July 27th 2022
PA.008 | Microcredit as a Resource for the Less Poor? Comparing Models in the Historical Perspective from the Middle Ages to the Present
09:00 - 12:30 - Centre des colloques - Room 3.01
Credit is the lifeblood for economies. The institutions or some others structures are the resources that allow credit to feed the economies. However, financial services are not accessible to everyone. The "financial exclusion", used for the first time in 1995 by Leyshon and Thrift (1995), indicates precisely those cases of limited physical accessibility to banking services. With Kempson and Whyley (1999), the term was then used in its current meaning with reference to the difficulty of an increasingly growing segment of the population to access the main financial services and products. Today, financial exclusion is widely recognized as one of the parts that make up a wider social exclusion. The objective of this session is to highlight the origins of the European culture of "credit assistance" with the search for the roots of the economic resource of microfinance and microcredit and the analysis of their transmission to the present. By investigating the forms of social protection and solidarity credit that were developed within urban and rural societies in Italy starting from the late Middle Ages and then spreading throughout Europe and then into the contemporary world, we want to try to evaluate and trace a demarcation between various microfinance models following the current economic crisis. Many scholars and politicians have often considered microfinance as the last possibility offered to that group of people with low income and therefore excluded from the traditional banking system, but it is now known that these resources have shown that it does not always alleviate poverty. The “conjunctural poor” needs financial products to be able to face the unfavorable economic situation or to stabilize consumption and protect itself from future risks. The microfinance resource and the institutions that practice it remain instruments of appropriate political intervention to extend financial services to other areas for which the opening of branches of traditional banks would be more expensive and, in any case, not profitable. Microfinance continues to gain credibility as an effective tool to alleviate poverty from both professional donors and policy makers, as supporters provide indicators of fund recovery performance, usually at rates between 90% and 100%. However, this thesis is totally contrary to the economic theories that teach us that, to promote economic growth, the price of money should be reduced. Microcredit and microfinance have always been seen as the panacea, the missing ingredients for the economic development of certain geographical areas and the reduction of poverty through small loans, savings, micro insurance and other financial services offered to those who have been excluded by institutions conventional banking. People living in poverty, like everyone else, need a diverse range of financial instruments to manage their activities, build resources, stabilize consumption and protect themselves from risks Financial exclusion and microfinance, however, are not products of the contemporary world: history shows that over time there have been portions of the active population of a certain geographical area that was going to populate the so-called group of poor conjunctural, that is those who they were momentarily expelled from the economic system. If not adequately supported by welfare state policies, the risk of falling into the category of structural poor was very easy. In the past, however, faced with the lack of a “welfare state” as we understand it today, there was a plethora of "charitable" institutions that assisted both the structural poor and the economic ones. And, in the absence of a specialized credit system and faced with the ecclesiastical prohibition of lending money because it is considered a sin, in central Italy from the fifteenth century the Monti di Pietà (pawnshops) spread among the various charitable institutions, in the wake of the Franciscan preaching. These institutions offered their service to that category of people who were temporarily in financial difficulty and could not turn to private bankers who practiced high interest rates. Most of the monti di pietà were born and spread in urban areas and were aimed at those who had the opportunity to present a real guarantee, while the monti frumentari were the expression of rural areas where there were small farmers, often tenants of land, that they did not have seeds to cultivate and then resorted to them, and the only guarantee required was the personal one. From the 13th century onwards, the “care of charity” has fed and protected the poor, gradually allowing the movement of capital with the emergence of ante-litteram forms of microcredit, starting in the 19th century in many parts of Europe we witnessed to the process of concentration, rationalization and specialization of banking services. The constitution of the National States required instruments to ensure that credit fed the national economies, and at the same time “well-being” gradually became the object of planning and public intervention. There was a diversification on one side of the banking activity and on the other on the construction of the welfare state. But institutions like the Monti di Pietà, if they had not turned into savings banks or the like, remained in the limbo between credit institutions and charitable institutions. The session intends to explore and compare long-term trends in microcredit models. The session welcomes contributions from all parts of the world, but with a special focus on those where the best sources are available (Europe, Asia, Africa and the Americas). Both empirical (providing new data) and theoretical or interpretative contributions are encouraged about microcredit. Through critical analysis of different models starting from the oldest to the most recent models such as the Grameen Bank model, the MC2 model, the village banking model and the SKS microfinance model, we intend to try to understand whether or not there is a more suitable model for the creation of wealth for the poor following economic crises.
