IDEAS home Printed from
   My bibliography  Save this article

Microfinance, labour markets and poverty in Africa: a study of six institutions


  • Paul Mosley

    (University of Sheffield, Sheffield, UK)

  • June Rock

    (University of Sheffield, Sheffield, UK)


We examine a range of six African microfinance institutions with a view to assessing and if possible enhancing their poverty impact. The impact of microfinance loans is variable between institutions, with a tendency in particular for savings services to be taken up by people well below the poverty line, especially in South Africa and Kenya. However, many benefits to the poor from microfinance programmes, in Africa at least, are likely to come via an indirect route, via 'wider impacts' or 'spin-offs', rather than by through direct impacts on borrowers. We examine, here, three of these indirect routes: (i) Microcredit to the nonpoor can reduce poverty by sucking very poor people into the labour market as employees of microfinance clients. This mechanism is important in three of our survey countries in particular (South Africa, Uganda and Kenya); (ii) Microcredit, whether or not the proximate recipient is poor, often enhances human capital through increased expenditures on education and related improvements in health, which may then extend to poor individuals through intrahousehold and inter-generational effects. (iii) Microcredit, whether or not the proximate recipient is poor, often improves the household's risk management capacity through the enhancement of social capital, partly achieved by deliberate training and capacity-building efforts and partly through fungibility of loan proceeds into the building up of social networks. This in turn may lead to 'poverty externalities' through the extension of credit groups to include poor people, and through the stabilisation of village income, which reduces the vulnerability of the poorest to risk. In all of our case studies, many male and female beneficiaries are members of farmer groups and|or business associations; they share information on markets, prices and technology and cut costs by pooling resources for transporting goods to and from markets and by sharing storage facilities; often borrowers invest in this form of social capital, on which drawings can be made by poor people outside the borrower population, using the proceeds of their loan. We examine, in a non-rigorous way, the magnitude of these 'wider impacts', and in a concluding section examine how they may be developed and expanded by means of institutional and policy initiatives. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Paul Mosley & June Rock, 2004. "Microfinance, labour markets and poverty in Africa: a study of six institutions," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(3), pages 467-500.
  • Handle: RePEc:wly:jintdv:v:16:y:2004:i:3:p:467-500
    DOI: 10.1002/jid.1090

    Download full text from publisher

    File URL:
    File Function: Link to full text; subscription required
    Download Restriction: no

    References listed on IDEAS

    1. James Copestake, 2002. "Inequality and the polarizing impact of microcredit: evidence from Zambia's copperbelt," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(6), pages 743-755.
    2. Bob Baulch & John Hoddinott, 2000. "Economic mobility and poverty dynamics in developing countries," Journal of Development Studies, Taylor & Francis Journals, vol. 36(6), pages 1-24.
    3. Marguerite S. Robinson, 1996. "Addressing some key questions on finance and poverty," Journal of International Development, John Wiley & Sons, Ltd., vol. 8(2), pages 153-161.
    4. Frank Ellis, 1998. "Household strategies and rural livelihood diversification," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 1-38.
    5. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    6. Paul Mosley, 2002. "The African green revolution as a pro-poor policy instrument," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(6), pages 695-724.
    7. Zeller, Manfred & Schrieder, Gertrud & von Braun, Joachim & Heidhues, Franz, 1997. "Rural finance for food security for the poor," Food policy reviews 4, International Food Policy Research Institute (IFPRI).
    8. Kabeer, Naila, 2001. "Conflicts Over Credit: Re-Evaluating the Empowerment Potential of Loans to Women in Rural Bangladesh," World Development, Elsevier, vol. 29(1), pages 63-84, January.
    9. Shahidur Khandker & Hussain Samad & Zahed Khan, 1998. "Income and employment effects of micro-credit programmes: Village-level evidence from Bangladesh," Journal of Development Studies, Taylor & Francis Journals, vol. 35(2), pages 96-124.
    10. Hulme, David, 2000. "Impact Assessment Methodologies for Microfinance: Theory, Experience and Better Practice," World Development, Elsevier, vol. 28(1), pages 79-98, January.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. van Rooyen, C. & Stewart, R. & de Wet, T., 2012. "The Impact of Microfinance in Sub-Saharan Africa: A Systematic Review of the Evidence," World Development, Elsevier, vol. 40(11), pages 2249-2262.
    2. R. Casselman & Linda Sama & Abraham Stefanidis, 2015. "Differential Social Performance of Religiously-Affiliated Microfinance Institutions (MFIs) in Base of Pyramid (BoP) Markets," Journal of Business Ethics, Springer, vol. 132(3), pages 539-552, December.
    3. Copestake, James, 2007. "Mainstreaming Microfinance: Social Performance Management or Mission Drift?," World Development, Elsevier, vol. 35(10), pages 1721-1738, October.
    4. Namizata Binaté Fofana & Gerrit Antonides & Anke Niehof & Johan Ophem, 2015. "How microfinance empowers women in Côte d’Ivoire," Review of Economics of the Household, Springer, vol. 13(4), pages 1023-1041, December.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jintdv:v:16:y:2004:i:3:p:467-500. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.