Does History Matter? The Old and the New World of Microfinance in Europe and Asia

This paper examines the evolution of microfinance in Europe and Asia. It argues that attributing the origin of microfinance to recent initiatives in Bangladesh misses the its historical depth and scale. It examines:

• The microfinance histories of two European countries - Ireland and Germany - and the following lessons to be learned from their experiences:
  • Informal local initiatives based on self-help have tremendous potential;
  • Savings are the essence of self-reliance;
  • The viability and sustainability of small enterprises and local institutions are intertwined;
  • Continuous access to financial services is crucial in poverty alleviation and economic development.
• Microfinance in India - its origins and early developments;
• Three strands of indigenous finance in India - moneylenders, chit funds, and merchant bankers;
• The history of rural finance, which was mostly in the form of abusive money lending;
• Microfinance and banking in India under the British rule;
• The search for new approaches to reach the rural poor in Independent India;
• Cooperative finance in rural India;
• Linking formal and non-formal finance.

The paper concludes with the statement that digging into the history of rural and microfinance in Europe and Asia generates a wealth of data and insights, but does not produce a coherent picture of what propels or holds back growth. There is, therefore, a need for a coordinated effort at microfinance history in developed and developing countries.