G - Financial Economics
G21 - Banks • Depository Institutions • Micro Finance Institutions • Mortgages
H - Public Economics
H81 - Governmental Loans • Loan Guarantees • Credits • Grants • Bailouts
Paola Avallone - Italian National Research Council - CNR, Institute of Studies on The Mediterranean - ISMed
Donatella Strangio - Sapienza - University of Rome
Maria Carmela Schisani - Università degli Studi di Napoli Federico II
Antoni Furió - University of Valencia
Microcredit in the Shop in Late Medieval Tuscany
So Nakaya - Osaka University
This study examines microcredit practices on the part of shopkeepers in Late Medieval Tuscany. Even before the establishment of the Monte di Pietà, citizens and countrymen had various sources of small credits in their everyday dealings within the consumer economy. People in temporary want of money could receive either goods or money not only from professional moneylenders such as local bankers or foreign pawnbrokers, but also from amateur lenders who extended loans on the basis of their own temporary surplus, as evidenced by notarial records as well as private memoriale. Shops were an important source of credit, which was extended in a variety of forms. The books of innkeepers (including wine purveyors) and second-hand dealers in Prato, a city in Tuscany, show that numerous people bought items on credit and, in some cases, borrowed money. The importance of retail shops in the credit networks of urban society is demonstrated in the frequency and volume of credit transactions as well as by the range of social status on the part of the customers involved.
Microcredit in the Cities in Medieval and Early Modern Japan
Hiroshi Niki - Osaka University
From the sixteenth century a micro-level method of finance called tanomoshi, a type of lending circle, was used in Japan whereby people acting cooperatively could realize a set amount of capital. For example, each of ten participants would contribute 100 mon per month. After 1 year, 12,000 mon would have accrued, with the entire amount then given to one participant, determined by lottery. The recipient could use this large sum for any purpose, such as investing in expensive equipment or embarking on a new business. The following year the same process would begin again, with the previous recipient required to participate. After 12 months a different recipient would again be decided by lottery. In this way over the course of ten years each of the ten people would accrue 12,000 mon once. Participants were typically merchants or craftsmen living in cities. For people who would otherwise have difficulty amassing a large amount of capital on their own, this micro-level method offered a business opportunity.
Interpersonal Credit Networks in Renaissance Florence: A Resource for Both Rich and Poor? An Exploration through the Catasto of 1427.
Matteo Pompermaier - Stockholm University
In Renaissance Florence, the allocation and deployment of financial funds took place mostly via intrapersonal and non-intermediated exchanges. At that time, Florence was a strongly embedded society, in all the segments of individuals’ lives. Credit networks were an indispensable vehicle of elite integration, which contributed to easing commercial trade and fostering economic development. However, the role that popular classes had in these social networks has been so far neglected. This study aims to contribute to filling this gap. By relying on social network analysis, it assesses whether the networks of the lower classes developed and were sustained by the same factors and characteristics as the elite. More in general, it is also a matter of better defining the concepts of ‘poor’ and ‘poverty’, and retracing inter-class relations in Renaissance Florence. To this end, the research focuses on the Catasto of 1427 and more specifically on a group of 453 tax declarations of households residing in one of the city neighbourhoods, the gonfalone of Nicchio. The use of social network analysis is strategic, as it allows us not just to visualize complex credit relations, but also to ascribe them mathematical measures useful to study relational characteristics.
Lending to the working poor: the importance of small credit in early modern Italy
Mauro Carboni - University of Bologna
Recourse to pawn credit was part of the survival strategies of lower income families in pre-modern Europe. Short-term lending against collateral was ubiquitous, but concerns about interest charges – deemed usurious – aroused considerable social and religious tensions. Placing pawnshops under public control was a way of affording borrowers a degree of protection against high charges. The most successful institutionalization of community-based pawn banks (Monti di pietà) began to catch on in late Renaissance Italy. These new agencies not only extended credit to those who had no other source, but in the main they did so according to ethical rules. Comparing norms and dealings of a selected number of successful pawn-broking institutions, located in northern and central Italy, this paper will explore both the magnitude of the phenomenon and the evolution of the trade. Throughout the early modern period Monti remained the focal point of a large poor and middling clientele, yet they expanded their services, to attract better off customers. It will be argued that administrators worked to reconcile opposites: services to more affluent households aimed at expanding credit and at reducing costs shouldered by the working poor, contributing to long-term urban social stability.
