ABSTRACT
Microfinance has a long history in every developed country and in not a few developing countries. Yet many observers associate microfinance with credit NGOs and their recent origins in Bangladesh. This chapter first examines the history of microfinance in two European countries, Ireland and Germany, for the following reasons: (1) attributing the origin of microfinance to recent initiatives misses its historical depth and scale, and the chance of learning from trial and error; (2) self-help and informal finance were at the origins of microfinance in Europe; (3) conducive policies created an environment in which informal beginnings evolved into networks of local financial institutions, now part of the banking system; and (4) realising how informal finance evolved into the banking system, and contributed to poverty alleviation and development, may induce policy-makers, donors and researchers to take a fresh look at indigenous and informal finance in the developing world. The chapter then turns to one segment of the variegated microfinance landscape in Indonesia: linkage banking, which bridges the gulf between formal and informal finance. This is followed by an examination of the long history of microfinance and indigenous banking in India, including the recent rise of linkage banking inspired by the Indonesian experience.
