Edited by Luigino Bruni and Stefano Zamagni
Chapter 22: Microfinance
Many historical moments and contexts have witnessed the emergence of microfinance practices, that is, of specific financial techniques designed for providing the unbanked poor with access to credit, saving, insurance and other complementary non-financial services. Different institutional formats and innovative financial techniques have been locally experimented with to reduce information asymmetries, transaction costs and lack of collaterals, all factors which are extremely severe especially when we come to the poorest. In fact, being unbanked is only one of the many interdependent forms of exclusion the poor suffer. Financial, economic, and social exclusion interact in a circular and cumulative process which triggers multiple poverty traps (Myrdal, 1958). Throughout the last 30 years, thanks to institutions like Grameen Bank, BRAC (Bangladesh Rural Advancement Committee) and ASA (Association for Social Advancement) in Bangladesh, Bank Rakyat in Indonesia, BancoSol in Bolivia, modern microfinance has become a global movement reaching around 190 million clients worldwide (Reed 2011). During the 1980s and 1990s, the increasing number of microclients and their high repayment performances convinced the majority that microfinance was a ‘revolution’ in the global fight to poverty as well as in development thinking (Yunus and Jolis 1999; Ledgerwood 1999). Under the flag of the win–win proposition (Morduch 2000), microfinance promised to reduce poverty in a sustainable way: a promise which attracted massive investment from the aid industry, multilateral organizations and private donors.
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