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This paper critically examines the validity of the prescriptions of conventional law and economics theory using evidence from two programs aimed at poverty alleviation through improving access-to-credit. The two programs illustrate alternative approaches to institutional reform—the land-titling program (for instance, as advocated by Hernando de Soto in Peru) represents the formalist perspective, while microfinance (as exemplified by Muhammad Yunus’ Grameen Bank, a trust-based program) provides evidence on a more informal, norm-based approach. On a ‘static’ analysis, it finds that the Yunus model outperforms the De Soto model (both in terms of efficiency and equity)—thereby underscoring the benefits of a more socially-rooted norm-based system, at least in the short run. But, on a ‘dynamic’ analysis, it finds that the rapidly expanding microfinance sector in Bangladesh itself shows evidence of increasing formalization. This comparative study thus questions the widespread belief in the importance for development of formalizing legal institutions and arrangements. It demonstrates not only that formal law may not be a necessary pre-requisite for development in the short run, but that some countries might do better focusing on alternative institutional reforms. At the same time, it shows that, in the longer run, formal and informal legal systems may be complements rather than substitutes. This analysis has direct and important implications for the evolution of legal arrangements in China: It thus argues that it is crucial for China to reject the assumed superiority of formal law per se, as well as the false dichotomization between formal and informal systems.

In 1991 Choudhury's resistance to microcredit collapsed. Indeed, he saw opportunities in microcredit that had not been seized by early pioneers such as Grameen Bank and BRAC. He saw ways to make microcredit operations more streamlined and cheaper, so that ASA could survive and grow on earnings from lending. So ASA moved hurriedly and massively into microcredit, and an account is given of how branches were set up and developed, as seen by ASA workers. ASA took loans from a bank and from a new government-backed finance wholesaler, but it soon became clear that its main engines of growth would be surpluses and client savings. We hear first-hand accounts of microcredit from staff and members. All this is set against the background of Bangladesh's return to democracy in 1991.

This chapter explores the powers inherent in discursive knowledge production, in order to explain why Bangladesh, a nation with a rich culture and a remarkable resilience in the face of adversity, would simultaneously become the world’s poster child for abject poverty. Much of the problem lies in the NGOs becoming the source of social and economic welfare. The NGO to beneficiary relationship after all, is not a relationship between equals. The founding of the Grameen Bank and the fanfare that resulted has only served to strengthen the people’s faith in NGOs, if only because the Nobel Prize the bank has achieved is a source of national pride, representing a kind of social equality with the West. Such attitudes toward the supposedly beneficent actions of the Grameen Bank and the empowering applications of microfinance have only served to stifle criticism and alternative economic solutions.

This chapter examines the operation of rural credit markets in the postbellum South in the mirror of colonial India. Using the records of the 1929–1930 Provincial Bank Enquiry Committees (PBECs) and data on Indian rural expenditures and finance from 1951–1952 by the All-India Rural Credit Survey (AIRCS), it investigates the nature of agricultural credit in colonial India in comparison to the Grameen Bank and postbellum U.S. South credit markets. The chapter also explores the relationship of the caste network and the credit system, and then concludes with a discussion of the effect of the credit system on the behavior of Indian cultivators.

This chapter analyzes the means by which the Grameen Bank and associated NGOs have obtained informal sovereignty—a phenomenon the author terms, “NGO governmentality.” Under the microfinance revolution, women are portrayed as autonomous entities and savvy entrepreneurs, though the ethnographic studies conducted by the author reveal a more depressing reality. NGOs tend to enforce policies and practices that dictate the financial habits of their clients—usually the desperately poor—and limit what they may or may not do with the money and services they were provided. These organizations also make use of peer pressure and gender roles to manipulate the behaviors of women in order to achieve NGO objectives.

Chapter 3 outlines parts of the neoliberal values and visions to which the activists in the GJM are opposed. Activists protest against neoliberal ideas and international financial institutions like the World Bank, the World Trade Organization (WTO), and the International Monetary Fund (IMF). This chapter, however, discuss ethics and visions in a specific context, in relation to the United Nation’s first Millennium Development Goal (MDG) that reads: ‘Eradicate extreme poverty and hunger’. The contrast between, on the one hand, the values behind the first UN MDG and, on the other hand, the values and visions of the activists in the GJM is not insignificant but originates from conflicting worldviews. It is argued that in extension these worldviews are related to conflicting ethical values on debt and individual guilt, now locally experienced and expressed among activists and (I)NGO workers.