Microcredit and Development: a comparative analysis between Brazilian and Italian experiences

Andressa Jarletti Gonalves de Oliveira, Pontifical Catholic University of Paran

Over the last 20 years, the role of financial inclusion and microcredit in alleviating poverty arises in the debate on development policies. Successful experiences such as the Grameen Bank created by Muhammad Yunus demonstrate that access to microfinance services might benefit people to cross the poverty line through the creation of social and economic opportunities.

On Economics, the debate about development also has changed. Some counter-theories emerged, question-ing the utilitarian approach, which focusses on the Gross Domestic Product — GDP to measure development. The capability approach, theorized by Amartya Sen, proposes a broader and more complex informational basis to assess development, taking into consideration the personal characteristics and the social, economic, cultural, political, and environmental factors that could influence the quality of life.

The notion of development as freedom focuses on the agency aspect of human life and considers the real freedom people have to live the life they choose. This perspective presents the task for public policy-makers to identify and remove unfreedom barriers.In this sense, it is worth discussing if and how access to microfinance can contribute to increasing agency and foster development expanding socio-economic opportunities. Some studies question that access to microcredit, by itself, might not be efficient in improving the quality of life and alleviating poverty.

It depends on two main factors: the methodology adopted in granting credit and the rates of interests applied to the loans.This paper focuses on the methodologies of three different experiences on the field of microfinance, the Brazilian Community Development Banks — CDB, the programs of Brazilian Public Development Banks — PDB, and the Italian Cooperative Banks — BCC (Banche di Credito Cooperativo). Despite the differences in the legal status, the target public, and on the socio-economic environments that surround these financial institutions in Brazil and Italy, the three analyzed models have in common the principles of mutuality, solidarity, cooperation, and localism, that guide the granting credit processes.

As will be seen, they are driven by stakeholder orientation, they focus on the generation of social impact on the community they serve and adopt alternative banking practices.The paper is organized as follows. Section 2 addresses the theoretical notion of development and discusses the conditions under which the usage of microcredit can contribute to development by the creation of social and economic opportunities. Section 3 presents a comparative analysis of Brazilian CDB, Brazilian PDB, and Italian BCC, identifying the main features, the similarities, and differences of these microfinance institutions. Section 4 points out the final considerations.

DOI: https://doi.org/10.13128/cambio-8484

Read Full Text: https://oaj.fupress.net/index.php/cambio/article/view/8484




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