Balancing perspectives on informal finance

Abstract

The importance of tailor-made financial services is being recognized in the microfinance arena. Informal financial agents and traditional savings and lending societies have often been stereotyped as usurious moneylenders or as remnants of traditional culture. The increased recognition of informal finance as a positive force should be seen against the wider backdrop of consistent failure among state-regulated suppliers of targeted, cheap credit. The chapter examines questions and approaches that might lead to a more balanced view of informal finance. Balanced perspectives on informal finance take into account its diversity and flexibility. The study of informal financial arrangements requires a significant investment in research in order to describe in full detail the multitude of nuances found across countries in just a single structural pattern such as rotating savings and credit associations. Placing research findings about structural forms and variations into their wider context is essential to explain this ‘multitude of nuances.’