In lecture ten you will learn about the informality of MFIs. You will learn that informal nature ofthe micro financial institutions is based on the social capital. In the first part, you will study thechallenges of informality through case studies. In the second part, we discuss the challenges facedby micro-financing institutions. In section three, you will learn how to make micro institutionswork. 7
INTRODUCTION 8LECTURE ONE: BASIC CONCEPTS OF ECONOMICDEVELOPMENT
This premier lecture discusses economic growth. After defining economic growth, weshall discuss the determinants of growth. In addition, we shall analyse some traditionaltheories of economic growth. Then we shall differentiate between economic growth anddevelopment as defined by the United Nations.In the first lesson, we begin by exploring the basic concept of economic development andthe conditions for growth. The second part discuses the determinants of growth. OBJECTIVESBy the end of this lecture, you should be able to:a.Relate economic growth to development. b.Analyse the relevance of different theories economic growth.c.Discuss the determinants of trade.d.Explain why some countries are more economically developed than others9
1.1.Economic development and growth Economic growth and development have been debated for centuries. Industrialization hadbrought forth permanent changes in the economic and human activity. After the GreatDepression (1929-1933), the importance of these processes increased. Overcoming anyeconomic difficulties, whether we speak about the decreasing unemployment rate orabout the external equilibrium, there is a correlation between economic growth anddevelopment. Any decision made at a state or a higher level is aimed at reaching thesetwo objectives. Today, more than anytime, in a recessionary, liberalized economy, in aworld marked by a strong demographic increase, and the depletion of natural resources,by changes of climate and of ecosystem destruction, we are more preoccupied than everby the problems of economic growth and development. Economic Growth and Development – Conceptual ApproachThough there is no unanimously accepted theory of growth. Most theoreticians think ofthe economic development as a process that generates economic, social, quantitative and,particularly, qualitative changes, which causes the national economy to cumulatively anddurably increase its real national product. In contrast and compared to development, economic growth is, in a limited sense, anincrease of the national income per capita. It involves the analysis, especially inquantitative terms, of this process, with a focus on the functional relations between theendogenous (external) variables. In a wider sense, it involves the increase of the GDP,GNP and NI, and therefore of the national wealth, including the production capacity,which could be expressed in both absolute and relative size, or in per capita. It includesalso the structural modifications of the economy.