Microfinance: Giving Credit to Relationships

Book review of Microfinance by Antonio Androni and Vittorio Pelligra, Il Mulino Publisher

By Tommaso Reggiani

 Microfinanza_1In 2006, Muhammad Yunus and his Grameen Bank, historical promoter of microcredit programs, were awarded the Nobel Peace Prize. From that moment onwards, many commentators and specialists literally "jumped on the winner´s wagon," excessively inflating the number of articles and publications on microfinance. During these three years, we have heard two main versions: those who claim to redirect the success of microcredit to a sterile technical and operative question, and those instead who have described it - maybe even more disturbingly - as a "bucolic" phenomenon of rustic solidarity.

Evidently, both campaigns propose an erroneous or at least reductive image of the phenomenon. Andreoni and Pelligra have already been studying this topic for an unquestioned amount of time, and the merit of their book rests in the fact that it is able to successfully frame the phenomenon of microfinance within a well-defined methodological furrow. This innovative, and never as before necessary, operation allows the authors to provide an adequate and unified foundation - theoretical and philosophical-cultural - to the phenomenon of microfinance in its multiple dimensions.

 Succeeding in moving through an interesting multi-disciplinary approach, ranging from economy and psychology, history and philosophy, they propose a ensemble vision regarding the genesis and evolution of the phenomenon, as well as the hidden dangers that hang over possible future developments of microfinance. As Stefano Zamagni underlines in the book´s preface, the particular lens through which the authors have chosen to analyze the phenomenon of microfinance is that of civil economy, where genuine relationality within the market and the pro-social value expressed by the economic sphere do not represent a sporadic exception. Rather, they constitute the natural foundation of every economic fact which is authentically civil and fully humanizing. According to the authors, they have taken the relational approach to economy, through which they can trace deep roots of experience in microfinance. In this particular case, the central role is played by relationships of trust established between persons who, although not obligated by external links (laws and/or contracts), chose to be not only rational but reasonable, "giving credit to relationships", deciding to loan money to subjects who lack guarantees, leading to their human and social development. These people know that their sense of propriety and responsibility towards those who borrow from them builds the only true and indispensable guarantee that the loan will be repaid.

 Keeping this wide-horizoned analysis in mind, the book´s second merit is the harmonious and coordinated development of both the macro-economic discussion, in relationship to development programs and microcredit-based programs that fight against poverty, and the micro-economic dimension, as analyzed in light of more recent interdisciplinary studies arising from the mutual influence between economy and cognitive science. The latter are aimed at deepening the psychological and motivational components that are at the base of different individual decisions and social interactions in the economic environment.

 The current economic crisis is teaching us that the economic theory written in scholarly manuals - based on the assumption that egoism is the only functional behavior in the economic sphere - has shown itself to be short-sighted if not absolutely erroneous when compared to the facts. Using the case of microfinance, this book offers important points for reflection, showing the goodness and opportunity of a new approach, perhaps less elegant but surely more capable of thought.

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