A Case Study of Microfinance and Community Development Banks in Brazil: Private or Common Goods?

Inclusive financial sectors are essential to poverty alleviation. While microcredit can be governed as a private good, self-managed civil society organizations propose an alternative way of managing financial services. Brazil’s Community Development Banks (CDBs) are growing and dynamic manifestations of these nonprofit organizations. Based on field research in Brazil, this article uses Elinor Ostrom’s design principles of successful self-governing common-pool resource organizations to analyze CDBs’ microcredit system. Our results suggest that private goods could be altered when they are governed by community self-managed enterprises. They become hybrid goods as they mix the characteristics of private and common goods. This change is facilitated by specific organizational arrangements such as self-governance that emerge from grassroots dynamics and the creation of collective-choice arenas. These arrangements help strengthen the inclusion properties of nonprofit microcredit services.