A comparison of Microcredit Practiced by the Catholic Monti di Pietà and the Orthodox Monasteries in Eastern Europe
Lidia Cotovanu - Romanian Academy of Science
Since the first Christian centuries, monasticism, based on the principle of voluntary poverty, was ascribed the role of intermediary between humanity and God with respect to the salvation of the faithful, as well as the duty to assist by means of alms the forced poverty, that is, re-distributing the donations made by valid laymen. This allowed monasteries to acquire goods, then to engage in economic practices meant to increase and sustain their patrimony. In spite of the formal prohibition to make money with money, both on the Catholic and the Orthodox side, the monasteries adapted to the development of commerce and to the social quest for liquidities, but mobilized different ideological and institutional means. Unlike the Orthodox world, where charity aims the poor who have nothing, in the Catholic world appeared, in the 15th century, the type of the poor short of money. The Mounts of Piety, urban establishments of the Franciscan brothers which offered secured loans with low interest rates, contributed thus to the expansion of the consumer market within a institutional and legal framework. On the contrary, the Orthodox monasteries continued, until the 19th century, to support their charity work and, implicitly, their economical and financial activities, according to the traditional principle of redistributing alms to poor who had nothing. This might explain, albeit partially, the fact that the disadvantaged social strata of the Orthodox world remained until very late attached to the self-sustained economy.
Serving the "poveri bisognosi". The loan on pawn in the Kingdom of Naples: birth, evolution and establishment.
Paola Avallone - Italian National Research Council - CNR, Institute of Studies on The Mediterranean - ISMed
Vittoria Ferrandino - Sannio University
Economic historiography has recognized that the evolution of financial mechanisms in the long run explains structural aspects of capitalist economic performance. Discretion in the allocation of credit resources by financial institutions, stimulated by certain institutional contexts, limit access to credit to few economic actors as part of networks of relational resources with financial capacity. The resulting concentration of economic activity, as well as its consequently unequal distribution of resources, can therefore be interpreted as a correlate of discretionary financial mechanisms. Many scholars and politicians have often considered microfinance as the last possibility offered to people with low income, and therefore excluded from the traditional banking system. But now it is known that some ways of implementing these mechanisms not always alleviate poverty. And history helps us with today's mechanisms. Financial exclusion is not, in fact, a product of the contemporary world. Even in the past, in addition to the structural poor, there were the conjunctural poor who were allowed to re-enter the market only if they could obtain cheap loans. The Monti di Pietà played the role of pawnbrokers in the Italian peninsula from the second half of the 15th century, replacing first the Jews and then the Christians who practiced usurious rates. In Southern Italy, microcredit in the form of pawnbroking is found later than in the central areas of the Italian peninsula. First the Monte di Pietà of Naples, then the Monte dei Poveri, and later still the Neapolitan public banks ensured, in the most populous city after Paris, the ante litteram microcredit service. The objective of our paper will be to highlight an economic model that saw the service of loans on pawn as forerunner of microcredit concentrated in a few institutions. From the birth of the Monti di Pietà in Naples and their evolution into public banks alongside other welfare institutions which had the real privilege of being allowed to open banks, we will try to understand why at a certain point all the banks in the city were authorized to lend on pawn. We will then focus on a case-study, that is, analyzing the accounts of the pawnshops opened in the public banks in order to understand the trend of "poverty" in an important moment for Southern Italy, when the Kingdom of Naples finally became autonomous with its own King: Charles of Bourbon.
