What's Wrong With Microfinance?

Microfinance has been a long-lived development fashion. It has been around since the 1980s, and in 2005 it enjoyed the accolade of a UN international year. The reasons for this success are obvious. It reaches millions of poor people, particularly women, and it can be profitable both for some of its customers and also for the institutions which finance it. There are, however, some important problems, discussed in this book. Some arise from exaggerated expectations, some from bad design and mismanagement and some from erroneous basic policies. Is microfinance really a step on the road to economic growth, or is it a short-term palliative, keeping poor people poor? Can an MFI really work if it embraces the "double bottom line" of both profit and social good? Is microfinance, especially credit, harmful, often landing the vulnerable poor in debt? Should microfinance be reaching the poorest? The chapters, written by well-known experts in the field, are grouped around the categories: clients, institutions, and expectations. The authors sound a timely warning to governments, bankers, donors and the general public. The intention is not to bring microfinance to a stop, but to make people pause, reassess their expectations and re-think some policies. Microfinance is never a panacea and may sometimes be actively damaging to its intended customers.Contributors: Irina Aliaga; Hugh Allen (Boulder Microfinance Training Program and Southern New Hampshire University's Microenterprise Development Institute); Milford Bateman; Thomas Dichter; David Ellerman (University of California/Riverside); Dr. Prabhu; Malcolm Harper; Mary Houghton and Ronald Grzywinski (both ShoreBank Corporation); David Hulme; SusanJohnson; Vijay Mahajan; Imran Matin and Munshi Sulaiman; M. A. Saleque; Richard L. Meyer (Ohio State University); Paul Mosley; Dr J.D. Von Pischke (Frontier Finance International, Washington, DC); S. M. Rahman; Paul Rippey; Namrata Sharma; Frances Sinha; Kim Wilson (Fletcher School, Tufts University).