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Micro finance and poverty reduction in Asia: what is the evidence?

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  • Weiss, John
  • Montgomery, Heather
  • Kurmanalieva, Elvira

Abstract

Despite the extensive spread of micro finance, studies on the actual impact of MFIs are often more ambivalent about its impact than is the aid community. Much has been written on the range of institutional arrangements pursued in different organizations and countries and in turn a vast number studies have attempted to assess the outreach and poverty impact of such schemes. However, amongst the academic development community there is a recognition that perhaps we know much less about the impact of these programs than might be expected given the enthusiasm for these activities in donor and policy-making circles. In recognition of this uncertainty this paper aims to bring together some of the recent evidence that has been accumulating on the impact of microfinance activities on poverty reduction. In particular we ask what is the evidence on three specific issues: (1) the extent to which microfinance initiatives have made a lasting difference in pulling households out of poverty on a permanent basis; (2) the extent to which microfinance programs reach only the better-off amongst the poor, leaving the ‘core poor’ unaffected; and (3) how far micro finance is a cost-effective means of transferring income to the poor. The evidence surveyed here suggests that the conclusion from the early literature, that whilst micro finance clearly may have had positive impacts on poverty it is unlikely to be a simple panacea for reaching the core poor, remains valid. Reaching the core poor is difficult and some of the reasons that made them difficult to reach with conventional financial instruments mean that they may also be high risk and therefore unattractive microfinance clients. Hence there is a need to continually improve design and outreach and to see MFIs as part of the package for targeting the poor, rather than the whole solution.

Suggested Citation

  • Weiss, John & Montgomery, Heather & Kurmanalieva, Elvira, 2003. "Micro finance and poverty reduction in Asia: what is the evidence?," MPRA Paper 33140, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:33140
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    File URL: https://mpra.ub.uni-muenchen.de/33140/1/MPRA_paper_33140.pdf
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    References listed on IDEAS

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    4. Amin, Sajeda & Rai, Ashok S. & Topa, Giorgio, 2003. "Does microcredit reach the poor and vulnerable? Evidence from northern Bangladesh," Journal of Development Economics, Elsevier, vol. 70(1), pages 59-82, February.
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    6. Mark Schreiner, 2003. "A Cost-Effectiveness Analysis of the Grameen Bank of Bangladesh," Development Policy Review, Overseas Development Institute, vol. 21, pages 357-382, May.
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    Cited by:

    1. Toshio Kondo & Aniceto Orbeta Jr. & Clarence Dingcong & Christine Infantado, 2008. "Impact of Microfinance on Rural Households in the Philippines," Development Economics Working Papers 22639, East Asian Bureau of Economic Research.
    2. Heshmati, Almas & Kim, Jungsuk, 2014. "A Survey of the Role of Fiscal Policy in Addressing Income Inequality, Poverty Reduction and Inclusive Growth," IZA Discussion Papers 8119, Institute for the Study of Labor (IZA).
    3. Soliman, Ibrahim & Mashhour, Ahmed, 2012. "National agro-food policies in Jordan," MPRA Paper 66782, University Library of Munich, Germany, revised 10 May 2012.
    4. Flore Gubert & François Roubaud, 2005. "Analyser l’impact d’un projet de Micro-finance : l’exemple d’ADéFI à Madagascar," Working Papers DT/2005/14, DIAL (Développement, Institutions et Mondialisation).
    5. Katsushi Imai & Thankom Arun, 2008. "Does Microfinance Reduce Poverty in India?," The School of Economics Discussion Paper Series 0814, Economics, The University of Manchester.

    More about this item

    Keywords

    Asia; microfinance; poverty; impact;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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