For those of you interested in the history of local finance and the supposed links between microfinance and other financial institutions and traditions, you might want to look at a recent blog posting by the excellent Phil Mader. Phil is completing his PhD at the Max Plank Institute for the Study of Societies (disclosure: I'm on Phil's PhD advisory panel) and his latest blog discusses the long-held view that somehow microfinance can trace its lineage back to the cooperative banking movement. Being a long-standing supporter of cooperatives myself, it has long annoyed me to hear microfinance enthusiasts claim that Grameen Bank-style microfinance is the direct descendent of the cooperative banking movement, since to my mind they are quite different creatures in almost every important economic, political, social and cultural respect. So it is great to see Phil provide some very interesting background on the subject and, in so doing, he challenges the idea that there is anything other than a superficial connection between the two traditions. Given that the posting is essentially a boiled down version of Chapter 2 of his PhD, I'm sure he'd value any comments.
from Peter Burgess firstname.lastname@example.org
I am interested in history, and very much aware that there tend to be many versions of history. As an English schoolboy I learned one version of history, Subsequently living in Canada and in the USA I learned very different versions of the same history, and also during a career which took me to more than 50 countries. a whole lot more perspectives of history. Perhaps the most thought provoking was comparing my English perspective of history with professional colleagues from France!
I see the history of microfinance in somewhat the same way. There is not just one perspective of the history ... there are multiple strands of history ... many of which are worth understanding. But there is also the problem of rewriting history and false history.
So this is my perspective of Grameen history!
I have been following the story of modern microfinance since the late 1970s. I heard about the work of Dr.Yunus in Bangladesh when I was working extensively in Africa and over a number of years located many traditional self help groups in Africa that had some of the characteristics of what Dr, Yunus was reported to be doing. By the mid-1980s many of the international official development assistance organizations were including microfinance components in their projects. Many of these were quite useful while the 'project' was ongoing but failed as soon as external project funding ended. In my experience, this was not the failure of the microfinance itself, but the 'rules' about the handling of government moneys. My personal experience is that the ODA community popularized the microfinance model of Dr. Yunus and the Grameen Bank and tried to replicate the microfinance idea because, relative to the terrible failure of most development projects, the microfinance components were successful.
Independent of my observations specific to microfinance, I noted that socio-economic performance was sometimes quite positive, and sometime quite catastrophic. Development performance varied depending on the place ... and what sort of an economic and development ecosystem was in place. Some communities had a relatively complete ecosystem, others had important missing elements. Where development assistance focused on what was most needed, the progress was impressive. Where the assistance was merely driven by a donor agenda, it was usually a total waste. To repeat the lesson learned ... development performance had a huge variability depending on the state of the place.
From what I know about the Bangladesh Grameen model for microfinance, there was a similar understanding of the broader development ecosystem ... 16 elements were part of the routine that Grameen used.
It is more than 35 years since Dr. Yunus made a tiny loan ... and as I understand the history, he stepped away from what he was teaching as an academic economist and started on a path that was very different than the standard practice of the established institutions. As an educated person, I am sure he drew on what he had learned and taught ... but the Grameen business model did not embrace much of the practice of the establishment. If it worked, it got replicated.
I would also add that Dr, Yunus moved on from simple microcredit to other development initiatives a long time ago ... health ... education ... food ... telephone ... solar energy and so forth ... and the social business model. These were original initiatives that were relevant in the context of Bangladesh. I am reminded of the invention of the telephone more than a hundred years ago, and the stories of its invention in Russia, the UK, Canada and the United States (to my limited knowledge) by different people at around the same time
My knowledge does not have an academic pedigree ... in fact I have come to discount what is in academic libraries when it seems to be in conflict with what I have seen for myself. I trust what I see, especially since I was trained in 'observation and perception' early in my corporate career and got used to making important decisions based on low cost data collection and analysis very very quickly. Modern methodologies to analyze development performance are unacceptably expensive and usually cannot give useful results simply because the externalities are dominant.
Hopefully all development assistance initiatives will eventually migrate to a methodology where the goal and purpose is to get the most progress for the minimum of external resource use and there are simple metrics of state, progress and performance in the place. I am on record advocating for 10 times as much progress as we normally get for the same amount of money ... and it is quite possible that we can do much better than that.
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