional changes are necessary for the financial sector to effectively serve poor people. The experience of microfinance sector growth over a decade in two countries has been investigated using a ‘micro-ethnographic’ methodology to respond to this question.The research finds that a focus on institutional functions rather than institutional forms aids definitional precision and allows comparability across markets. Social norms underpinned the development of institutional functions, as theories of social embeddedness suggest. These norms also became integrated into institutional functions through the process of change, adding to critiques of externally imposed ‘best practice’ institutional blueprints. Further, beyond the widely accepted institutional functions which the rest of the financial market needs to operate efficiently, this research highlights the importance of a constitutional function (or law) to include poor people in the formal financial system, appropriate supervision for microfinance providers and support for the development of microfinance.Recent theories of institutional change offer insights beyond path dependency in identifying spaces for change and how changes will ‘stick’. However, to better analyse change at the level of particular institutional arenas, greater elaboration is needed of: how to incorporate multiple sets of agents (including external development agents) and multiple institutional functions; appropriate time-frames for analysis and processes of actor engagement.
Date of Award12 Dec 2012
Original languageEnglish
Awarding Institution
  • University of Bath
SupervisorSusan Johnson (Supervisor)


  • financial inclusion
  • instutional analysis
  • micro finance
  • Uganda
  • Bosnia

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