A central assumption of modern economics is that the poor lack credit due to equilibrium credit rationing; a combination of high transaction costs and imperfect information makes it difficult for lenders to know how creditworthy a prospective borrower might be or how prudently that individual might use loaned funds. Aid agencies, commercial financial institutions, multinational corporations, governments and nonprofits have all made massive efforts—and investments—to try to overcome this challenge, perhaps especially for smallholder farmers. Their efforts have taken a number of approaches, from integrated rural development and conditional lending through contract farming, to (most recently) microfinance. None of those efforts has succeeded fully; some have failed spectacularly.
In this masterful book, Parker Shipton offers an insightful view of the complexities of financial transactions in rural Africa and of the broader development efforts in which credit programs have long figured prominently. He discusses a range of programs, some government-led, some run by private corporations, some of domestic origin, others initiated abroad, but all revealing the routine oversimplification of finance as experienced and practiced by rural Africans.
Money is an emotionally, morally, politically, and socially charged subject. Emphasizing that there is no credit without debt, and that credit programs typically blend altruism, fantasy, and usury, Shipton explains and illustrates the inextricability of cultural and economic dimensions of financial transactions and how these commonly subvert reductionist efforts at promoting development through credit programs. Savings, insurance, and credit are transacted by human beings who worry about their family and friends, the communities of which they are a part, and the deeper philosophical and spiritual traditions to which they subscribe. Because of the time lag between payment and repayment, trust ultimately underpins all financial transactions, but trust is itself a complex phenomenon that is difficult to measure or manage.
Furthermore, multiple prospective sources of finance are available to most rural Africans, but under markedly varied relationships and terms. Thus credit programs never enter communities unencumbered by prior fiduciary relationships. How well an externally directed program is integrated with prevailing local practice is often a good predictor of whether it will succeed, and by what measure(s). Many such programs are either both successes and failures or neither one according to the multidimensional criteria by which their impacts might reasonably be assessed.
This beautifully, at times playfully, written book draws on the author’s decades of experience with the people and topic, demonstrating a masterful command of contextual detail as well as a big-picture vision. It is an unusual ethnographic study, not just because it focuses on the complexities of financial transactions, but also because its subjects are both the Luo peoples of western Kenya who are the intended “beneficiaries” of the various schemes studied and the professionals in governments, commercial banks, corporations, nonprofits, and aid agencies operating locally, nationally, and globally with some link to finance in western Kenya.
Shipton’s narrative rings true in terms of my own observations of finance in rural Africa. The purported gains of group-based savings and lending, for example, often get subverted by participants’ higher-order concerns for personal relationships. Not only do friends make loans, but equally, loans make friends; see the work of Andrew Mude, S. M. Osterloh, and Christopher Barrett. This has powerful implications for “impact evaluations” of financial interventions. For example, the randomized controlled trials currently in fashion typically assume away the complex informational and relational heterogeneity of credit to make a false assumption of exogenous and uniform “treatment” effects on randomly selected subjects. The “impact evaluation” community would benefit from a thoughtful reading of Shipton’s volume.
This book was a deserving finalist for the African Studies Association’s Melville J. Herskovits Award. It is the third book in a trilogy that includes The Nature of Entrustment (2007), which won the award, and Mortgaging the Ancestors (2009), which was also a finalist. In this volume, the author builds on his outstanding foundation of work among the same Luo communities of western Kenya. As in the two previous books, Shipton here evinces his ethnographic talents with rich description of the peoples and customs he studies, but also deftly mixes in insightful observations from economics, political science, and sociology. The result is a rich study that is accessible to readers from any discipline in the social sciences or humanities. Provocative and insightful, this volume merits reading by anyone interested in rural finance in the developing world, agricultural and rural development in East Africa, or the operation of aid agenciess.
