Monday 18 January 2010

Does Microcredit Really Help Poor People?

anuary 14, 2010

With public funding for development under the greatest pressure in nearly two decades, the international community has focused more than ever on asking questions about what aid works best and why. Microfinance, particularly microcredit, has come under scrutiny as recent studies have emerged that may cast doubt on some of the claims around its impact on the lives of poor people.

In a new Focus Note entitled, “Does Microcredit Really Help Poor People,” CGAP’s Richard Rosenberg reflects on the state of the evidence.

Microcredit began to capture public attention a quarter-century ago, rising to prominence with reports that tiny loans were enabling millions of poor borrowers, mostly women, to start or expand microbusinesses, and that the new income from those businesses was lifting many out of poverty. There have been hundreds of inspiring stories of poor people who lifted themselves into the middle class with income from businesses they financed with microloans. Rosenberg asks, “Do these individual anecdotes represent the general experience of the hundreds of millions who have gotten microloans over the years? Is microcredit being oversold?”
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