Battling a Wicked Problem
A school of thought hails microcredit as a social innovation, a messiah to enable people to help themselves out of poverty through entrepreneurship. An opposing school of thought considers microcredit as a capitalist demon ensnaring the poor in poverty and debt. The layman and the million professionals working in this industry are at a loss to make sense of the stories that circulate about microcredit. This book provides this sense-making, useful for students, professionals, investors and researchers who are attracted to this field.
Poverty is a wicked problem, akin to Hydra, the Greek mythological monster with many heads. As microcredit tries to balance multiple objectives to grapple with these multiple heads, it has needed to shift the weapons it uses. The arsenal for this battle has needed new philosophies, changing ethics, differing missions, institutional partnerships, the latest technologies and new products. These rapid innovations have differed in speed across the world, with adaptations in developed and developing countries. This book presents these with many case studies and field research.
It is clear that development initiatives, no matter how financial, cross academic disciplines. At the very least, they affect disciplines such as economics, business management, sociology, history, geography, politics, legal systems in place, as well as science, which is evolving at such a high speed. The book provides this multidisciplinary view and motivates future research and practices.
Chapter 2. Institutional Study of Microcredit: Successes and Failures
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Institutional Study of Microcredit: Successes and Failures
We have seen that wicked problems such as poverty are too complex to be solved by any one approach (Churchman, 1967, Weber and Khademian, 2008, Beinecke, 2009, Seager et al., 2012, Whyte and Thompson, 2012). Nevertheless, inaction does not help. Social entrepreneurs therefore try experiments such as microcredit and replicate them if they feel that they may be making a dent to the problem. This replication requires support from many stakeholders and, for this, the social entrepreneurs sell their dreams and visions through story-telling (Ashta, 2014a). However, it is hoped that one day the solution would be sustainable through market forces so that society can focus on other problems or other dimensions of the wicked problem (Houghton, 2015). This scalability using market institutions is often believed to be the only way to impact the billions of people affected by poverty.
This chapter starts by looking at the fast evolution of microcredit and the institutional environment that accompanied it. It then questions whether the rapidly scaled microcredit solution is sustainable in a financial as well as socio-ethical sense. Finally, it looks at institutional building that is required to protect microcredit.
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