Key principles of micro-credit / finance

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The aim of this chapter is to present systems thinking as a theoretical container for psychological wellness.


The research problem as stated in Chapter 1 described the insuffiency of current models in terms of holistic integration. To address this problem, the current chapter proposes a systems perspective of psychological wellness. According to Haines (1998) the major premise of systems theory is that the common laws governing systems provide a conceptual framework for understanding the relationships within a system and thus for handling any problems or changes encompassed by that system, or as depicted in this study, the psychological wellness of a system. This highlights the value of viewing a system (individual, group or organisation) as a whole and of gaining a perspective of the whole and how the parts of a system play their role in the light of the purpose for which the system exists.
The background of the historical development of systems thinking and the relevant systemic concepts will be presented. In addition, the relevance of chaos theory and fractal geometry as important branches of systems theory will receive attention


“Nearly all of humanity shares your predicament.” “And what predicament is that?” “If you don’t get what you want, you suffer; if you get what you don’t want, you suffer; even if you get exactly what you want, you still suffer because you can’t hold onto it forever. Your mind is your predicament. It wants to be free of change, free of pain, free of obligations of life and death. But change is a law, and no amount of pretending will alter that reality”.- Millman (1980, p.61)
Throughout the centuries it seems that there has always been a basic tension between parts and wholes. The ancient dichotomy between substance (matter, structure, quantity) and form (pattern, order, quality) has always been part of science.
Capra (1989) remarked that the emphasis on the parts has been called mechanistic, reductionistic or atomistic and the emphasis on the whole, holistic, organismic or ecological. These changes were never steady and were characterized by scientific revolutions, almost like pendulum swings from the whole to the parts and again from the parts to the whole.
New systems sciences, what Capra (1996) referred to as ‘The web of life’ are sciences of wholeness and connectedness. The notion of development or evolution– the idea that wholes grow and evolve – is the essence of modern systems sciences (Wilber, 2000). Laszlo (1987, p.9) was of the opinion that a new paradigm is on the rise which is scientific in origin and philosophic in depth and scope, it encompasses the great realms of the material universe, of the world of the living and the world of history: “The old adage ‘everything is connected with everything else’ describes a true state of affairs. The results achieved by the evolutionary sciences furnish adequate proof that the physical, the biological and the social realms in which evolution unfolds are by no means disconnected”.
In addition to this, Wilber (2000) stated that from the time of Plato and Aristotle until around the end of the nineteenth century, it has been maintained that the great domains or ‘realms’ – physiosphere, biosphere, noosphere – were one continuous and interrelated manifestation of Spirit, one Great Chain of Being that reached in a perfectly unbroken or uninterrupted fashion from matter to life, to mind, to soul and to spirit. Each link in this interconnected chain or system has intrinsic value for if any of the precious strands of the drape is destroyed, the whole fabric will become unravelled.


Koestler (1964) coined the term ‘holon’ to refer to that which, being a whole in one context, is simultaneously a part in another. That means a subsystem of a greater system is also a whole system on its own within another system within another system, ad infinitum. In this sense, individuals can be viewed as holons of groups, and groups can be viewed as holons of organisations and organisations are holons of society, all ranked in a hierarchical order. Theoretically, as stated by O’Connor and Lubin (1990) system levels can be identified from the smallest subatomic particles to the interaction of galaxies.
The universe is understood as a hierarchy of systems, where each higher level of a system is composed of systems at lower levels. An increasingly inclusive line of systemic integration implies an unlimited potential for a theoretical holism. In reality, interaction does not occur in such a hierarchic line, but can occur directly between an individual and an organisational system. Keeney (1983, p.10) described the interconnectedness and recursiveness of subsystems as follows: “It is like a set of self-organising Chinese boxes, each one neatly fashioned to fit inside the other, ad infinitum. Each system level is delineated by a boundary separating the functional interaction of one set of system from the next higher level of organisation”.
Rice (1969) introduced a systems theory of organisations, in which the individual, the group and the organisation are seen as a continuum of open systems. Each subsystem is a ‘holon’ of a bigger system or’ hierarchy’ where tasks are carry out in exchange with the environment. The psychological wellness of any individual, group or organisation can be seen as an open system, consisting of numerous subsystems that interact across different system boundaries. In this study, the proposed wellness model reflects an open system hierarchy with different ‘holons’. The model consists of three different levels of abstraction, where third level themes, second level themes and first level themes all interact interdependently to enhance or impair psychological wellness.


