Microfinance, labour markets and poverty in Africa: a study of six institutions
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.
Volume (Year): 16 (2004)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/journal/5102/home|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- 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.
- 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.
- Frank Ellis, 1998. "Household strategies and rural livelihood diversification," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 1-38.
- Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
- 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.
- 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).
- 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.
- 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.
- Hulme, David, 2000. "Impact Assessment Methodologies for Microfinance: Theory, Experience and Better Practice," World Development, Elsevier, vol. 28(1), pages 79-98, January.
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)
If references are entirely missing, you can add them using this form.