Endowed charities: The microfinance system used by charitable institutions in Catalonia (18th century)
Céline Mutos-Xicola - Girona University
The vulnerability suffered by some segments of society in the eighteenth century often led to the use of microcredits in the face of difficult economic situations. The more needy were able to use the credit services (pawnshops) of the Mont de Pietat, as M. Carbonell explains in the case of Barcelona. On the other hand, those who could present some form of collateral, whether property or a guarantee, could obtain a microcredit from a lender, usually through the mortgage rents known as censals, the tool used most for this purpose. In fact, studies on the Catalan case by Ll. Ferrer, E. Tello and R. Congost, among others, have highlighted the omnipresence of credit across all social groups, from the more privileged to the more needy. The Church, wealthy peasantry, moneyed families and professionals were the main creditors. However, there were also other, far less well known actors in this respect: charity organizations, whether hospitals, hospices or Houses of Mercy (cases de miseric rdies). Unlike other lenders, the quasi-banking activities that they habitually performed had little to do with their primary function: assisting the underprivileged. These charities managed a broad estate that came mainly from bequests, and was composed of properties, endowed charities and monetary resources from alms or legacies. However, the increase in patients or those seeking shelter could damage their economy at a time when public intervention was almost non-existent. The primary healthcare work they did would therefore be impacted by a lack of resources. It is for this reason that they did not hesitate to become part of the credit market in an attempt to increase or at least retain their capital. The aim of this study is to determine the true role some Catalan charities undertook in the financial products market during the eighteenth century. The account books of these institutions allows us to study the complex way in which their capital was managed. Notary registries provide the necessary information with regard to the creation of censals, telling us when and why they were used, but above all establishing the profile of the beneficiary and their guarantors. This, in turn, allows us to determine which category of workers turned to the charity organizations for microcredits and compare them with those who used other means. Furthermore, it is essential to analyse whether the supply of credit was flexible enough to adapt to a demand that was prone to fluctuation. In fact, research into the fluctuations of censal creation should allow us to demonstrate whether demand was linked to specific periods or to the life cycle of borrowers. Looking from the other side of the mirror, it would also be necessary to determine whether the institution was able to create wealth by this means or whether moneylending hampered its operations by diminishing its capital, and consequently degrading its charitable work. Finally, the results obtained by the institutions should be compared with data for the more classic moneylending market to determine the real impact of offering microcredits.
Microcredit and the body: Human commodification in 18th century Britain
Tawny Paul - University of California, Los Angeles
The poor in Britain practiced an economy of makeshifts. Without access to lending institutions, they converted goods into credit at the pawnshop, or their reputation into credit through borrowing. But one of the less considered credit ‘instruments’ used in this period was the body. In taking loans, men and women literally pawned themselves, subjecting their bodies to incarceration as forms of collateral if they did not repay. When they had nothing left, the poor commodified their bodies in the form of labour contracts, including indentured servitude and naval service. This paper considers the practices of human commodification that took place in domestic Britain as a means of accessing credit. These practices were not slavery, but existed on the same spectrum. It considers the agency that the poor claimed in commodifying their own bodies, and the markets that developed to facilitate these activities. In this case, we can see how financial exclusion shaped labour markets and led to forms of coercion.
Microfinances at the eve of capitalism: notarial credit during the second half of the 18th century in Buenos Aires
Martin Wasserman - CONICET - Universidad de Buenos Aires
Since Ancient Regime times, notaries exercised an active role in shaping the dealings they formalized. Debts obligations and mortgages contracts were some of the major dealings rubricated at the notarial office in Buenos Aires during the 18th century. Their role allowed businesses without the restrictions of relational proximity between creditor and debtor, bypassing the reputational sanction mechanisms. After the Seven Years' War (1756-1763), Buenos Aires became one of the epicenter of imperial conflict in Hispanic America. This resulted in increasing regional remissions of fiscal resources to Buenos Aires, to cover the expenses involved in the military defense of this Imperial border. The influxes of fiscal money invigorated the economy of Buenos Aires since 1766, promoting by indirect ways an acceleration of commerce and, therefore, an increasing use of credit instruments. In absence of local banks, from 17th century economic actors of Buenos Aires had resorted to notaries to access credit resources, in a tradition that resembles other latitudes of the European and Hispanic American economies. This practice flourished during the second half of the 18th century with the multiplication of notarial offices in town. Using statistical tools and Social Network Analysis, this paper advances on the central aspects of the active function of notaries in credit transactions: mediation and contractual informational intermediation in a prebank economy.
