Microfinance

Does Microfinance Impact Poverty?

There have been a lot of studies conducted on the impact that microfinance is having on reducing poverty. Recently, Grameen Foundation USA commissioned Nathanael Goldberg to research all of the relevant studies on microfinance in an objective manner. The summary of his research is published in a free report called Measuring the Impact of Microfinance: Taking Stock of What We Know.

Goldberg does a good job of summarizing the highlights of many impact studies so even though this is still a long read (56 pages), it focuses our attention on the core findings. He covers the criticisms of various studies and doesn’t shy away from the contradictions between studies or the negative or inconclusive results. The reality is that measuring impact on poverty – especially long-term, sustainable impact – is a very challenging research task. It is very difficult to carefully select a good control group to which you are comparing and to isolate the impact of microfinance itself (vs. other factors) on poverty reduction.

Here are a few highlights:

  • Two major studies strongly suggest that microfinance works better for the poorest than the less poor. Other studies don’t find this distinction.
  • There is strong evidence that female clients are empowered, though the data on increased adoption of family planning is less clear.
  • Quite consistently loans provided to women (rather than men) have a significantly greater impact on poverty reduction. Often loans given to men do not help with poverty reduction.
  • Even in cases where poverty reduction is not observed, having loans helps to smooth cash flow enabling improvements in quality of life (e.g. year round money to buy food.)
  • There are many indications that poverty reduction goes beyond the borrower families to the larger community … that is, there are secondary local, positive impacts on poverty reduction in the immediate village/area.

Goldberg’s Net: There is a wide range of evidence that microfinance programs can increase incomes and lift families out of poverty. Access to microfinance can improve children’s nutrition and increase their school enrollment rates, among many other outcomes.

Read the full paper

5 thoughts on “Does Microfinance Impact Poverty?

  1. Hi DaveI’ve just discovered your blog and I plan to revisit and read through your archived posts, as the alleviation of poverty is also an interest of mine.I’m just finishing reading ‘The End of Poverty (How we can make it happen in our lifetime) by Jeffrey Sachs with a foreword by Bono. Earlier this year I read ‘The Fortune at the Bottom of the Pyramid’ by C.K. Prahalad. Both represent cutting edge thinking on macro/policy level combined with commercial approaches. If you have not already discussed these important works in your blog I commend them to your attention. If you wish, I would be happy to write a brief review of either or both for you.I am closely involved in helping a small, rural children’s charity in India, and for my day job I’m a marketing and communications manager for an Irish/international bank based in Dublin.Keep up the good work!!Gerry

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  2. Thanks Dave,I guessed you would be well ahead of me! I will keep an eye on your site and will watch out for updates, as it’s very enlightening.RegardsGerry

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  3. I enjoyed this particular articule. I am curious about one of highlights that was presented in the piece. It is the part that states that loans given to women had a significantly greater impact on poverty. Although their is no doubt that men are probably one of the greatest culprits in developing countries’ present situations, I don’t believe enough credit is given to the possibility of men stepping up and taking the situation in their hands. I would hope that men throughout the world could get as much opportunity as women to advance their present situations. Just a thought. Arnold

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  4. I would say that poverty is a two way thing both men and women are involved in it because they may be found in a critical situation whereby they borrow some money to sustain them. it could be both in the developed and developing countries. There also women who are not married/divorcee who can access such facilities hence this is a critical path to follow. I say the causes of borrowing from these institutions it’s because of the conditions in which one can be found men and women especially bad employment laws, unemployment,and low population.etc.

    gideon

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