Micro-finance doubts arise
Micro-finance is a concept which has won its major proponent a Nobel prize. But it comes down to whether it is effective the empirical evidence has been scant. "Until now" writes Chris Blattman:
[D]oes microlending actually deliver on development and poverty alleviation?Amazingly, we have almost no idea. There’s been little hard evidence to go on, even after 20 years of a global microfinance explosion.
Until now. A number of projects, many coming out of IPA or J-PAL, are starting to show experimental results. Continue reading.
For a less wonkish read (and listen) Blattman suggests this BBC report.
I spent time in Uganda working with two different microfinance institutions (MFIs) as a Kiva fellow. A few things come to mind when I read this report.
First, there are MFIs and there are MFIs. Some truly have a mission to help poor people have a better life, and others are quite predatory. (Kiva makes a point of screening its MFIs before partnering with them.) Not all MFIs are the same; some have minimal impact on poverty and exist primarily to serve the MFI. And so an overarching study like this one may not be as helpful as one that studies more closely what are the attributes of MFIs that help people the most.
Second, my experience (admittedly very limited) suggested to me that microfinance will help two groups the most: a) the next generation that will get a more advanced education (most of the money used by borrowers went to school fees, in my experience); b) the people with strong entrepreneurial drive.
In the case of the entrepreneurs, not everyone who owns a small business fit that mold, but for those who do, microfinance is an incredibly powerful tool.
One thing that was important for me when I went to Uganda and met with the borrowers was to see first-hand that the money given for Kiva loans actually got into the hands of the borrowers. That's one of the gifts of microfinance: that money isn't filtered and skimmed through other sources.
It was the personal stories that have made me a believer in microfinance. For more of these personal stories, I recommend checking out the Kiva Fellows blog at http://fellowsblog.kiva.org/
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No, microfinance isn't a panacea, but in my personal experience, it is still a good thing.
Laura Toepfer
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August 13, 2009 1:12 PM