The Capabilities Model and the South West Alberta Community

Loan Fund (SWACLF)Megan Heroux

April 2011

In partial fulfillment of an Applied Study course at the University of Lethbridge

*Released with student consent to the SWACLF

•Part one- Overview of Microfinance

•Part two- Amartya Sen and the Capability Model

•Part three- Application of Sen’s Capability Model in the Canadian Context

An Overview of Microfinancing

Concepts

•Microcredit- specific to small loans. Focus on getting loans to the very poor.

•Microfinance- broader term incorporating more financial services not just credit.

Microfinance in Canada

•Microcredit in Canada defined as: a loan given to an entrepreneur of less than $ 25,000 (Horvath, 2001).

•Loans are offered to those who cannot receive credit through traditional sources.

Microfinance in Canada: Three types

•1) Private Organizations- seeking profit.

•2) Government Organizations- seeking economic development.

•3) Non-profit Organizations- seeking to empower individuals living in poverty.

(Horvath, 2001)

Horvath, S. L. (2001, December). Building community capacity through group loans for minority populations in Canada. Retrieved from http://https://dspace1.acs.ucalgary.ca/bitstream/1880/39297/1/2001_Horvath.pdf

Microfinancing in Canada:Community Development

•Participatory

•Bottom-up approach

•Helps individuals take control over their own lives

•Break the cycle of poverty

• (Armendariz de Aghion & Morduch, 2005; Littlefield, Murduch & Hashemi, 2003)

Microfinancing in Canada:Challenges

• Difficult to keep financially stable

• Limited research and best practices.

• Canadian marketplaces are more developed and competitive.

• Clients may be cut off from government assistance.

• (Horvath, 2001; Cameron, n.d)

Amartya Sen and the Capability Model

Concepts • Functionings: Achievement of a person-

what she/he manages to do and values doing.

• Capabilities: A persons ability to achieve and enjoy different functionings. Reflect a persons ability to chose between different ways of living.

• A functioning may be thought of as the way a person chooses to use a capability.

• (Sen, 1995; Sen, 1990; Sen, 1985)

The Capabilities Model:Theoretical Underpinnings

•Poverty should be seen as “deprivation of basic capabilities” –not merely lack of income.

•A lack of capabilities can lead to low income, ill health, hunger and undernourishment.

•It is inappropriate to make a comprehensive list of capabilities since they vary so drastically from person to person.

• (Sen, 2004; Sen 1999; Sen 1990).

The Capabilities Model:Theoretical Underpinnings

•Focus less on desire fulfillment and more on capabilities and functionings.

•Sen relates his theories back to those of Aristotle, Marx and Smith.

•Aristotle States: “Wealth is evidently not the good we are

seeking; it is merely useful and for the sake of something else” (as cited in Sen, 2009,

pg 253 )

The Capabilities Model:Theoretical Underpinnings

• Sen bases his work on giving people the opportunity to live lives they have reason to value.

• Encourages us to think of people as ends, not means.

• Freedom:▫ Intrinsic Importance: Considered important in itself.▫ Instrumental Importance: Gives people the

opportunity to chose their best option and live the life they value.

▫ (Sen 2009; Sen 1999; Sen 1990)

The Capabilities Model:Praise and Critiques

•Furthers the distinction between relative and absolute needs- human need is based solely on living a life of value.

•Sen respects the diversity of individuals and their circumstances.

• (Dean, 2009)

The Capabilities Model: Praise and Critiques

•Difficult to implement

•Focus on individual liberty while ignoring the role of social solidarity.

•Too individualized and liberal- does not account for our cultures value of interdependence.

• (Dean, 2009)

Application of Sen’s Capability Model in the Canadian Context

Applying Sen’s Concepts :World Bank “Empowerment and

Poverty Reduction”• Empowerment as “the expansion of freedom of

choice and action”

• Focus on what assets people living in poverty possess (ex/ social capital and collective capacity)

• Places the burden of responsibility back on the individual

• Bottom-up and participatory approach • (World Bank, 2002)

Applying Sen’s Concepts :World Bank “Empowerment and

Poverty Reduction”•Four Key elements lead to empowerment

▫Access to information▫Inclusion/participation▫Accountability (from state officials, public

employees and private actors) ▫Local organizational capacity

▫ (World Bank, 2002)

World Bank. (2002, May 1). Empowerment and poverty reduction: A sourcebook. Retrieved from http://siteresources.worldbank.org/INTEMPOWERMENT/Resources/486312-1095094954594/draft.pdf

Applying Sen’s Concepts:Brandon University “Capacity

Framework”•Recognize the assets that people have

available to them.

•Uncover peoples strengths and assets so that they may use them to better their lives.

•Networks and social relations are among the most important assets

• (Reimer & Tachikawa, 2008).

Annis, R., Racher, F., & Beattie, M. (Eds.). (2009). Rural community health and well-being: A guide to action . Retrieved from Brandon University, Rural Development Institute website: http://www2.brandonu.ca/organizations/rdi/Publications/Health/RuralCommunityHealth_and_Wellbeing_a_Guide_to_Action.pdf

South West Alberta Community Loan Fund. (2010, December 8). Addressing poverty in Alberta. PowerPoint Presentation

Incorporating Sen into the SWACLF•Business Preparation program, addressing the

root causes of poverty, aligns well with Sen.

