Financial cooperatives for sustainable local economic and social development

Abstract

The last 30 years or so has seen the commercial or ‘new wave’ microfinance model rise to dominate the poverty reduction agenda in both developing and transition countries alike. Initially inspired by the Grameen Bank model that emerged in Bangladesh in the 1970s, but later refined to incorporate more fully standard neoliberal commercialization imperatives, the microfinance model is now the most visible poverty reduction strategy around. Nevertheless, even its strongest supporters agree that it still remains moot as to whether it actually possesses the required ‘transformative capacity’ to secure permanent poverty reduction associated with genuinely sustainable national, regional and local economic and social development. This article looks at a local financial systems model arising in Western European practice that, in contrast to the commercial microfinance model, is unequivocally associated with sustainable economic and social development and growth, and thus also sustainable poverty reduction. The author argues that this ‘integrated cooperative financial systems model’ should have had, and should still have today, enormous implications for developing and transition countries (still) seeking to construct local financial institutions that are capable of establishing genuinely equitable and sustainable local economic and social development trajectories.