‘Hiero means sacred or holy, and ‘arch’ means governance or rule (Wilber, 2000). Introduced by the great sixth-century Christian mystic Saint Dionysius, the ‘Hierarchies’ referred to nine celestial orders, with Seraphim and Cherubim at the top and archangels and angels at the bottom. Among other things, these celestial orders represented higher knowledge, virtue and illuminations that were made more accessible in contemplative awareness. Wilber (2000) continued his argument and stated that these orders were ranked because each successive order was more inclusive and more encompassing and in that sense ‘higher’. In this sense, ‘hierarchy’ in the final analysis means ‘sacred governance’ or ‘governing one’s life by spiritual powers’ In the history of the Catholic Church, these celestial orders of contemplative awareness were translated into political orders of power, hierarchically represented by the Pope, archbishops, bishops, priests and then the deacons.
Hierarchy is central to systems theory as you cannot have wholeness without hierarchy. Unless the parts are organized into a larger whole, where the principle of synergism (the sum is greater than the whole) applies, there will only be heaps and not wholes (Wilber, 2000). Notions of ‘higher’ and ‘lower’ were part of the old paradigm but in wholeness thinking and in the new paradigm it is not about domination and exploitation but rather a network or web-of-life thinking (Capra, 1997).
For the purpose of this study the discussion on systems thinking are organized in 3 broad categories namely ‘The Whole’, ‘The Goal’ and ‘The Internal workings’. This framework will be used to discuss the following systemic concepts: holism, non-summativity, open systems, system boundaries, feedback, multifinality, equifinality, stable equilibrium, explosive instability and bounded instability.
In addition, an important domain of system thinking, namely chaos theory and fractal geometry, is discussed with the purpose of exploring its potential value to provide a visual framework for the psychological wellness model


“What pattern connects the crab to the lobster and the orchid to the primrose and all four of them to me? And you?”
– Bateson, 2000
Holism refers to the theory that the parts of any whole cannot exist and cannot be understood except in relation to the whole. The implication is that phenomena cannot be explained in isolation. Smuts (1987) considered a holistic organism to contain its past and much of its future in the present. This is a very attractive principle in the context of psychological wellbeing. What happened in the past impacts on the present as well as the future of any living system and is therefore relevant for the organisational consultant to understand the bigger context of a specific system.
In the twentieth century the holistic perspective has become known as ‘systemic’ and the way of thinking it implies as ‘systems thinking’ (Capra, 1997). Non-linear dynamic systems theory emphasizes patterns, complexity, flux and flow, the interplay of ambiguity and order, stability and instability and the natural value of uncertainty and generative chaos (Stacey, 2003). The whole is not the sum of its parts and can only be understood as a totality. Individual parts of a living system are important but it is the relationship between the parts and how they fit into the whole that characterizes systems theory. A reductionistic approach where independent parts are analysed is incompatible with a systems theory approach.
Systemic concepts such as holism, open systems, system boundaries, feedback and non-summativity will be discussed next.

Holism: from the whole to the parts

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The medieval worldview was based on the Aristotelian philosophy and Christian theology of an organic, living and spiritual universe. Aristotle, the first biologist in Western tradition, introduced the idea that the whole is greater than the sum of its parts (Glass & Mackey, 1988). His ‘wholeness’ philosophy and science became the doctrine of the church and dominated Western thought for two thousand years after his death.
The idea of the Earth as a living, spiritual being continued to flourish throughout the Middle Ages and the Renaissance until the 16th century. At this time the Aristotelian philosophy of wholeness was replaced by that of the world as a machine, which became the dominant metaphor of the modern era (Glass & Mackey, 1988). This radical change was brought about by the Scientific Revolution which was characterized by new discoveries in physics, astronomy and mathematics. The Scientific Revolution was associated with names such as Copernicus, Galileo, Newton and Decartes (Capra, 1997). Decartes created a method of analytic thinking, which consists in breaking up complex phenomena into pieces to understand the behaviour of the whole from the properties of its parts. To Decartes, living organisms were machines which could only be completely understood by analysing its smallest parts. Newton completed this conceptual framework with his Newtonian mechanics which was the greatest scientific achievement of the 17th century. Galileo banned quality from science, restricting it to the study of phenomena that could be measured and quantified. In this regard, the psychiatrist Laing (in Capra, 1996, p.19) remarked:
“Galileo’s program offers us a dead world: Out go sight, sound, taste, touch and smell, and along with them have since gone aesthetic and ethical sensibility, values, quality, soul, consciousness, spirit. Experience as such is cast out the realm of scientific discourse. Hardly anything has changed our world more during the past four hundred years than Galileo’s audacious program. We had to destroy the world in theory before we could destroy it in practice.”
Within the Cartesian paradigm the emerging patterns were predictable and constant and novelties never occurred. The new linear, universal laws of gravity and motion were believed to drive the behaviour of all living systems in a predictable way to a state of equilibrium. Then came the eighteenth century, and the pendulum started swinging back again from the parts to the wholes (Glass & Mackey, 1988).

