Monday, August 29, 2011

Microfinance Fails the Poor

SOYMB has already blogged a few times on the miracle cure of Mohammed Yunis and his Grameen Bank scheme to provide the poor with credit and lift them out out of poverty. The Guardian reports on a new study commissioned by the UK Department for International Development (DfID). Maren Duvendack and her team concluded "No clear evidence exists that microfinance programmes have positive impacts." Furthermore, the much-cited claims that microfinance can empower women have not been found to stand up.

These findings contradict the claims of champions of microfinance. Duvendack's own research shows that microfinance is not much better for the poor than any other form of finance, such as moneylenders or banks.

"Some people are just too poor to do anything productive with credit. If you can't secure basic survival, you can't grow a business. Food security and health are crucial and perhaps once these have been secured, people can graduate to microcredit. Microfinance often has to be combined with other interventions," comments Duvendack.

Duvendack's review for DfID is paralleled by another review commissioned by the department on microfinance in Africa, which is yet to be published but which, according to Duvendack, comes to broadly similar conclusions.

Previous SOYMB posts here , here , and here

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