Hundreds of independent, local, quasi-charitable microcredit societies, or "loan funds," were lending to as many as 20% of Irish households in the mid-nineteenth century. Monitored by a central regulatory authority, funds in the system were successful in mitigating informational, moral hazard and enforcement problems, and thus operated at a surplus in a market where intermediation by the banks seems not to have been possible. Created under special legislation, their goal was to relieve poverty by providing credit to the "industrious poor" on a large scale, at competitive interest rates, without public funding. Evidence from the loan funds offers new insights into capital formation in the Irish economy of the nineteenth century and suggests that traditional notions regarding the economic activities of the Irish poor may need to be rethought; it is also relevant for development economists studying current microcredit initiatives.
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Paper provided by EconWPA in its series Economic History with number
9704002.
Find related papers by JEL classification: N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913 O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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