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Attempting the Production of Public Goods through Microfinance

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  • Philip Mader

Abstract

This article critically evaluates attempts to create public goods via microfinance loans in reference to the specific example of water and sanitation. The microfinancing of water and sanitation is a private business model which requires households to privately recognise, internalise and capitalise the bene-fits from improved water and sanitation. But household water and sanitation, being closely linked to underlying common pool resources, and being merit goods, have strong public goods characteristics and therefore depend on collective solutions. Two cases, from Vietnam and India, are presented and evaluated. Despite their dissimilar settings and designs, evidence is found that both projects encountered similar and comparable problems at the collective level which individual microfinance loans could not address. The problems encountered warn against an emergent micro-privatisation of water and sanitation through microfinance. JEL Classification: O16, O18, Q25, Z18

Suggested Citation

  • Philip Mader, 2011. "Attempting the Production of Public Goods through Microfinance," Journal of Infrastructure Development, India Development Foundation, vol. 3(2), pages 153-170, December.
  • Handle: RePEc:sae:jouinf:v:3:y:2011:i:2:p:153-170
    DOI: 10.1177/097493061100300204
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    References listed on IDEAS

    as
    1. Karlan, Dean S. & Zinman, Jonathan, 2009. "Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila," Center Discussion Papers 52600, Yale University, Economic Growth Center.
    2. Karlan, Dean & Zinman, Jonathan, 2009. "Expanding Microenterprise Credit Access: Randomized Supply Decisions to Estimate the Impacts in Manila," Working Papers 68, Yale University, Department of Economics.
    3. Byström, Hans N.E., 2008. "The Microfinance Collateralized Debt Obligation: A Modern Robin Hood?," World Development, Elsevier, vol. 36(11), pages 2109-2126, November.
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    More about this item

    Keywords

    Microfinance; water and sanitation; public goods; Samuelson; cost recovery;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Z18 - Other Special Topics - - Cultural Economics - - - Public Policy

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