Microcredit in Prefamine Ireland

Abstract

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. Their goal was to relieve poverty by providing credit to the "industrious poor" at competitive interest rates without public funding. They successfully mitigated informational, moral hazard and enforcement problems, and operated at a surplus in a market where intermediation by the banks seems not to have been profitable. Loan fund activity offers new insights into capital formation in the nineteenth-century Irish economy, and challenges traditional notions regarding the economic activities of the Irish poor. They are also relevant for economists studying current microcredit initiatives.

JEL Classification: O16, N23