ABSTRACT
The provision of targeted credit has been a longstanding strategy in national development efforts in the South or Third World. In Bangladesh, the birthplace of microcredit through the now famous and globally influential Grameen Bank, rural credit was touted as central to development efforts in the 1970s.1 However, neoclassical economists, who argued that such practices resulted in a distortion of the market for scarce investment funds, identified subsidised credit as a failure from the mid-1970s.2 During this same period, a number of Non-Government Organisations (NGOs) experimented with mechanisms for the alternative delivery of credit. These ‘microcredit’ initiatives involved the provision of collateral-free small loans to jointly liable people for the purposes of income generation and self-employment. The recipients of loans were typically not eligible for credit from commercial lenders, and were predominantly women. Microcredit programmes expanded rapidly in Bangladesh generating a wave of enthusiasm in development circles with the Microcredit Summit Secretariat (MCS) launching a ‘global movement to reach 100 million of the world’s poorest families, especially the women of those families, with credit for self-employment and other financial and business services, by the year 2005’.3
