Over the past few weeks I have come across a number of articles critical about microfinance. An article in Foreign Policy stated that
the brilliant ideas advanced by Yunus and de Soto have had limited real-world impact, and in practical terms, neither of their economic notions has the capacity to remake the world, as is often claimed.
A good overview about the impact of microlending can be found on the From Poverty to Power blog written by Duncan Green, Head of Research for Oxfam GB.
The ‘success’ of MF has largely been judged on the success of the business model (i.e. do people repay their loans), but does it actually reduce poverty?
Green summarizes the most recent studies, using randomized control trials, which raise serious doubts about the poverty alleviation impact of microlending and quotes the President of the Bangladesh Economic Association, QK Ahmad, whose own survey of 2,500 borrowers (99% of them women) concluded that microfinance had been grossly oversold. ‘They take out credit, and give it back. That’s all they do’ he said. Microlending, according to him, is a simplistic approach which ignores crucial issues such as ‘existing power relations in society.’
Well, yes, but isn’t giving a person credit exactly doing that - shifting existing power relations? Don’t we see how suddenly in many countries women are for the first time in the history of their countries able to open a bank account or own land and how they have a new standing vis a vis their husbands?