The SOYMB blog has posted several times about the
short-comings of micro-finance and the over-inflated claims for it as a
solution to world poverty. This article confirms our opinion.
“A comprehensive DFID-funded review of extant data concludes
that the microfinance craze has been built on ‘foundations of sand’, for ‘no
clear evidence yet exists that microfinance programmes have positive impacts’.
Just last year, Abhijit Banerjee and Esther Duflo of the Poverty Action Lab
reported the results of a randomised evaluation of microcredit in Hyderbad,
India, concluding that microcredit caused no significant changes in
consumption, health, education or women’s empowerment. Such findings deal a devastating
blow to the rosy narrative of microcredit, and yet somehow it still manages to
survive.
It’s time to stop pretending that microfinance is a
meaningful tool for development. When it comes to poverty reduction, we know
exactly what needs to happen. Poverty is a political problem, and as such
demands a political solution.
The microcredit industry is profoundly unstable, true, but
the bigger problem is that microcredit doesn’t actually work when it comes to
accomplishing its stated goal of reducing poverty. As David Roodman from the
Center for Global Development put it in his recent book, ‘The best estimate of
the average impact of microcredit on the poverty of clients is zero.’ "
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