Is Microfinance Really Effective in Alleviating Poverty?

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A provocative article from the summer issue of the Stanford Social Innovation Review, titled “Microfinance Misses Its Mark,” is available for free on the SSRI website. The author, an associate professor at the University of Michigan’s Ross School of Business, states that, “…my analysis of the macroeconomic data suggests that although microcredit yields some noneconomic benefits, it does not significantly alleviate poverty.” The article’s subheading summarizes his conclusion:

Despite the hoopla over microfinance, it doesn’t cure poverty. But stable jobs do. If societies are serious about helping the poorest of the poor, they should stop investing in microfinance and start supporting large, labor-intensive industries. At the same time, governments must hold up their end of the deal, for market-based solutions will never be enough…

Comments have been posted there by readers raising some good questions and objections to the viewpoint expressed in the article. Worth checking out for those interested in microfinance and global development. And while you’re there, consider subscribing! The Stanford Social Innovation Review “is a quarterly journal that brings the best in research and practice-based knowledge to individuals and organizations working for social change around the world.” You may also be interested in their Social Innovations podcasts offered for free online at http://www.siconversations.org/.