David Roodman's Microfinance Open Book Blog

 

Posts in: 3. Credit History

 

Chapter 3 Tweaked

March 14th, 2011

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I’ve just revised chapter 3 in the same manner as I did chapter 2.

I did make one significant addition to the text (.docx, .pdf): coverage of “industrial life assurance”—life insurance for the working classes—starting in 19th-century Great Britain. Before, there was almost nothing on insurance. I really like the richness this brings. I came to appreciate that Britain gave the world two major innovations in financial services to the masses in the 19th century: savings banks (postal and otherwise) and life insurance for regular folks. These contrast with microfinance today, with its emphasis on credit. It makes me wonder if there isn’t huge, exploitable potential for life insurance in developing countries now. Here are the main relevant sections (see documents linked to above for footnotes):

Britain’s second great achievement in financial services for the masses was establishing “industrial life assurance.” While savings banks arose from a charitable impulse, the sellers of life insurance to working-class people were motivated by profit from the start (if also a sense of mission). The Joint Stock Companies Act of 1844 made it much easier to start companies and sell shares to the public—perhaps too easy. The financial industry saw dozens of start-up in the 1840ss, many short-lived and no more deserving of public trust than the worst friendly societies. Historian Laurie Dennett describes the scene:

In the field of life assurance [unsound companies] seemed to succeed one another with exceptional rapidity. The Post Magazine and Insurance Monitor…, a weekly paper founded in 1840 to act as a reporter on the assurance industry and exposer of its abuses, certainly found numerous subjects for dissection….The editor on one occasion referred to an entity “brought into existence under the facilities for forming such companies by the [Act]…whose robberies amounted to £60,000,” another “composed of a low set of vagabonds, whose signatures as shareholders were procured at a pot-house for pints of beer,” and finally, one which “at the end of three years, had only £14,512 left in every shape and form out of £45,081 received in solid cash…” Charles Dickens’ “Anglo-Bengalee Disinterested Loan and Life Insurance Company” had plenty of prototypes in life, as did its dissolute President, Tigg Montague, alias Montague Tigg.

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Chapter 3 Main Post: Credit History

March 9th, 2009

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Microfinance is a modern phenomenon, right? Maybe thirty years old?

Wrong.

When what is now chapter 3 (.doc .pdf) was but a twinkle in my eye, I thought it would be just a few paragraphs near the top of what is now chapter 4. But as I delved into its subject–the long history of projects to bring financial services to poor people–the terrain expanded before me and drew me in. I do believe this is the fullest review of that history, but it is superficial relative to the richness of its subject. Someone should write a book on this topic.

From the intro of chapter 3:

To the extent that microfinance is older than most enthusiasts and practitioners think it is, that begs the question of what lessons from history are being missed. What are the constants of history? What are the variables? How do economic and cultural characteristics of a country, such as wealth and tightness of community bonds, determine which methods succeed? And since history never repeats itself exactly, how does modern microfinance break from the past? What have today’s innovators contributed to the long historical flow of ideas? Those questions motivate this excursion into history.

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Illuminating Microfinance’s Past: A Bibliography

March 7th, 2009

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Herewith, a bibliography of materials that illuminate microfinance’s past. Feel free to send me additions. I suppose this should be made into a wiki page somewhere.
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