Microfinance: Dreams and Reality

2018

In contemporary times microfinance is promoted by powerful organisations such as the United Nations (UN) and the World Bank as a cutting-edge financial innovation that has the potential to meet certain development ends and goals, including poverty alleviation and women's empowerment. Indeed, the UN officially declared 2005 the International Year of Microfinance. However, research on the impact of microfinance is often conf licting, with certain studies providing evidence of the empowering effects of microfinance, and other studies analysing its disempowering potentials. Such conflicting perspectives challenge the 'magic bullet' notion of microfinance and illustrate the richness of research in this field. In light of these conflicting viewpoints, the purpose of this special issue is to set out a platform for these debates, and to introduce papers appearing in this special issue on microfinance. This is a discussion paper exploring key issues theoretically. The paper finds...

Journal of Culture, Society and Development, 2016

The history of modern microfinance activities can be traced back to 1976, when Muhammad Yunus set up the Grameen Bank as a project of assisting poor women to access credit for income generating activities in Bangladesh. Since then several microfinance institutions modeled on the Grameen Bank have been developed and implemented in reaching majority of the unbanked poor population in many countries around the globe. Microfinance is now being considered by many countries and governments as one of the most important and effective strategies of poverty alleviation. Among the beneficiaries of micro financing are women Microfinance has enabled them to be self employed thus improving their security, autonomy, self confidence and status within the household. This study examines microfinance as a poverty alleviation strategy. Lessons from microfinance institutions in Kenya reveal that microfinance has provided poor people in Kenya especially women with an opportunity to engage in income gene...

Oxford Development Studies, 2013

Microfinance (MF) has grown over the last two decades into an important sub-field of development studies. This special issue of Oxford Development Studies explores the contributions of MF, drawing particularly on research conducted in India. After a brief overview of the emergence of MF as a research field, this introduction develops three themes. First, we argue that MF interventions generally involve, and assume a process of transformation of, financially excluded people and groups who are not fully dominated by the logic of market exchange but have histories, culture, social relationships and politics structured by other kinds of authority and dynamics. Second, we argue that understanding MF interventions at the local level requires the social and political analysis of global development architecture, while MF may also play a role in consolidating or cementing global political economy at its base. Third, we argue that MF interventions have provided fertile ground for research into the causes and consequences of poverty. The introduction ends with summaries of the contents of the special issue.

2008

With the Muhammad Yunus being recently awarded the Nobel Peace Prize for his pioneering approach and sustained effort in addressing the problem of poverty, microfinance programs have continued to grow in usage and popularity. There are numerous studies that demonstrate the tremendous successes of such programs throughout much of the underdeveloped world. However, the universal effectiveness of microfinance institutions in alleviating poverty is still in question, and not free from debate. Much of the evidence cited for the successes of microfinance and microcredit are merely anecdotal or involve in-depth case-study approaches, which provide vivid examples and rich details of the impact and effectiveness of specific programs in specific locations at a specific time, but generally fail to achieve a more rigorous standard that would allow for research findings to be widely generalized. Some more rigorous studies have been conducted and more are surely to follow, but in the meantime, NGO leaders and government policy makers must exercise caution and restraint in applying the microfinance approach universally as a means of alleviating poverty. This article reviews some of the recent research into the effectiveness of microfinance programs and proposes areas for future directions in the continued research of microfinance programs.

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.

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.

2013

Directed by Professor Christian E. Weller In just 30 years microfinance has transformed from a credit-based rural development scheme that has claimed to reduce poverty and empower poor women, to a $70 billion financial industry. In the process, the traditional NGO-led model has given way to commercialized institutions, resulting in an increased emphasis on profitmaking. This has also led to confusion in the sector around its mission: is it to alleviate poverty and empower poor women or simply to provide the "unbanked" with access to formal sources of finance? This research considers the main debates in microfinance with regard to its mission and presents empirical evidence on the effectiveness of microfinance. The study is based on the Pakistani microfinance sector, which provides an ideal opportunity for a comparative analysis of two distinct models of microfinance-the v nonprofit microfinance institutions (MFI) and the microfinance banks (MFB). The research compares the depth of outreach, mission, practice, and borrower experiences of MFIs and MFBs, employing a political economy framework. The data includes 140 interviews with policymakers, donors, senior, mid and low-level microfinance officers, and their clients; as well as observations of practitioner-client interactions, including the process of disbursement and collection, group meetings, and field visits with loan officers in urban Pakistan. It also comprises two district-level surveys: the microfinance outreach survey from the Pakistan Microfinance Network (PMN) and the Government of Pakistan's Social and Living Standards Survey (PSLM). The surveys are analyzed econometrically to test whether district-level socioeconomic differences affect patterns of outreach. This study broadens our understanding of the extent to which the local political economy shapes the outcomes of a market-based intervention, such as microfinance. It also provides an insight into the evolution of microfinance, specifically as framed by the global development discourse and subsequent public policy choices. Finally, the study provides an authoritative account of how institutional structure affects microfinance's effectiveness as a tool for poverty alleviation, empowerment and financial access.

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.

Journal of Global Economics, 2017

The objective of the current approach is to set out how microfinance institutions (MFIs) are incentives for economic development and as sources of lowering poverty. In this respect, a sample of 197 new and old clients having recourse to MFIs is targeted. The discriminant descriptive analysis which is proposed in this article is useful for mainly meeting the results that microfinance has a highly significant effect on improving people's standards of living as well as lowering poverty rates. The comparison between the new and old clients of MFIs is suggestive of the fact that: the older the MFIs is, the more the opportunity to escape poverty is at reach. It is noted that an ambiguity submerges in the short-term micro-credit. The impacts of microfinance are timely joined. Time as a variable is marked importantly in appreciating microfinance in the long term.

Journal of Entrepreneurial Finance, JEF, 2004