Credit and the Rural Poor in Pre-Industrial France
Elise M. Dermineur - Umeå University
How to access credit when there was no guarantee to offer? This paper explores credit allocation to the rural poor in pre-industrial France. In rural areas, landed property constituted the main access to credit. Most notarial loans such as annuity contracts were backed with land. Landless dwellers thus often could only count on their social capital to locate available funds and enter credit markets. Poor borrowers’ reputation and honesty but also other villagers’ solidarity allowed the poorest members of the community to borrow. In the meantime, in the absence of charitable institutions such as the Mont de Piété, solidarity and reciprocity between villagers often constituted the only access to funds for the poorest households of the community. This paper aims at identifying the rural poor strategies in locating available credit funds in local communities. It also aims to analyze the various credit networks the poor entered, as well as the purpose and extent of such loans. Notarial loans are used to measure the poor exclusion from institutionalized credit. And probate inventories help to identify the poorest members of the community. But these probates also help us to reconstruct the network of informal and formal lending within the community highlighting the poor’s strategies in credit allocation.
Economic Concerns and Moral Connotations in the 17th and 19th centuries: The Monte di Pietà di Roma. Pawnbroking
Donatella Strangio - Sapienza - University of Rome
This paper (based on original archival sources) will document the expansion of the pawnbroking. In particular, the role of the Monte di Pietà of Rome will be examined. The origins of the Monte di Pietà in Rome are well-known: established on the initiative of Giovanni Calvi, a commissioner of the Franciscan Order in Rome and approved by Pope Paul III, the Monte opened in 1539. Monte's operations from the 16th century onwards. Particular attention will be devoted not just to ethical concerns but to the key countercyclical function played by pawnbroking activities at the lower end of the market, not just from an economic viewpoint but from a political perspective as well. Indeed the Monte played an important, albeit indirect, political role, at crucial junctures in the 18th and 19th century history of papal Rome: easy access to cheap Monte credit was instrumental in keeping internal peace and preventing the flaring up of social tensions.
Making way for the “Sparkasse” – Institutions of transition between personal and non-personal credit in 19th century Germany
Daniel Reupke - Stuttgart University
Regularly, New Institutional Economics refers to the 19th century as an era of an institutional revolution. Starting from a stable environment, I assume an evolution of institutions in the credit market comparable to the well-known shift from personal to impersonal trust, which led to various informal phenomena coexisting on the market. Based on an extensive analysis of notarised debt certificates in the rural areas of Saar-Prussia spanning the whole of the 19th century, I focus on the institutional transition period. While before 1820 most loans were granted by private individuals, after 1870 savings banks (“Sparkassen”) almost completely took over the credit market. Remarkably, the demand of microcredit in the intervening period was satisfied by a growing sector of semi-institutional organisations such as church factories (“Kirchenfabriken”) and credit unions – both cooperative and company-internal ones (“Bruderschaften” or “Pensionskassen”). The proposed talk will highlight these transitional forms of institutional revolution, which satisfy the financial needs of the less fortunate through collective self-help organisations. It aims to contribute to the differentiation of the research field by presenting the institutional revolution as a heterogeneously multilayered and locally varying process.
Understanding Ottoman Microcredit Mechanism: The Case of Cash Waqfs
Cem Korkut - Ankara Yildirim Beyazit University
Bulut Mehmet - Istanbul Sabahattin Zaim University
Critics of capitalist economic theory are increasing during periods of economic and financial crisis. While these criticisms are sometimes made for partial applications, sometimes the entire system is criticized. Capitalist economic theory does not accept any systematic criticism because it holds power. Even real alternatives are being eliminated. In fact, capitalism uses these alternatives to solve some of the problems within its system. One of these alternatives is the Islamic economic mentality. The Islamic economic mentality presents an important alternative to two major economics schools such as capitalism and socialism. In Islamic economics, historical practices are as important as the Qur’an and the Sunnah. The economic practices of the Ummah throughout history show the solutions that they have found to the economic and financial problems within the borders of Islam. One of these practices is the cash waqfs (CWs) that became widespread during the Ottoman period. The records show that CWs had been active for over 500 centuries. The CWs are a reflection of both the Islamic and Ottoman economic mind. The CWs did not allow the banks, one of the most important institutions of capitalism, to enter the Ottoman geography until the second half of the 19th century. All or part of the capital of the CWs consists of cash money. The income of cash is used for the purpose of the waqf. Income methods are at the forefront of modern Islamic financial instruments today. The borrowers of these waqfs were generally small enterprises. Thanks to the CWs, Muslim entrepreneurs could find funding opportunities under the Islamic rules. Moreover, the archival sources have shown that the CWs funded not only consumption but also production and trade. The methods used in CWs in an economic order where interest is forbidden are also important for showing the flexibility of the Islamic legal system, fiqh. In this study, the Islamic economic mentality will be examined especially in the light of the waqfs of the Ottomans in the Balkan geography. The basis of the work is the establishment documents of waqfs from the Ottoman Waqfs/Foundation Archives.
