February, 2004

To Market, to Market: In Whom We Trust?

  • Stephen Daley

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Nobel Laureates have argued that development does not occur in a vacuum. Ideal conditions while impossible to attain are oft still considered in policy and aid decisions. The original promise of microfinance was that it would enable the poor, denied finance through established mechanisms, sufficient capital to bring their entrepreneurial vision tolife. Since its (microfinance) humble beginnings much has been learnt. Education is now considered an important ingredient in the enabling of the entrepreneurial poor. As such, government agencies and donors have placed a premium upon livelihood training and in some cases character building. In this working paper, Daley contends that explicit teachable knowledge, while beneficial, can never outweigh the tacit knowledge of the individual loan recipients. It is this knowledge of their surroundings and the institutional matrix in which they live, which will in large part, determine their prospects for continued growth and success. But if these gains are to be realized it will depend on the individual’s ability to move from those personal mechanisms of exchange, so common in developing areas, towards more impersonal mechanisms. Daley argues that it is the informal learning of more formalized market mechanisms that is essential if the current educational and training emphasis is to have more than a transitory impact.