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Beyond Ending Poverty

Author

Listed:
  • Shahidur R. Khandker
  • M.A. Baqui Khalily
  • Hussain A. Samad

Abstract

The recent past has witnessed phenomenal growth in MFIs around the world. Today as many as 200 million people are beneficiaries of microfinance. Given its worldwide attention, microfinance has received serious criticism, including the argument that it is a fad with less-than-expected benefits for the poor. Surely, microfinance is not without any pitfalls. Yet the premise of improving access to financial services for consumption smoothing by the poor has never been a subject of controversy. What has been controversial is whether microfinance can alleviate poverty. That the poor lack an effective and affordable alternative financing mechanism to support income generation does not necessarily mean microfinance is a panacea since it involves entrepreneurial skills, which many poor lack. It is little wonder that studies evaluating the benefits of microfinance have produced conflicting results. Of course, study findings are contextual: They are positive in conducive environments and less so in unfavorable ones. Microfinance must be distinguished from anti-poverty schemes (e.g., conditional cash transfers) because benefits from microfinance-supported activities, which involve participants’ entrepreneurial skills and ability, take time to realize. This book using household long panel survey of 1991/92-2010/11 from Bangladesh addresses some of criticisms—including whether pushing microfinance has made it redundant as a tool for poverty reduction—while investigating whether it still matters for the poor after two decades of extensive growth. The book’s findings confirm the positive effects of continued borrowing from a microfinance program. Despite a manifold increase in microfinance borrowing, loan recovery has not declined and long-term borrowers are not trapped in poverty or debt. Interest rates charged by MFIs are not too high for realizing returns on investment, although the MFIs have scope for lowering them. The book is expected to contribute to the ongoing debate on the cost-effectiveness of microfinance as a tool for inclusive growth and development. It is expected to fill knowledge gaps in understanding the various virtues of microfinance against its portrayal as having drifted from its original poverty-reduction mission.

Suggested Citation

  • Shahidur R. Khandker & M.A. Baqui Khalily & Hussain A. Samad, 2016. "Beyond Ending Poverty," World Bank Publications, The World Bank, number 24669, July.
  • Handle: RePEc:wbk:wbpubs:24669
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    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Keisuke Hirano & Guido W. Imbens & Geert Ridder, 2003. "Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score," Econometrica, Econometric Society, vol. 71(4), pages 1161-1189, July.
    3. Mark M. Pitt & Shahidur R. Khandker, 1998. "The Impact of Group-Based Credit Programs on Poor Households in Bangladesh: Does the Gender of Participants Matter?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 958-996, October.
    4. Joseph P. Kaboski & Robert M. Townsend, 2011. "A Structural Evaluation of a Large‐Scale Quasi‐Experimental Microfinance Initiative," Econometrica, Econometric Society, vol. 79(5), pages 1357-1406, September.
    5. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    6. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
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