Faculty of Economics and Business Administration Publications Database

Microfinance Once and Today

Authors:
Source:
Volume: 51
Pages: 183 - 205
ISSN-Print: 0023-4591
Link External Source: Online Version
Year: 2018
Abstract:

The paper sketches the history of the German savings and cooperative banks of the 19th century and that of modern microfinance in developing and transition countries of today and explores the parallels that exist between these two histories. One result is that the German savings and cooperative banks of the 19th century can rightly be regarded as precursors of modern microfinance. Another result, that also contains important practical and policy-relevant implications, is that the success of both the German popular banks of the 19th century and of a number of today’s microfinance institutions is due to a strategic shift undertaken quite early in their respective development: They have both abandoned their initial two-way specialization of offering only one type of financial services – either only loans or only deposit facilities – and of only addressing really poor people and very small businesses and instead adopted the role of genuine financial intermediaries, that offer loans and take clients’ deposits, and broadened the spectrum of clients they aspire to reach, such that they have become truly inclusive financial institutions.

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