Microcredit and peasants: experience from pre-states Levant
Amos Nadan - Tel Aviv University
Even in times when the Ottoman Empire expanded its international trade during the nineteenth century, formal credit was virtually non-existent to peasants. They also had meagre chances of receiving formal credit during the mandate (British and French) period. One key problem was that banks in particular were interested in receiving money on loans rather than produce, commodities or other goods. On the other hand, merchants who traded with the peasantry, whether marketing their agricultural produce or selling them products, often also functioned as moneylenders in interlinked transaction; meaning that selling goods simultaneously produced a contract in the credit market. Merchant-moneylenders provided credit with high yet hidden interest rates and operated within a contestable market. This paper explores and analyses the business relations between merchant-moneylenders and peasants, and how these ultimately led to increased liquidation of peasant lands by merchant-moneylenders who became the landlords in the aftermath of the Land Law of 1858.
«Effective help». The battle over small loans between the Monte di Pietà and private banks (Naples, 1900)
Maria Rosaria De Rosa - Suor Orsola Benincasa University, Naples
At the turn of the twentieth century, the Italian banking system experienced a process of progressive complexity and change in various regional contexts of the country. In my paper I would like to analyze the situation of the city of Naples, in southern Italy , and the central role played by the Banco di Napoli in the development of credit lines able to respond to the various needs of customers in search of liquidity during the early decades of the twentieth century. I will focus on a particular segment of the Banco’s lending practices, which concerns micro-credits to households. From this point of view, it is particularly interesting to follow the activity carried out by the Monte di Pietà, a branch of the Banco which had a long tradition in granting loans on pledges to the "less fortunate class". During this period the Monte di Pietà widerwent a process of reorganization whose purpose - which concerned not only territorial expansion of the service, but also an intervention to reduce the interest rates charged by the Banco - had to do with the need to counter, and eventually replace, the action of small private banks that had recently proliferated and offered a variety of credit services for the economic needs of citizens. Documents show a scenario of great competitiveness between the credit institution represented by the Banco and the private initiative of the many small credit entrepreneurs, a dimension in which the gender issue is not secondary. In fact, women were surprisingly protagonists in these circuits, and their money was often used to start specialized businesses in proximity loans. Through cross referencing archive documentation concerning Monte di Pietà and the statutes of private banks founded in Naples at the turn of the 20th century, I would like to reconstruct this specular dimension and outline the terms of a 'battle' for financial inclusion that offers a privileged look at the complex mechanisms and criteria needed to access to micro-credit in contemporary cities.
Integrating micro-finance and philanthropy through the Syrian sanduq: lessons learnt from Jabal al-Hoss
Sabrina Iannazzone - Università degli studi di Napoli l'Orientale
Alija Avdukic - Al-Maktoum College of Higher Education
The ‘sanduq’ model, literally a savings box, became known as a micro-finance innovation to enhance socio-economic development of low-income rural communities in Jabal al-Hoss, one of the poorest areas in Syria, before the Syrian civil war (O. Imady & H.D. Seibel). The initiative responded to the unmet needs of rural people living in poverty who were unable to access and mobilise sources of finance in the traditional banking system. The article makes visible the key lessons learnt from the Jabal al-Hoss project - sustainability, self-reliance and profit sharing, and women inclusion. In doing so, it deconstructs the concept of the ‘sanduq’ innovation as the modern articulation of the Islamic philanthropy and sheds light on new prospects for value-based charitable practices and their application outside the country of origin. Using an ethnographic approach, this article explores today’s potential of ‘sanduq’ models for community empowerment, financial inclusion and social justice, particularly under political instability or unfavourable economic conditions.