DEVELOPING A GROUNDED THEORY OF LOCAL DEVELOPMENTAL MICROFINANCE NEEDS

Abstract

Developmental microfinance has been presented, especially during the first five years of the twenty-first century, as an all encompassing and selfsustaining miracle tool for lifting people out of poverty through economic development and job creation. Recent literature has shown this claim to be problematic. Developmental microfinance, however, still has the potential to play a significant role in South Africa‟s social development. Studies that seek to understand the financial services needs of localised communities and present alternative and innovative ways of meeting these needs are therefore much needed. This study utilised constructivist grounded theory to study the developmental microfinance needs of business households in two disadvantaged communities. An alternative definition emerged through the study, representing a shift away from viewing developmental microfinance as a service delivered to a community by an organisation that sees the delivery of a service as its primary activity, towards a view of developmental microfinance as a community-driven activity based on knowledge and assets already available in the community. In the new paradigm suggested by the study, the developmental microfinance activity flows from what might be viewed as the external organisation‟s main mission: the facilitation of the building of social capital.