In this book, Erin Beck presents a useful, rigorous, and interesting analysis of the internal workings of nongovernmental organizations (NGOs) in Guatemala. Beck convincingly argues that the extant literature on NGOs, and especially microfinance institutions (MFIs), is too general, too abstract, too economistic, and too aggregated to identify the most effective approaches to development projects and microfinance. Further, she suggests that in order to determine the most effective approaches to microfinance and other development activities, scholars must understand better how development projects work on the ground. This requires us to look inside development NGOs to understand how they operate on the ground.
Beck’s solution to the failures of the scholarly literature on NGOs—and microfinance institutions in particular—is an in-depth, qualitative, “thick” description of two MFIs working with rural Guatemalan women. Each description, based on extensive fieldwork, emphasizes the varying incentive structures, goals, and belief systems held by NGO donors, workers, and beneficiaries. Beck argues that the on- the-ground impacts of MFIs and other NGOs are substantially driven by these factors, which may contradict or compete with the NGOs’ official goals.
Apparently as part of a most-different-systems research design, Beck studies two organizations with similar goals but very different strategies and ideologies, comparing them in detail to determine how those differences do or do not impact outcomes. Given that there is little evidence that microfinance improves recipients’ standards of living, it is perhaps unsurprising that both NGOs seem to face significant internal difficulties that limit their effectiveness.
The first of these two organizations is the professionally operated and well-organized Namaste Guatemaya, an NGO that uses microfinance to pursue economic development in rural Guatemala. Namaste was founded by a successful businessman in the global North, who assumes that microloans can be a powerful tool for economic development because of their ability to harness the supposedly inherent entrepreneurial qualities of all people, including rural Guatemalans. The NGO lends exclusively to women because Namaste’s directors believe that loans are more likely to lead to long-term benefits in womens’ hands.
Namaste’s strategies have changed over time. Initially, the organization worked through local (Guatemalan) nonprofits, but gradually came to work directly with beneficiaries. Namaste also came to deemphasize microcredit in favor of business training and mentoring and withdrew from the most heavily impoverished areas of Guatemala when it found that loans to the very poorest of the Guatemalan poor would be consumed rather than invested.
However, the organization has consistently emphasized recordkeeping and accountability for workers and beneficiaries. Indeed, one of Namaste’s biggest challenges is the tendency for forms and recordkeeping to crowd out mentoring and education, which the organization believes are its comparative advantage. Beck argues that workers can easily demonstrate their effectiveness to supervisors by filling out forms correctly, which they believe to be the task that will determine whether they keep their desirable, well-paying jobs with the NGO. Beck notes, therefore, that the process of emphasizing accountability takes on a new meaning, unintended by the organization’s funders and directors, which stands in the way of its nominal goals.
The second organization Beck describes is the Fraternidad de Presbiteriales Mayas, or the Fraternity. The Fraternity is a personalistic NGO that emerged as a splinter of the Guatemalan Presbyterian Church—taking issue with the church’s paternalistic treatment of women—and seemingly operates largely according to the somewhat idiosyncratic beliefs and practices of its charismatic director. Although the organization uses small loans to attract new beneficiaries, it sees itself primarily as a missionary organization that promotes education; a left-leaning, anticapitalist ideology; and a worldview that combines evangelical Protestantism with traditional Mayan religious beliefs and cultural practices. Although Fraternity workers appear to be more fully socialized into the Fraternity’s mission and beliefs, the organization is poorly organized and relatively inefficient; loans do not appear to improve the material lives of most recipients, and activities are poorly planned. More worrisome, the organization appears to favor some Mayan language groups at the expense of others.
Like Namaste’s beneficiaries, most of the members of the Fraternity are originally attracted to the organization by the offer of small loans, given collectively to groups of women. However, the Fraternity does not see itself primarily as a microlending institution and, in fact, does little to ensure that the organization’s loans are used profitably or efficiently. Although beneficiaries of the organization are required to attend classes and other group activities, the content of these events is rarely related to personal finance or economic development. Instead, consistent with the Fraternity’s ideology and mission, it tends to focus on female self-esteem and empowerment, Christian and traditional Mayan beliefs, and environmental responsibility.
In the case of both MFIs, then, differing incentives, belief systems, and goals impact effectiveness on the ground. While Namaste’s directors and funders seek to promote economic development, NGO workers face strong incentives to complete forms (ostensibly for accountability) and only weak incentives to provide mentoring and education. And the Fraternity’s workers and directors are relatively uninterested in single-minded economic development, instead using microfinance as a carrot to attract beneficiaries to ideologically driven classes focused on their (somewhat poorly defined) model of holistic development. No wonder, then, that microloans fail to deliver on their promise of improving the quality of life for recipients and their families.
Beck’s detailed descriptions of the Fraternity and Namaste are a useful counterpoint to the economistic literature that typically uses randomization to examine some impacts of microfinance and other NGO activity. Given what we know about NGOs, aid, and microfinance, the microlevel analysis and focus on ideas and beliefs can tell us much about how microfinance and other development activity works in practice and why development projects often fail to achieve their stated goals. Interestingly, Beck’s approach, which focuses on ideas and beliefs much more than interests and institutions, shares much with rationalist works like Gibson et al.’s Samaritan’s Dilemma (2005), which explores why development aid is often unsuccessful, tracing many failures to contradictory incentives that aid donors, workers, and recipients face. And like Beck, Robert Bates, in his classic rationalist work Markets and States in Tropical Africa (1981), finds that contradictory economic and political incentives can undermine development policies by creating unintended consequences that contradict nominal goals.
The primary flaw in Beck’s work is directly related to its strengths as detailed, microlevel, qualitative research. Although the argument that NGO activities hold different meaning for beneficiaries, workers, and donors makes powerful intuitive sense, it is unclear how much we can generalize these results to NGOs more broadly. No doubt, there are many NGOs in which goals, beliefs, and incentives vary broadly across the organization, but surely some NGOs have well-aligned belief systems, some NGOs have broadly shared goals and strategies, and in some NGOs, incentives are well aligned from top to bottom of the organization. Understanding the relative frequency of such alignment and disalignment may be an important goal for future research. In other words, how common is it for NGOs to have well-aligned beliefs, incentives, and goals? And does such alignment improve the ability of NGOs to improve the lives of their beneficiaries?
