Two rallying cries propelled the second wave of microfinance. First, in the 1970s it was ‘proved’ that poor people repay their loans; and second, we ‘learned’ that you can lend money to poor people and make money doing it. These statements may motivate people, but they are impoverished reflections of history.
The first wave of microfinance began in 1864, and rapidly spread over much of Europe, delivering both credit and savings in villages the banks would not touch. Reflecting on nearly 50 years of village finance practice, the journalist Henry W. Wolff wrote in 1910 that “… there has been found to be no more regular and more scrupulous repayer than the small man.” (People’s Banks, p. 27)
The private incentives driving this movement were observed by Léon Say, a laissez faire economist and French Minister of Finance. He visited many ‘people’s banks’ and commented that “… all these wonders which I have seen are the wonders of private initiative and decentralization. It is private initiative, it is the decentralization of credit which is the dominating cause of all this progress in wealth.” (People’s Banks, p. 10)
The first wave of microfinance now accounts for about 10% of banking assets in America and 20% in Europe. It deepened financial inclusion, filling in areas that banks could not. Practitioners in the second wave have ignored this history. Why? Einstein did not reject Newton, and we cannot defeat poverty by ignoring such a rich vein of human experience.
villagefinance 
Dear Brett Hudson Matthews
I like the issue you have raised. I agree that financial inclusion is possible if all players work hand in hand. No need to blame to each other. Better to learn from each other and work together.
Navraj
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I think the call is in the right direction if both players would fairly play it. I work with microfinance institution and there seems to be vas difference in our attitude towards the delivery of financial services becuase those at the main stream calmed to provide superior services than the micro sector.
Together we could work hand in hand to accelerate the allivating of poverty.
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True Brett, we are yet to see strategic alliances being formed in the microfinance sector in order to deepen outreach. Networks and collaborations are most effective in addressing the great need for financial services at the low-end markets.
We see consortia being formed to address HIV/AIDS in Africa but are yet to see consortia being advocated by donors to address financial exclusion in this part of the world.
Anthony.
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Nav Raj, Asare, and Anthony – I am very encouraged by all your comments. Perhaps if we can work around the ‘experts’ with ideologically-driven agendas we can have a genuine impact on poverty in our lifetimes. Feel free to contact me off-line if you want to. My e-mail is brett@mathwood.com.
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