Can an agenda for economic development be premised on an aggressive program built around Microfinance?

Abstract

This study provides formal theoretical evidence that an agenda for the economic development of a `Village' that is built around an aggressive foray into the provision of Microfinance is, consistent with the extant empirical evidence, more likely to fail, than to succeed. Suppose, however, that Microfinance has reformulation as a social mechanism for, first, the introduction of a positive shock to each of Villagers' capacity for asset buildups and the permanent component of a Village's monetary liquidity; and second, with Villagers receiving some guidance on what exactly it means to innovate new products, the funding of a rational gambit that some Villagers attain to new product innovations. The formal theory arrives at two antecedent initiatives and five independently necessary conditions which collectively transform Microfinance into a Pareto optimal social mechanism that, feasibly has a beneficent impact on sustainable economic growth and development.  

Keywords: Economic Development, Entrepreneurship, Economic Growth, Monetary Liquidity, Village Saturation, Product Innovation

JEL Classification: G21, G28, D01, D51, D52, O1