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The World Until Yesterday is interesting, but far less compelling than Diamond’s masterpiece, Guns, Germs and Steel. Diamond’s goal is to learn lessons for our modern ways of being and interacting from “thousands of natural experiments in how to construct a human society”. These ‘natural experiments’ evolved in every corner of the globe before the rise of the first states about six thousand years ago. He calls these natural experiments ‘traditional’ societies.

Diamond’s focus is where his heart is – Papua New Guinea – and the book includes many personal stories. PNG includes many of the most traditional societies on earth. And modern human development there has been compressed Continue Reading »

DSCN1854 Saving Wood

Children playing in an Isabel village. Saving in wood (left).

In a 2002 speech Sir Dudley Tuti described as ‘quite tormenting’ the state of rural credit unions in the Solomon Islands. The Paramount Chief of Isabel Province, Sir Tuti had pioneered the national credit union movement two decades earlier. He had secured national legislation and formed the Solomon Islands Credit Union League (SICUL). By 1994 the SICUL reported 121 credit unions with 16,588 members: reaching almost a quarter of the nation’s households.

The Solomons are a natural laboratory for community-based finance: Continue Reading »

In The End of Money (see citation, last entry) David Wolman suggests that poor people may taste the ‘cashless’ (i.e. digital) society early on, due to a ‘leapfrog effect’ that has already delivered mobile phones to over a billion people without bank accounts – many living in villages which have yet to be reached by national road or electricity networks.

“Almost overnight the phone has evolved from a one-trick pony Continue Reading »

The cashless village: in a pre-cash village like this (Solomon Islands), value is not stored in currency. Villagers don’t depend on cash to exchange value, either.

In The End of Money: Counterfeiters, Preachers, Techies, Dreamers – and the Coming Cashless Society (Da Capo Press, Boston MA, 2012) David Wolman seeks not the end of money generally but specifically the end of paper cash – the sooner the better.

 

He spends a year living without cash – those germ-infested, cocaine-smudged notes – and Continue Reading »

A cluster of VSLAs in rural Rwanda. Clustering expands the market for governance, and enhances opportunities to ‘rewire’ networks.

The heart of VSLA is ‘time-limitation.’ The time-limitation feature is typically understood as an ‘action audit’ – a way for members to manage risk by giving them an opportunity to say “show me my money.”

A recent study of human cooperation[1] gives us a fresh look at time-limitation. There have been many doubts raised about cooperation: in particular due to the effect of so-called ‘free-riders,’ who exploit its benefits without contributing to its successes. However, Continue Reading »

If elite capture is such a serious threat, how was it dealt with during the microfinance revolution in Europe? F.W. Raiffeisen addressed this risk directly: he asked village elites to play leadership roles in the cooperatives – but to derive no material benefit from them.

In speeches he emphasized religious duties of charity and responsibility to community, and encouraged the villagers to elect leading individuals to the board, conditional on their character. Board positions received no compensation. Raiffeisen Continue Reading »

By 1979 only 61 of the 400 Comilla cooperatives were still functioning.  One observer attributes this result to four factors:  fraud/lack of internal controls, stagnation, diversion of funds, and ineffective external supervision. The central problem of fraud and weak controls “was possible not only because of individual dishonesty, but because the people were not made aware of their rights, and were not in a position to voice their rights (Aditee Nag Chowdhury, Let Grassroots Speak, p. 54).

Partly as a result of Dr. Khan’s experience, later Bangladeshi practitioners in microfinance, such as Dr. Muhammad Yunus and Fazle Hasan Abed, Continue Reading »

The ‘cooperative wave’ of microfinance gave way to the ‘microcredit’ wave in the 1970s. ‘Elite capture’ severely damaged the cooperative wave in the South. The story of the transition from the Comilla model to Grameen Bank, at the inflection point between the movements, is exemplary.

The ‘Comilla Model’ was initiated in East Pakistan by Dr. Akhter Hameed Khan in 1959. Khan drew inspiration from the Raiffeisen credit unions of rural Germany. He envisioned ‘vigorous local institutions’ that could provide credit and access to markets for the farmers of Comilla district. The cooperatives Continue Reading »

Layaway plan from Chuka, Kenya, Feb 17, 2012

A shopkeeper shows us his informal yet careful bookkeeping for his customers.  After selecting the product or device they wish to purchase, they come to an agreement with the shop’s owner for a layaway plan that suits their need for flexibility and control over the amount paid each time and frequency of said payments.  Once the total amount is cleared they are free to collect the device and take it home, sometimes taking as long as 2 or 3 years to reach their goal. Since they have selected the product already and the shop has put their name on it, there is an intangible sense of ownership that incentivizes their efforts to complete the transaction as rapidly as they are able.

The sticker seen is used to mark the specific product as an indicator of having been “Sold”, while Continue Reading »

Flower mandala, Ahmadabad. Many great traditions need right and left to clap.

The founders of early financial cooperatives believed in ‘cooperation’. This was not a sentimental idea. It was seen as a practical tool for pooling financial and human resources where poverty was too great for individuals to escape by themselves. It required an almost obsessive focus on both prudent financial management and disciplined adherence to operational rules.

Democracy in private enterprise, and practical concern for poorer neighbours, are left-wing ideas. Prudent financial management Continue Reading »