Microfinance and third world development: a critical analysis

The Nobel Prize winning model of micro-lending to the poor has triggered the rapid growth of microfinance industry and it is largely projected as a key enabler for poverty alleviation and supports macro economic growth for the poor regions. This view is challenged by many academic scholars and the press, based on analysis and empirical evidence to support their arguments. Some even argue that microfinance is counterproductive and works against global poverty programs. Based on studying some of these reports, I present a summary view of the concept, growth and the evolution of the microfinance industry and submit that while microfinance initiatives do support the poor and provide a safety-net, these alone cannot provide the benefits in the long run and may even be counterproductive, unless they are implemented and managed as part of other state-driven poverty programmes.

The global effort at reducing poverty has seen many innovations and among the very innovative ones is the provision of microfinance to the hitherto discriminated economically active poor who lack the three traditional Cs, that is, character , collateral and capacity according to the conventional banks.

Development in Practice, 2020

This article provides a systematic literature review of growing research on microfinance, as promoted by scholars and policymakers in an entrepreneurial finance context. The results suggest promising opportunities for further research on microfinance in developed countries. Bibliometric analyses were used to identify three main dimensions of microfinance that guide academic research: social considerations, economic effects, and performance of microfinance institutions. Most literature focuses on developing countries, reflecting the success of microfinance as an instrument for promoting social and economic development. A keyword co-occurrence analysis reveals that financial inclusion and entrepreneurship domains remain empirically underexplored.

In Goodhart C Financial Development and Economic Growth Palgrave, 2004

Microfinance institutions deliver financial services for low-income individuals via innovative techniques. This paper first explains the nature and scope of such techniques, and then delivers an overview of recent trends. In conclusion, the paper calls for international donors' and local governments' support in at least three main areas, so that recent innovations can further enable microfinance institutions to meet both their selfsustainability and social objectives.

International Small Business Journal: Researching Entrepreneurship, 2017

Over the past two decades, there have been substantial efforts to expand the impact of microfinance around the world, especially in emerging economies. This commentary and Special Issue of International Small Business Journal, seeks to better the understanding of both the contributions and limitations of microfinance in terms of fostering entrepreneurship and economic development. Specifically, we review prior research to understand whether and how microfinance can help to encourage entrepreneurial activity as well as to reduce poverty. We then highlight the gaps in the existing literature and lay out an agenda for future research in this domain.

Executive Overview Microfinance is an emerging phenomenon that opens access to capital for individuals previously shut out from financial services. In its direct engagement with the poor, microfinance represents a new way for financial capital to potentially stimulate economic growth in developing countries. However, microfinance is poorly understood, and it remains unclear whether it delivers on its promises. The goal of this paper is to introduce the topic of microfinancing to a wider audience of management researchers and to identify opportunities for future research in this new and growing area.

Oxford Handbooks Online, 2012

International Finance and Banking, 2014

Microfinance Institutions (MFIs) have served millions of poor people around the world by offering them small loans with easy repayment terms. This review paper highlights the microfinance activities performed by the MFIs and also indicates the critical factors that hinder the growth of microfinance in developing and developed nations. It is found that the foremost factors obstructing the adoption of microfinance are: lack of financial stability, uncontrolled growth, cultural and value impede, systematic frauds, bureaucratic obstacles, state intervention, methodological defects, and shortage of credit rating agencies.

Microfinance is an area of research whose popularity is reflected by the unique potential for wide ranging socioeconomic outcomes which support political goals unmatched by alternative avenues for financial support. However, despite the large amounts of financial resources funding microfinance across the world, and glorious potential economic benefits, there is no consensus regarding the success or failure of microfinance in achieving socioeconomic political goals. This paper examines the empirical literature on microfinance to establish where microfinance has developed from, the organisation of MFI’s, the success or failure of microfinance, and future research methodological possibilities. It has been found that the success or failure of microfinance depends on the benchmarks to which it is measured. From a social empowerment perspective, microfinance success has been observed. However, from an economic development perspective the results are equivocal. The success of microfinance ...