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Microfinance and Poverty Reduction: The problematic experience of Communal Banking in Peru

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  • Ana Marr

    () (Department of Economics, SOAS, University of London, UK)

Abstract

As a response to many partial and over-simplistic theoretical and empirical studies, this paper presents a more comprehensive analytical framework for assessing the success of microfinance in achieving its dual objective of financial sustainability and poverty reduction. By giving centre stage to the study of group dynamics and using principles of social psychology and imperfect information, the paper argues that microfinance has not only not solved the original problems of information asymmetries between borrowers and lenders but also, in its pursuit of financial sustainability, is destroying the very foundations of these schemes by disrupting the social fabric of communities, creating more poverty and excluding the poorest and most vulnerable from any given group.

Suggested Citation

  • Ana Marr, 2002. "Microfinance and Poverty Reduction: The problematic experience of Communal Banking in Peru," Working Papers 122, Department of Economics, SOAS, University of London, UK.
  • Handle: RePEc:soa:wpaper:122
    as

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    File URL: http://www.soas.ac.uk/economics/research/workingpapers/file28856.pdf
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    References listed on IDEAS

    as
    1. de Aghion, Beatriz Armendariz & Gollier, Christian, 2000. "Peer Group Formation in an Adverse Selection Model," Economic Journal, Royal Economic Society, vol. 110(465), pages 632-643, July.
    2. Wydick, Bruce, 1999. "Can Social Cohesion Be Harnessed to Repair Market Failures? Evidence from Group Lending in Guatemala," Economic Journal, Royal Economic Society, vol. 109(457), pages 463-475, July.
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    Cited by:

    1. Emilios Galariotis & Christophe Villa & Nurmukhammad Yusupov, 2011. "Recent Advances in Lending to the Poor with Asymmetric Information," Journal of Development Studies, Taylor & Francis Journals, vol. 47(9), pages 1371-1390, July.

    More about this item

    Keywords

    Microfinance; Poverty; Information Asymmetries; Latin America; Peru;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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