Microfinance

Microfinance comes under the microscope

Our correspondent finds doubts raised about the effectiveness of one of the big ideas in the fight against poverty

The statistics make mightily impressive reading: microfinance is worth a dizzying $6.5 billion; its ten largest funds grew at an equally impressive 32 per cent last year alone. It is, according to a report published yesterday, “unscathed” by the global recession. So why is the apparently well-meaning practice of lending small amounts of money to people in poverty so controversial, so much so that its critics think its time has already passed? In short, does microfinance really work?

microfinance iarrest

According to Aneel Karnani, Associate Professor of Strategy at the Ross School of Business at the University of Michigan, the answer is, in short, no. “The problem with microfinance is that it simply doesn’t do that much to lift the poor out of poverty,” he argues.

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