POLICY ARENA

edited by

BEN ROGALY AND CHRIS ROCHE

EDITORIAL: LEARNING ABOUTLEARNING ON MICROFINANCE

NORTH AND SOUTH

CHRIS ROCHE1 AND BEN ROGALY2*1Policy Department, Oxfam, Oxford, UK

2School of Development Studies, University of East Anglia, UK

This Policy Arena originates from two sessions of the NGO study group of theUK-based Development Studies Association in September 1997. The aim of thesesessions was to explore the similarities and di�erences between micro®nance experi-ences in di�erent parts of the world, with a particular focus on what has been learnt inthe `South' and in the `North' and whether there were any speci®c lessons which weretransferable across these conventional divides.

Replacing `developed' and `developing' with `North' and `South' is an improve-ment because it reaches beyond the notion of an inevitable process of progressivechange. However, because of the immense diversity of contexts within both, Southand North are best conceived of as metaphors (Eyben, 1988, 1). All of the articles hereemphasize the extreme care that needs to be exercised in using the terms North andSouth particularly if one is really talking about experiences in speci®c countries, forexample, Bangladesh or the UK.

Micro®nance is concerned with delivering small loans, accepting low levels ofsavings deposits, and providing insurance and other ®nancial services to which poorpeople often lack access. Theway it is done has varied historically and across countries.These di�erent contexts in¯uence the success or otherwise of speci®c technologies(or designs) used for delivering services. Two of the articles in this collection stressthis point (see Pearson on peer collateral and Rogaly on cooperatives and mutuals).The di�erent technologies vary in terms of how much they cost the institutionalproviders of micro®nanceÐ including the often ignored costs of encouraging users to

CCC 0954±1748/98/060795±04$17.50# 1998 John Wiley & Sons, Ltd.

Journal of International DevelopmentJ. Int. Dev. 10, 795±798 (1998)

* Correspondence to: Ben Rogaly, School of Development Studies, University of East Anglia, NorwichNR4 7TJ, UK.

participate in groups, in the case of peer-group lending (Bhatt, 1997; Reinke, 1997).These costs, too, vary according to context.

Johnson's article in this Policy Arena shows how the costs associated withparticular technologies, and the way they are calculated, has important implicationsfor the potential for `scaling-up' provision of micro®nance services. The currentorthodoxy, which emphasizes as its bottom line the ®nancial sustainability of micro-®nance institutions (or progress towards it), seems to ignore such necessary steps inthe process (and their costs) as building the linkages between ®nancial systems, localeconomies, and social capital. These steps are analysed in Pearson's article from®rst-hand experience in Norwich, England.

The con®guration of actors involved in providing ®nancial servicesÐ including butalso going beyond micro®nance institutions themselvesÐ requires a dynamic andpossibly changing (and probably ®nancially unsustainable; see Hayday and Locke,1998) set of local institutional arrangements. This is particularly the case if ®nanciallysuccessful micro®nance institutions follow Michels' iron law of oligarchy (Michels,1915, cited by Upho�, 1995). While several international donors and others, whichare promoting micro®nance today, emphasize the importance of scaling-up as anecessary condition for achieving the great goal of ®nancial sustainability, Michels'law suggests the opposite: that larger scale inevitably involves greater distance fromusers or members, more organization, and therefore a tendency to oligarchy. Therelationship between governance and scale in ®nancial services cooperatives isexamined in Rogaly's contribution to this Policy Arena.

Such issues are of increased signi®cance when it is recognized that internationaldonor concerns can be traced back to the economic and political interests of Northerngovernments and companies, which have domestic as well as international agendas.Unequal international power relations mean that certain countries, governments andcommercial entities have a disproportionate in¯uence on the development of globalmarkets, and ®nancial and aid policy, among other things. The strand of `green' and`new' economics at the root of community banking and the social economy in partsof the North represents a contestation of those interests from within (see Johnson'spaper in this issue). This is important, given that the views and values of Northerngovernments in relation to poverty reduction and wealth creation in their own societiesis likely to in¯uence, if not dominate, their international policy (Stokke, 1996). Inthis very real sense, greater learning and sharing, about, for example, the search foralternative social banking models in the North, are a vital part of in¯uencing inter-national agendas in the future.1

However, Pearson in particular highlights potential dangers in the currententhusiasm for South±North and North±South learning (see for example, Maxwell,1998a), with particular reference to the uncritical importation of models developedand re®ned elsewhere. Given that development agencies have, or should have, learntthat the exact replication of Northern strategies of poverty reduction and incomegeneration in the South is unlikely to succeed, it is ironic that the importance ofcontext and diversity at time seems to be absent from the debates on what the Northcan learn from the South. This is particularly the case given the level of disagreement

1 Conversely, the 1997 White Paper `Eliminating World Poverty: A Challenge for the Twenty-FirstCentury' of the Department for International Development, UK, can be used as a lobbying and advocacytool to attempt to persuade the UK Government to follow its own quite radical anti-poverty policies in theUK.

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that exists about the causal connections between anti-poverty policies and practiceson the one hand, and their impact on the other; as well as the variety of criteria thatare used to judge success (for a summary of this discussion with respect to themicro®nance sector, see Johnson and Rogaly, 1997, ch. 5).

There are clearly growing comparisons, connections, and even some convergencesbetween the North and South (Maxwell, 1998b). However, these have, as Gaventaargues, `often times been articulated in terms of economic connections brought on bymultinationals or capital mobility, or by cultural connections, encouraged by globalmedia and information technologies'. It is important also to take note of `social andintellectual connections involving shared development strategies and concepts'(Gaventa, 1997, emphasis added).

This suggests that what need to be shared are strategies that cope with diversity anddi�erence at the local level, that are based on adaptation and learning through doing,and that are grounded in a common understanding of what it means to struggle forchange in one's own society. The papers presented in this collection illustrate theworth of such an endeavour but also caution against simplistic generalizations andbanal comparisons that do not respect the speci®city of particular contexts or thedi�erent, and often con¯icting, experiences, aspirations, and strategies of those livingand working within them.

ACKNOWLEDGEMENTS

An earlier version of this collection was published as a Working Paper by Oxfam(GB). We are grateful for improvements made to the original draft by Ann Cullenof Oxfam and to the Enterprise Development Group of the Department forInternational Development (UK) for ®nancial support. However, neither areresponsible for remaining errors nor for the views expressed in any of the papers.

REFERENCES

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Edwards, M. and Hulme, D. (1995). Performance and Accountability: Beyond the Magic Bullet.

London: Earthscan.

Eyben, R. (1998). `Poverty and social exclusion: North±South links', paper presented in the

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Gaventa, J. (1997). `Crossing the great divide: building links between NGOs and community

based organisations in North and South', paper prepared for the conference on NGOs and

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Hayday, M. and Locke, M. (1998). `South±North lessons in micro®nance and the role of social

investment'. In Rogaly, B. and Roche, C. (eds), Learning From South±North Links in

Micro®nance. Oxford: Oxfam Working Paper.

Johnson, S. (1998). `Micro®nance North and South: contrasting current debates', Journal of

International Development, this issue.

Johnson, S. and Rogaly, B. (1997). Micro®nance and Poverty Reduction. Oxfam: Oxford.

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Maxwell, S. (1998a). `The same di�erence', Guardian 25 March.

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and South', IDS Bulletin, 29(1).

Michels, R. (1915). Political Parties, Glencoe, ILL: Free Press. (1959 reprint).

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Upho�, N. (1995). `Why NGOs are not a third sector: sectoral analysis with some thoughts on

accountability, sustainability and evaluation'. In Edwards and Hulme (eds) (1995).

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