From Microcredit to Productive Capability: Reframing Microfinance for Structural Transformation and Competitiveness in Uganda
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Despite the rapid growth of microfinance as a key development effort, Uganda’s production structure still relies on low-productivity activities and traditional production factors. This article argues that current microfinance practices mainly support consumption smoothing and survival entrepreneurship instead of fostering productive transformation and competitiveness. The study draws from political economy, institutional theory, and innovation-focused development views to redefine microfinance as a possible strategic tool for building productive capabilities, improving technology, and promoting organizational learning. Through qualitative analysis of national policy frameworks, development reports, and academic literature on Uganda, the article presents a combined conceptual, contextual, and theoretical framework that connects microfinance to economic transformation by building capabilities at both the firm and system levels. The findings show that the transformative effect of microfinance relies not just on access to finance but also on its connection to innovation systems, institutional incentives, and strategies for upgrading value chains. This study enriches development finance research by shifting the focus of microfinance from merely a poverty-reduction tool to a productionfocused instrument for structural transformation.
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