The Lessons of Microfinance History

February 16, 2012

Over on CGAP’s main blog, I just previewed chapter 3 of my book, which was the most fun to write. It puts microfinance in the context of history—history that turned out to be longed and richer than I imagined when I started.

A snippet:

While I admit to a certain obsession with origins, I believe that my historical investigation illuminates the present as well as the past. The demand among poor people for tools to manage their money turns out to be nearly as old as money. Many of the techniques used today to meet it, including groups and joint liability, also go way back. (The Hebrew bible refers to cosigners.) But there is little sign that such financial services reduced poverty that much. If anything, the causal arrow points the other way: as nations industrialized their way of poverty, the demand for financial services grew, as did the ability to supply them. That is why so many of the paths of ancestry in financial services lead back to England, home of the industrial revolution. But this should not diminish our respect for the modern pioneers of microfinance, for they are the rarest of figures in the history, the people who had the adaptability, vision, and drive to develop and promote particular ways of mass-producing financial services for the poor.

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1. Alex Counts Says:
   February 16th, 2012 at 11:11 am

   David, You clearly had fun with the history chapter. But probably not as much fun as many had reading it. I have made occasional efforts to understand the ancestors of modern microfinance, but never captured the topic to my satisfaction — until I read your chapter. Did you consider including mention of the loan fund that Benjamin Franklin seeded in his estate plan (I am assuming you are aware of it). –Alex Counts

2. David Roodman Says:
   February 16th, 2012 at 11:21 am

   No, I was not aware of it! The irony is that you’re not the only one to point me to new examples or sources in the last few days, now that the book is done….and getting such examples was why I started the blog three years ago!

3. Alex Counts Says:
   February 16th, 2012 at 11:27 am

   Sorry I did not bring to your attention earlier. Reading your draft chapters was always in the important but not urgent box on my desk. Anyway, I just found this online about what Franklin did. Many people have brought this fund to my attention over the years. http://eh.net/book_reviews/ben.....crofinance