Sen’s capability approach and microcredit: lessons from a Malaysian case

ABSTRACT

This article examines a case study from Malaysia, the Credit Union Malaysia, to illustrate how the capability framework and institutions have practical value within the scope of microcredit, and how the constraints that the disadvantaged face can be relaxed through the use of microcredit. The capability approach provides an analytical framework to describe how a microcredit scheme can overcome the problems posed by conversion factors in order to enlarge the space of capabilities available to individuals.

KEYWORDS:

• Labour and livelihoods – Microfinance
• Aid – Capacity development
• Civil society – NGOs
• Participation

Acknowledgements

The useful comments of two anonymous referees are duly acknowledged.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Shankaran Nambiar is a senior research fellow at the Malaysian Institute of Economic Research, Kuala Lumpur.

Notes

1. Sen (1985, 9–10) acknowledges the contribution of Lancaster (1966), but adds that in addition to commodities and characteristics we “have to consider the ‘functionings’ of persons”; how commodities and characteristics are used to deliver well-being.

2. Robeyns (2000, 12) correctly stresses that commodities are valuable within the capability approach not merely because they are exchangeable for income or money, but because of the characteristics that enable a functioning. She gives the example of a bike which is valued not only because it is object made of certain materials, with certain features, but because it enables the functioning of mobility.

3. Sen (2000, 75) states that the “concept of ‘functionings’, which has distinctly Aristotelian roots, reflects the various things a person may value doing or being.” He clarifies that for a fuller picture of the well-being of a person “we clearly have to move on to ‘functionings’ … what the person succeeds in doing with the commodities and characteristics at his or her command” (Sen 1985, 10).

4. The notion of conversion factors (Robeyns, 2005, 99) can be based on Sen’s typology of “instrumental freedoms”. Sen (2000) mentions five instrumental freedoms: (1) political freedoms, (2) economic facilities, (3) social opportunities, (4) transparency guarantees, and (5) protective security. Arguably one can derive a set of conversion factors that encourage (or limit) instrumental freedoms from the list of instrumental freedoms that Sen offers.

5. “Social characteristics” is a sweeping term that spans a range of issues that would more properly be sub-divided into social, political, and institutional practices. I follow Robeyns’ (2001) use of the term. I recognise that Robeyns uses social characteristics to encapsulate “variations in social climate” and “differences in relational perspectives”, no less wide categories that Sen (1999, 70–71) uses to classify the sources of variation between incomes and advantage.