What is wrong with microfinance

The microfinance delusion: who really wins?

I’m always amazed at how many students show up each year in the classrooms of the London School of Economics, where I teach, quivering with excitement about microfinance and other “bottom-of-the-pyramid” development strategies. Like eager young missionaries, they feel they’ve stumbled upon the One Idea that is sure to save the world. Would that it were true. What’s so fascinating about the microfinance craze is that it persists in the face of one unfortunate fact: microfinance doesn’t work. Of course, there are some lovely anecdotes out there about the transformative power of micro-loans, but 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.” This is not a fringe opinion. ….[READ]

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