To this panel we invite papers which analyse links between credit creation and economic practices in order to assess the interaction between the design of financial contracts and economic and social behaviour in historical and contemporary contexts.
In recent years, there has been an expanding literature on financial sector practices and reform, microfinance and informal savings and credit arrangements. The question how these financial arrangements affect the economic and social practices of those involved in contracting credit and savings is much less explored. On the one hand, we are interested in the perceptions of economic activities which lies behind the development of specific financial contracts. On the other hand, we are interested in cases in which economic behaviour and social appearance are adjusted to fit these perceptions. We hope to go beyond the duality in the debate on the causes for unequal distribution of credit explaining the outcome as either a difference in creditworthiness or discrimination, since both these explanations suggest that these inequalities in access to financial services are due to causes outside the financial system. Instead, we look for processes which classifies clients, their incomes and their assets endogenously while designing financial contracts and creating credit.
This paper studies the condition for banks in East Africa to create local credit during late colonialism. While the British colonial authorities maintained restrictive monetary policies in the hands of the currency board, the banks were able to expand the money supply (including deposits held by the public) by a more generous credit policy. In the process of credit creation, the banks played an important role in developing assets which could be held by them as collateral for outstanding loans. However, the restrictions caused by the limited number of recognised assets tended to direct credit in to few sectors of the economy. This paper addresses the issue of how this development in the financial sector might have affect economic growth.
This paper discusses perceptions of economic activities as formed within the micro financial discourse. This discourse creates stereotypes of economic behaviour based on ideal perceptions of poor and female borrowers. I argue that standardised contracts for credit are created in accordance with these perceptions and that potential borrowers, their incomes and assets are classified accordingly. As potential borrowers adjust to the expected economic behaviour in order to be recognised as borrowers, their interpretations of the formal and informal norms of creditworthiness materialise the discourse. Furthermore, I explore the possibility of standardised contracts leading to over-capitalisation in sectors of the economy represented in the discourse as suitable for micro business.
This paper considers the moral expectations implicit in systems of credit by examining legal cases which arose in colonized Uganda when the practice of foreclosure on land pledged in debt came into conflict with colonial protections against eviction, and also with the pre-existing Ganda practices regarding the accumulation of obligation expressed in gifts of land. Evidence of cases appealed to the High Court, as well as other archival and oral sources, suggests that judges prioritized the rights of land occupants to subsistence over the rights of creditors to payment when debtors displayed the deference required in the Ganda practice of obligation. At the same time, Ganda patrons lost some of their control over their clients, as those clients re-framed their labor debts in financial terms. The personalization of financial obligation and the monetization of personal obligation which can be seen in the Buganda region of Uganda in the 1930s draws attentions to the unspoken moral assumptions inherent in systems of credit and debt.
Why the Maria Theresa dollar, issued in Vienna, continued to be in circulation in the Red Sea region until World War II although Austrian sovereignty never reached the region and most regional powers struggled unsuccessfully to substitute their own currencies for the Maria Theresa dollar is still a riddle. This paper argues that the Maria Theresa dollar worked in interface both with international currencies such as Sterling pound and with local monies such as salt bar, cloth, iron, glass beads, cartridge and copper coins. Exporters of local products, such as coffee and hides, needed to secure a supply of the Maria Theresa dollar to enabled merchants to purchase these commodities. It also shows that grand circuits connecting local markets sustained the circulation of the Maria Theresa dollar. One of the circuits departed Aden and passed through western Ethiopia and Port Sudan, finally returning to Aden. Crossing borders set by administrations and differences in religion and language, these circuits facilitated various commodities to be transported in the opposite direction of the dollar. The acceptance of the Maria Theresa dollar did not depend on authority nor intrinsic value but on the invisible circuits interfacing multiple markets. The exchange rate between the Maria Theresa dollar and Sterling pound fluctuated according to demand/supply. In the case of Aden, the rate in busy season was twice as high as in the slack one. On the other hand, one dollar is too expensive for ordinary people to use in daily transactions. The exchange rate between the Maria Theresa dollar and local small monies also fluctuated day by day, and the rates were different region by region.