From Microcredit to Productive Capability: Reframing Microfinance for Structural Transformation and Competitiveness in Uganda

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.  

microfinance; productive capability; economic transformation; political economy; competitiveness; Uganda.

1. Banerjee, A. V., & Duflo, E. (2011). Poor economics: A radical rethinking of the way to fight global poverty. New York: PublicAffairs. [Google Scholar] [Crossref]

2. Banerjee, A. V., Karlan, D., & Zinman, J. (2015). Six randomized evaluations of microcredit: Introduction and further steps. American Economic Journal: Applied Economics, 7(1), 1–21. [Google Scholar] [Crossref]

3. Beck, T., & Demirgüç-Kunt, A. (2006). Small and medium-size enterprises: Access to finance as a growth constraint. Journal of Banking & Finance, 30(11), 2931–2943. [Google Scholar] [Crossref]

4. Bowen, G. A. (2009). Document analysis as a qualitative research method. Qualitative Research Journal, 9(2), 27–40. [Google Scholar] [Crossref]

5. Chang, H.-J. (2002). Kicking away the ladder: Development strategy in historical perspective. London: Anthem Press. [Google Scholar] [Crossref]

6. Duvendack, M., & Mader, P. (2020). Impact of financial inclusion in low- and middle-income countries: A systematic review of reviews. Journal of Economic Surveys, 34(3), 594–629. [Google Scholar] [Crossref]

7. Gereffi, G. (2018). Global value chains and development: Redefining the contours of 21st century capitalism. Cambridge Journal of Regions, Economy and Society, 11(1), 61–79. [Google Scholar] [Crossref]

8. Grimm, M., Paffhausen, A. L., & Stöver, J. (2016). Do small businesses create more and better jobs? Experimental evidence from Uganda. World Development, 84, 331–347. [Google Scholar] [Crossref]

9. International Labour Organization (ILO). (2022). Global employment trends and social outlook 2022. [Google Scholar] [Crossref]

10. Geneva: ILO. [Google Scholar] [Crossref]

11. Lall, S. (2001). Competitiveness, technology and skills. Cheltenham: Edward Elgar. [Google Scholar] [Crossref]

12. Mazzucato, M. (2018). The entrepreneurial state: Debunking public vs. private sector myths (2nd ed.). London: Penguin. [Google Scholar] [Crossref]

13. North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge: Cambridge University Press. [Google Scholar] [Crossref]

14. Rodrik, D. (2007). One economics, many recipes: Globalization, institutions, and economic growth. Princeton: Princeton University Press. [Google Scholar] [Crossref]

15. Teece, D. J. (2014). The foundations of enterprise performance: Dynamic and ordinary capabilities in an economic theory of firms. Academy of Management Perspectives, 28(4), 328–352. [Google Scholar] [Crossref]

16. Top of Form [Google Scholar] [Crossref]

17. World Bank. (2020). Global value chain development report 2020: Technological innovation, supply chain trade, and workers. Washington, DC: World Bank. [Google Scholar] [Crossref]

18. World Bank. (2023). Uganda Economic Update: Investing in productivity and structural transformation. Washington, DC: World Bank. [Google Scholar] [Crossref]

19. Yin, R. K. (2018). Case study research and applications: Design and methods (6th ed.). Thousand Oaks, CA: Sage. [Google Scholar] [Crossref]

• Drone-Based Phenotyping and its Utilization in Crop Improvement: A Review
• An IoT-Enabled Smart Healthcare Monitoring System Using Machine Learning for Early Health Risk Prediction
• Strategic Integration of Artificial Intelligence for Achieving Operational Excellence in Container Freight Stations Using Evidence from Chennai, India
• Adoption of OTT platforms: Analyzing User Behavior through the UTAUT2 Model
• Customers’ Buying Behaviour in Relation to Online Food Delivery (Evidence from National Capital Region (NCR) of India)