One size does not fit all: a case study of microfinance impact in rural Thailand

Today rural poverty remains one of the most important challenges for development policy makers, practitioners and scholars. Despite microfinance gaining prominence as a poverty reduction solution for the rural poor in the 1990s, recent microfinance impact studies have shown mixed results about its effectiveness in improving the poor’s standard of living and its ability to reach the poorest of the poor. This contradicting outcome may be explained by several possible reasons. It may be due to the fact that microfinance outcome is dependent on 1) the notion of poverty adopted, 2) the design and operation of microfinance and 3) the existing social capital within which microfinance scheme is embedded. Further to the debate on its contradicting outcome, there is also a lack of studies on the effects of social capital on single-liability schemes despite its influence on the result, and a limited qualitative case studies on microfinance scheme in Thailand. This research contributes to these debates and addresses those gaps by examining two single-liability microfinance initiatives in rural Thailand. A qualitative case study research approach was adopted to explore microfinance in this study. The findings revealed that microfinance enabled women with low education attainment to participate in village activities and have provided preliminary data on the missing poverty dimensions of dignity and without shame. This study also found that existing social capital can hinder as well as facilitate microfinance outcome. The kind of social capital that facilitated positive microfinance outcomes are characterised by the norms of reciprocity, trustworthiness and selfless volunteerism. On the contrary, existing social capital, seen as a norm of unequal power relations in Thai villages hindered microfinance outcome as it distributed most benefits to local elites rather than to ordinary villagers. Furthermore, the outcome was also found to be shaped by the effective implementation of three microfinance operational issues; client screening, monitoring and enforcement. These findings suggest that microfinance is not a one size fits all poverty reduction tool, instead its implementation should be dependent on the understanding of existing social capital and context within which microfinance operates.