Studies Show Microcredit Shortcomings
Six New Studies Point to the Inflated-Promise of Microcredit in Transforming the Lives of the Poor
We just became aware of this report, which compiles comprehensive research critical of the standard microcredit model.
Economist Esther Duflo of the Massachusetts Institute of Technology, a co-founder and co-director of J-PAL, co-author of the India and Morocco studies, and founding editor of the American Economic Journal:
[quote]These loans do help, but the changes are not transformative, certainly not transformative enough to justify charitable donations to the standard microcredit model. We have seen, though, that these are viable profit-making products, and so investors interested in a double-bottom line should take note.”[/quote]
– Applied Economics
Duflo suggests researchers and non-profits focus their attention on other approaches for financial inclusion for the poor.
Our own research in Bangladesh, which brought the voices of loan recipients to the table to address the ways in which microcredit often had net negative impact to their communities, mirrors many of the same findings coming to light in the J-PAL and IPA studies.