Publication

This paper reviews the triumphs and troubles of the microfinance industry. It then sets forth a frame for assessing the impact of microfinance. The author concludes that microcredit stimulates small-scale business activity, but that the best available evidence fails to show it reducing poverty. The main achievement of the microfinance movement, he states, has been the founding of businesses and businesslike non-profits that are delivering services to millions of people on a sustainable basis. The main challenge is that a microfinance industry is more likely to be safe and resilient if it contains not just microfinance institutions, but also credit bureaus, consumer protection laws, effective regulators, and more; and many of these other institutions are weak or absent in poor nations.