Does micro-finance really alleviate poverty? The $34bn question
If micro-finance initiatives really work, why haven’t loan shares and predatory lenders died out, asks Frithjof Arp
Despite about $34bn in funding and numerous micro-finance initiatives to help entrepreneurs in the world’s poorest countries, informal money-lenders and predatory loan sharks continue to thrive. Designed to help alleviate poverty in some of the world’s poorest countries, micro-finance initiatives provide loans to entrepreneurs and small businesses, hoping this will help the poor to work themselves out of desperate poverty. But if formal, government-supported micro-finance initiatives are widely available, why haven’t loan sharks and predatory lenders been wiped out? If micro-finance cannot compete with informal lenders, can we be confident that it really works? These questions really matter. Philanthropic donors and policy makers are enthusiastic about micro-finance initiatives and, understandably, those working in micro-finance often have a vested interest in showing that their work is effective. Research into how micro-finance initiatives really are performing should, therefore, t...
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