Academic journal article Military Review

Stabilizing Influence: Micro-Financial Services Capability

Academic journal article Military Review

Stabilizing Influence: Micro-Financial Services Capability

Article excerpt


An organic micro-financial services (MFS) capability in U.S. military units should be formally established as a key mission enhancer or "force multiplier" to support stability and reconstruction operations (SRO). Both FM 3-24, Counterinsurgency, and the Marine Corps manual Countering Irregular Threats: A Comprehensive Approach specifically note the need for MFS. However, neither manual goes into any detail on what MFS actually involves or how commanders in SRO environments should use them. This article aims to fill that gap.

Prior to the recent update of U.S. army counterinsurgency doctrine, veterans of SROs and humanitarian interventions recognized that stability ultimately hinges on the restoration and promotion of economic viability. The recent update of army and marine corps counterinsurgency doctrine has since acknowledged economic development as a key component of stability operations.

At the heart of current counterinsurgency doctrine is the notion that the people are the key "terrain" in SRO. Thus, soldiers must influence the indigenous people favorably to win their approbation. To do this, they have to understand how to affect "the social, ethnographic, cultural, economic, and political elements of the people among whom a force is operating" and apply specific tailored measures derived from that understanding. (1) Consequently, in operating environments where non-coercive skills are at least as important as coercive ones, Soldiers must bring more than mere force into play.

Close analysis of how to succeed within an insurgency framework suggests that providing immediate economic opportunities to the population is second only to providing physical security; thus, among the tools needed to cope with insurgencies is a bottom-up economic strategy linked to security measures. Such a strategy has to create the conditions for economic opportunity while also encouraging the population to participate in generating overall economic recovery. (2)

Unfortunately, all too often these efforts to encourage economic opportunity and participation focus on large-scale economic activities such as building power or manufacturing plants. Such projects require detailed planning, take time, and often are hampered by politics and bureaucracy. Meanwhile, as the projects move ponderously along, insurgents exploit the perceived lack of economic opportunity and progress. They feed off the unmet and perhaps unrealistic expectations of the populace.

Given the above, it seems that a more effective means of dealing with the close-in economic fight is with time-sensitive, small loans to micro-businesses. Delivery of micro-financial services to small-scale entrepreneurs during SRO can quickly stimulate economic activity, serving to undercut insurgent exploitation of economic instability. Quick, tangible results at low levels of commerce can create local buy-in and commitment from the populace. Such community investment can then serve to help garner support for government efforts to reestablish sovereignty and governance. Often underutilized or misunderstood by military forces, MFS is actually a simple but sophisticated tool that, when used properly, can deliver economic benefits to a target population at a comparatively cheap cost. Compared to grander projects that may take months and years to develop, small businesses realize economic benefit fast enough to improve stability.

Financial Problems

Challenges facing countries during SRO campaigns are similar to the problems non-governmental organizations (NGO) have handled for decades when working with large, poor populations in stressed environments. Consequently, NGO experiences provide many lessons. Among the more important that the intervening organization must understand is the limitations indigenous financial institutions may have in straitened conditions. For example, many unstable countries have long established banking institutions, such as those that currently exist in Iraq and Afghanistan. …

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