Finance and long-term development issues in Southeast Asia

This article analyses Southeast Asian finance over more than a century in light of three issues: the realisation of finance-leading development; indigenous entrepreneurship; and effective credit provision in rural areas. Colonial currency board systems and non-interventionist government characterised finance in pre-World War II Southeast Asia. There was decisive change after independence to a variety of state-directed, or indeed socialist, attempts to overcome unfavourable pre-war development legacies. Despite these departures, the article finds that throughout Southeast Asian history, finance rarely, if ever, led development. Today, indigenous entrepreneurship, explored for Malaysia, is generally either bolstered by political patrons or even entirely substituted for by state finance. More positively, market-aware state initiatives in microfinance may offer a realistic institutional alternative to rural Southeast Asia's historic reliance on informal finance.