Microcredit and International Development: Contexts, Achievements and Challenges. Edited by Farhad Hossain, Christopher Rees and Tonya Knight Millar. Routledge, 2011.

Microfinance services have played important roles in the development of small and medium scale enterprises, writes Dr Justice Nyigmah Bawole. This title deals with contemporary experiences in the microfinance industry – and while it omits to introduce the topic with an overarching theoretical framework, its strength lies in its empirical orientation and examination of experiences in a number of jurisdictions.

Microfinance services have been a significant contributor to the reduction of poverty in many parts of the world. These services, especially microcredit, have been considered some of the liberating tools for mainstreaming gender into development and providing agency to poor people in participating in their social mobility.

Microfinance and its many facets, unlike traditional donor funded projects that come in the form of dole-outs, have sought to change the course of poverty reduction by putting the poor, their businesses and their organisations at the centre of poverty reduction and social mobility.

This book documents the contemporary experiences in the microfinance industry. The book is timely and a worthwhile addition to the literature on the subject especially that it treats the topic during the worst and most widespread economic recession in world history.

The book argues that microcredit is valuable in its own right as an enterprise sustaining tool – in which case it contributes to providing the poor and unbanked sector of society microloans for business start-ups and expansion of small and medium enterprises.

This way, many poor people, mostly women, have succeeded in improving their situations and provided support for their families. The book confirms the popular held view that microcredit services have targeted largely women and in the process empowered them considerably.

Microcredit schemes have succeeded in reducing the poverty levels of many millions across the world especially in developing and transition countries. The book chronicles the successes of microcredit in poverty reduction.

But the book also provides significant evidence in the various chapters to demonstrate the weaknesses in the argument that microcredit is a magic bullet that replaces traditional banking as far as credit to small and medium enterprises and poverty reduction are concerned.

The most telling evidence is that many microcredit agencies have drifted in their mission into mainstream banking products – what Hulme refers to as a financial systems approach (p16) – to ensure sustainability and survival. And in default, agencies have experienced significant challenges in sustaining their operations.

This, the book intimates, has resulted from the weaknesses in the capacity of the often touted micro enterprises to repay credits offered them – something which both the microfinance institutions (MFIs) and their beneficiaries have sometimes manipulated records to cover-up. These challenges are likely to continue and the somewhat egalitarian orientation of microcredit is likely to reduce as the world faces the global recession, possible donor fatigue and the consequent decline in donor support for the industry.

Microcredit and the methodologies of the MFIs have also provided avenues for community and local social capital mobilisation. In this regard, microcredit has been reported to play social, political and even cultural roles. The book argues that microcredit schemes and programmes are valuable in the ways in which they have impacted on poor rural people and building of women’s institutions.

Microcredit provides avenues for the negotiation of stakeholder spaces and in this regard microcredit and has not only helped to build the capacities of the poor financially to enhance the management of their businesses; they have also been capacitated to negotiate their power statuses.

In the process, these local institutions and groups have succeeded in exerting their agency not only in contributing to their social mobility but also on the microcredit systems and the MFIs.

The strength of the book lies in its empirical orientation and its coverage of the subject of microfinance in a number of jurisdictions – Ghana and South Africa in Africa; Cambodia, India and Pakistan in Asia; Barbados in the Caribbean; and Mexico in North America.

The geographical spread of the cases discussed in the book typifies the global importance of microcredit and its role in development and poverty reduction across the world, especially in developing and transition countries. This way, the book succeeds in pushing the notion of the ubiquity of the microcredit phenomenon.

Although the chapters by Hietalahti and Nygren (p21-51) and Pellini and Ayres (p52-70) both provided the social capital framework as analytical frameworks for the discussions to back the empirical analyses, similar approaches by the other chapters would have given the book a very strong theoretical grounding.

In the absence of this, a more theoretically-driven introductory chapter would have provided an overarching theoretical framework for the discussions that follow in the subsequent chapters.

Nevertheless, rather than seeking to construct and impose such an overarching framework, there is a strong case for letting the diverse chapters speak for themselves. This approach allows the book to make a rich and significant contribution to the literature on microcredit and the role it plays in the development of small and medium enterprises, poverty reduction, capacity building and empowerment of local peoples as well as the building of social capital through the development of local institutions.

Readers will find that the book distils the challenges and prospects of microcredit and provides an indication of how adaptive the industry must be to survive the turbulence of the current economic meltdown.