Abstract
By the late 20th and early 21st century, credit institutions in Bolivia had become more complex, resilient and popular that at any time previously in its history. Traditional economics analyses emphasize incentives created by laws such as those promulgated by the Kemmerer mission in Bolivia in the 1920s and 30s, or material factors, such as transportation costs. Yet neither of these explanations offers a compelling explanation for the magnitude of the flourishing of popular and complex credit institutions in Bolivia after the 1960s. Cultural changes, however, might offer a compelling complement to legal and material explanations of credit development. Vatican II represented an important mass change in Bolivian culture, and institutions associated with these reforms ushered in a new era of credit institution development in the country.
Highlights
By the late 20th and early 21st century, credit institutions in Bolivia had become more complex, resilient and popular that at any time previously in its history
The Asociación de Entidades Financieras Especializadas en Micro Finanzas de Bolivia (ASOFIN), an association of 7 non-governmental organizations (NGOs), estimated that in 2008 up to 27% of the economically-active population (EAP) of Bolivia had a loan from a bank and up to 86% of the EAP, or about 3.4 million people, had a deposit in such an institution (See Annex 1; Norris 2011, 216)
What has led to the explosion of credit institutions encompassed by the microfinance revolution of the late 20th and early 21st century in Bolivia? New credit institutions are not created from whole cloth, but rather emerge from predecessor institutions, demographic features, and changing ideas
Summary
What has led to the explosion of credit institutions encompassed by the microfinance revolution of the late 20th and early 21st century in Bolivia? New credit institutions are not created from whole cloth, but rather emerge from predecessor institutions, demographic features, and changing ideas. A shared cultural tradition, or what social scientists call social capital (Coleman; Fukuyama; Putnam; Weber 2002), help ayllu members overcome daunting geographical impediments to cooperate with one another This is not to say that transaction costs are not important for the development of credit institutions in Bolivia, but such evidence suggest that the relationship between transaction costs, themselves based on material factors, and the development of credit institutions is complex and can be mediated in important ways by culture, the third of our potential explanations. Material and cultural factors may cause the development of credit institutions, but the very nature of these complex social phenomena makes it impossible to argue with precision or certainty that this is the case in any given situation. As Aristotle in Nicomachean Ethics wrote, “It is the mark of an educated man to seek as much precision in things of a given genus as their nature allows” (1094b, 24-26)
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