•Respect peoples goals and values while assisting them to create their own pathway out of poverty.

•Referral network and mentorship program- examples of social institutions that can help increase economic opportunity in Sen’s opinion.

As we move forward… • In the implementation phase of this project,

reflect on where you see Sen being incorporated.

•After reviewing Sen’s main concepts, do you see any gaps in the current SWACLF model where Sen may fit in?

•How could Sen’s model be used for the SWACLF while still incorporating the social and interdependent values of our culture?

References• Access Community Capital Fund. (2010). Annual report. Retrieved from:

http://www.accessccf.com/uploads/File/annualreports/ACCESS-Annual-Report-2010.pdf

• ACEM. (2010, December). Activity report. • Annis, R., Racher, F., & Beattie, M. (Eds.). (2009). Rural community

health and well-being: A guide to action. Retrieved from Brandon University, Rural Development Institute website: http://www2.brandonu.ca/organizations/rdi/Publications/Health/RuralCommunityHealth_and_Wellbeing_a_Guide_to_Action.pdf

• Armendariz de Aghion, B., & Morduch, J. (2005). The economics of microfinance. Cambridge, Massachusetts: MIT press.

• Cameron, S. (n.d.). Community investing in Canada. Retrieved from Canadian Community Investment Network Cooperative Canada website: http://www.microcreditsummit.org/papers/Workshops/12_Cameron.pdf Cape Fund. (n.d.). About CAPE fund . Retrieved April, 2011, from http://www.capefund.ca/en/about-capefund.html

• Carpenter, B., Findlay, C.,Blumell, J., Boyer, S., Cruse, J., & Evenson, C. (2010). University of Lethbridge: Microcredit community health nursing project. Unpublished raw data.

• Community First Development Fund of Saskatoon (Ed.). (2010, May). The Caring Neighbor,(9). Retrieved from http://communityfirstsaskatoon.ca/sites/communityfirstsaskatoon.ca/files/May_2010.pdf

• Dean, H. (2009). Critiquing capabilities: The distractions of a beguiling concept . Critical Social Policy, 29(2), 261-278

• Hariji, K. (2007, May). The Ottawa community loan fund: A research report on social impact. Community Economic Development Technical Assistance Program.

• Horvath, S. L. (2001, December). Building community capacity through group loans for minority populations in Canada. Retrieved from http://https://dspace1.acs.ucalgary.ca/bitstream/1880/39297/1/2001_Horvath.pdf

• Jubilee Fund. (n.d.). The Fund. Retrieved April, 2011, from http://www.jubileefund.ca/fund/

• Littlefield, E., Morduch, J., & Hashemi, S. (2003, January). Is microfinance an effective strategy to reach the millennium development goals/. Focus Note, 24. Retrieved from http://www.cgap.org/gm/document-1.9.2568/FN24.pdf

• Momentum. About Momentum. (2011). Retrieved April, 2011, from http://www.momentum.org/about-momentumMomentum. (2009). 2009 Year in review. Retrieved from http://www.momentum.org/sites/default/files/2009%20Annual%20Report%20Spreads.pdf

• Ottawa Community Loan Fund. (2010, December). Fuelling innovations, creating opportunities [Video file]. Retrieved from http://oclf.org/what-is-oclf/

• Reimer, B., & Tachikawa, M. (2008). Capacity and social capital in rural communities. In Revitalization: Fate and choice (chap. 6). Retrieved from http://revitalization.brandonu.ca/index.php?pageid=A

• SEED Winnipeg Inc. (2009-2010). Annual report. Retrieved from: http://www.seedwinnipeg.ca/documents/SEED2010ANNUALREPORTREVISED.pdf

• Sen, A. (2009). The idea of justice. Cambridge, Massachusetts: The Belknap Press of Harvard University Press.

• Sen, A. (2004, November). Dialougue capabilities, lists, and public reason: Continuing the conversation. Feminist Economics, 10(3), 77-80.

• Sen, A. (2000, June). Social exclusion: Concept, application, and scrutiny (Social Development Papers No. 1). Retrieved from Office of Environment and Social Development Asian Development Bank website: http:// http://www.adb.org/documents/books/social_exclusion/social_exclusion.pdf

• Sen, A. (1999). Development as freedom. New York: Anchor Books. Sen, A. (1990). Development as capability expansion . In J. Knight & K. Griffin, Human development and the international development strategy for the 1990's (pp. 41-58). (Original work published 1978)

• South West Alberta Community Loan Fund. (2010, December 8). Addressing poverty in Alberta. PowerPoint Presentation

• St. John's Community Loan Fund. (2010). Annual report. • Tarsilla, M. (2009, May). Evaluating the social impact of the

OCLF/Alterna community micro loan program: Carleton Centre for Community Innovation.

• World Bank. (2002, May 1). Empowerment and poverty reduction: A sourcebook. Retrieved from http://siteresources.worldbank.org/INTEMPOWERMENT/Resources/486312-1095094954594/draft.pdf