As a response to skepticism of the success of microfinance in a study done by economists Abhijit Banerjee, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan, six organizations released an open letter citing the advantages of microfinance. The six organizations are ACCION International, FINCA, The Grameen Foundation, Opportunity International, Unitus and Women’s World Banking, all of whom are nonprofit organizations based in the United States. According to the document, Measuring the Impact of Microfinance: Our Perspective, “Loans enable [borrowers] to buy tools and materials to start an income generating business and/or to increase the productivity of an existing business. Increased income generated from these businesses allows them to pay school fees to educate their children, stabilize food sources, and pay for other expenses that lead to the improvement of the health and well-being of their families” [2]. They refute claims made that microfinance “appears to have no discernible effect on education, health, or women’s empowerment” [3].
The organizations cite first-hand accounts of success stories from borrowers. They additionally cite seven ways in which microfinance has assisted their clients: building economic citizenship, leveraging assets, making productivity-enhancing investments, protecting against vulnerability, accessing services that improve quality of life, managing day-to-day resources, and facilitating economic transactions [2]. They claim that microfinance plays an important role in alleviating poverty, but that it must be met with other conditions (transparency, fair lending, etc) in order to be successful [2]. Furthermore, the group states that “the real impact of microfinance lies in its ability to create inclusive financial systems and inclusive societies – societies where the individual is not shut out of what that society has to offer” [3].
By Julia Korn, Research Associate
Sources and Additional Resources
[1] MicroCapital Paper Wrap-Up: “The Miracle of Microfinance? Evidence From a Randomized Evaluation” by Goda Thangada, June 22, 2009. http://www.microcapital.org/microcapital-paper-wrap-up-the-miracle-of-mi…
[2] ACCION International. “Measuring the Impact of Microfinance: Our Perspective” http://www.accion.org/Document.Doc?id=794
[3] “The Miracle of Microfinance? Evidence From a Randomized Evaluation” by Abhijit Banerjee, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan. May 30, 2009. http://collab2.cgap.org//gm/document-1.9.34827/The%20miracle%20of%20micro%C2%85nance.pdf
MicroCapital Universe: Opportunity International. https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Opp…
MicroCapital Universe: FINCA. https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=FIN…
MicroCapital Universe: Unitus. https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Uni…
MicroCapital Universe: ACCION International. https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=ACC…
MicroCapital Universe: Women’s World Banking. https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Wom…
MicroCapital Universe: Grameen Foundation. https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Gra…
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
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