Danilo Freire

What do we really know about microfinance?

Depending on whom you ask, with almost 200 million borrowers around the world, microfinance might be the best thing ever to happen to international development or an overhyped and dangerous intervention. Microfinance, the largest trend in international development in years, remains mostly unproven; it’s a realm of heartwarming stories and vague ideas about why and how it should work – and for whom.

[…] In the interest of figuring out exactly what we know – and don’t know – about microfinance, IPA has partnered with the Abdul Latif Jameel Poverty Action Lab (J-PAL) at the Massachusetts Institute of Technology (MIT), the Financial Access Initiative (FAI), and Consultative Group to Assist the Poor (CGAP) to publish a new paper on the topic. The paper takes a broad view of emerging patterns in what we know about microfinance thus far, based on a survey of randomized trials in microfinance in the last several years.

The evidence suggests that the truth lies in the in-between: Microfinance works really well sometimes – but not always. It works for some people the way we thought it might, and for others in ways we didn’t anticipate. For some people, microfinance doesn’t seem to have any measurable effect.

Read the full post on Innovation for Poverty Action blog.