MicroCapital Paper Review: “Great Expectations: Microfinance and Poverty Reduction in Asia and Latin America”

To access this article visit: “Great Expectations: Microfinance and Poverty Reduction in Asia and Latin America”

Authors: John Weiss and Heather Montgomery

Published by: Asian Development Bank Institute, September 2004

Quantitative Information: This article compares the development and status of microfinance within two regions: Asia and Latin America. The authors suggest Asia is more effective at reaching the poor, whereas Latin America is more advanced in developing microenterprise åö using the average loan balance per borrower of US$581 in Latin America versus US$195 in Asia to back their argument. Moreover, the article cites a Mix Market, a World Bank information clearing house on microfinance, report that only 10% of Latin American MFIs specified that they were targeting “very poor clients.”

Qualitative Information: Introduced as evolving for different purposes, microfinance within Latin America åö initially having a greater focus on commercial profitability åö is contrasted against Asia and the ideals of the Grameen Bank, a famous Bangladeshi microfinance institution (MFI). The authors propose that although NGOs are still important players within Latin America, there is a significant trend toward the commercialization of microfinance and thus MFIs’ focus on profitability. The article suggests that rural, impoverished regions particularly within larger countries such as Brazil, Mexico, and Argentina are under-addressed, but neither provides examples to support these statements nor distinguishes the types of MFIs and their target markets. While the authors agree that there are indications that MFIs have an impact on borrowers within Latin America, MFIs remain unsuccessful at reaching the poorest åö although they offer little propositions for MFIs to both achieve profitability and successfully touch the pooråÐest. They do, however, suggest more studies are needed on the impact and cost effectiveness of microfinance programs.

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