Monday, September 27, 2010

Should Local Communities Manage Their Own Microfinance Funds?

Given that they themselves are the primary beneficiaries of this shared financial resource, are local communities at a better position to manage their own microfinance funds?

By: Ringo Bones

Maybe it was the works on concepts of management and governance of shared or common resources of the 2009 Nobel Economics laureates Elinor Ostrom and Oliver Williamson that got me thinking that local communities are in a better position – in comparison to the central government – in managing their own microfinance funds. After all, as the primary beneficiaries, they are way better in deciding their own best interest when it comes to their own common resource usage than representatives from the central government, right?

When it comes to governing and managing common or shared resources, systems that combine central government and local community governance and management are currently the system that does the best. Good governance – with a nuanced approach – always has been the best method in identifying where markets and firms are most efficient, especially when it comes to fiscally important financial transactions. It may not be immediately self-evident, but when it comes to managing shared resources, it is best to think locally – and act globally.