Holism: from the parts back to the whole

The first strong opposition to the mechanistic Cartesian paradigm came from the Romantic Movement in art, literature, and philosophy in the late eighteenth and nineteenth centuries. The poet and painter Blake was a passionate critic of Newton and summarized his thoughts in the following lines: “May God keep us from single vision and Newton’s sleep” (cited in Glass & Mackey, 1988, p.74).
The German Romantic poet, Goethe used the term ‘morphology’ for the study of biological form from a dynamic, developmental point of view (Capra, 1996). Goethe admired nature’s ‘moving order’ (bewegliche Ordnung) and described form as a pattern of relationships within an organized whole – the central idea of systems thinking. Furthermore, Goethe wrote that each creature is but a patterned gradation (Shattierung) of one great whole.
Regarding development of the self and wholeness Erikson (1980, p.53) stated: “Whenever we try to understand growth, it is well to remember the epigenetic principle which is derived from the growth of organisms in utero…this principle states that anything that grows has a ground plan and that out of this ground plan the parts arise each having its time of special ascendancy, until all parts have arisen to form a functioning whole”.
The Romantic artists were mainly concerned with a qualitative understanding of patterns, and therefore they placed great emphasis on the basic properties of life in terms of visualized forms. The philosopher Immanuel Kant wrote ‘Critique of Judgment’ to explain the nature of living things and argued that organisms unlike machines are self-organizing wholes. Kant remarked (in Capra, 1996) that in a machine, the parts only exist for each other in the sense of supporting each other within a functional whole. In an organism, the parts also exist by means of each other, but in the sense of producing one another. By making this statement, Kant became the first to define the term ‘self-organisation’, another concept central to contemporary systems thinking.
Systems thinking emerged simultaneously in several disciplines during the first half of the 20th century (Glass & Mackey, 1988). An explosion of new complexity ideas shattered the Newtonian/Cartesian view of living systems as machines, constructed from separate parts: “The old view of a rational and mechanistic universe, ordered by rigid laws of cause and effect, collapsed into oblivion, to be replaced by a mystical world of paradox and surrealism” (Davies, 1993, p.103). In support of the new way of thinking, Smuts (1987, p.263) was of the opinion that a holistic organism is self-regulating and that “personality is new whole, the highest and most complete of all wholes and the most recent conspicuous mutation in the evolution of holism”. He went on to say that this whole (the personality) is an inner creative, recreative and transformative activity, the centre of orientation in all experience and reality.
In the 1920’s, von Bertalanffy and other biologists proposed The General Systems theory as an epistemology that would embrace all levels of science (Stacey, 2003). Von Bertalanffy and his colleagues were primarily biologists and therefore they did not look to artificial constructs or paradigms to understand the world, but to life itself, acknowledging that living systems are the natural order of life.
The ideas generated through a wholes or general systems theory approach can be applied to any discipline where there are two or more interrelated parts. Therefore, its principles transcend disciplinary boundaries and it can be applied in all fields such as biology, computer science, engineering, economics, family therapy, medicine, psychology as well as business management (Stacey, 2003). The principles of systems theory are valuable in consulting psychology as it provides a framework for not only understanding, but also for exploring interactions between subsystems (holons) within bigger systems (hierarchies). Some of the relevant concepts of systems thinking will be described next

1.1 Background and rationale of the study
1.2 Statement of the problem
1.3 Objectives of the study
1.4 Research questions
1.5 Significance of the study
1.6 Scope of the study
1.7 Limitations and challenges of the study
1.8 Structure of the study
1.9 Conclusion
2.1 Introduction
2.2 Historical background of microfinance/microcredit
2.3 Theoretical and conceptual literatures of microcredit interest rate
2.4 Microcredit definitions and key principles
2.5 Key principles of micro-credit / finance
2.6 Microcredit modality
2.7 Financial sustainability, outreach, and impact
2.8 Combining outreach and sustainability
2.9 Microcredit and the poor
2.10 Microcredit loan interest rates and the poor
2.11 Criticisms of microfinance/microcredit
2.12 Global trends of the microfinance market
2.13 Relevance of the theories to the study
2.14 Conclusion
3.1 Introduction
3.2 Historical Journey of Microfinance across the Globe
3.3 Microcredit service in Africa
3.4 Microcredit services in Ethiopia
3.5 Microcredit studies in Tigray
3.6 Empirical reviews of some other countries
3.7 Closing remarks
4.1 Introduction
4.2 Study area
4.3 Selection of microcredit providers
4.4 Sampling of the study
4.5 Sampling of microcredit providers
4.6 Background of the research strategy and design
4.7 Research methodology
4.8 Interview procedure
4.9 Research reporting and presentation
4.10 Measures for reliability and validity
4.11 Ethical considerations
4.12 Conclusion
5.1 Introduction
5.2 Results of descriptive analysis
5.3 Income status of the respondent’s household
5.4 Conclusion
6.1 Introduction
6.2 Key findings of this study
6.3 Major conclusions
6.4 Major recommendations
7. Overall conclusion 

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