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Microfinance and economic development

Author

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  • Cull,Robert J.
  • Morduch,Jonathan J.

Abstract

Microfinance is generally seen as a way to fix credit markets and unleash the productive capacities of poor people who are dependent on self-employment. The microfinance sector has grown quickly since the 1990s, paving the way for other forms of social enterprise and social investment. But recent evidence shows only modest average impacts on customers, generating a backlash against microfinance. This paper reconsiders the claims about microfinance, highlighting the diversity in evidence on impacts and the important (but limited) role of subsidies. The paper concludes by describing an evolution of thinking: from microfinance as narrowly construed entrepreneurial finance toward microfinance as broadly construed household finance. In this vision, microfinance yields benefits by providing liquidity for a wide range of needs rather than solely by boosting business income.

Suggested Citation

  • Cull,Robert J. & Morduch,Jonathan J., 2017. "Microfinance and economic development," Policy Research Working Paper Series 8252, The World Bank.
  • Handle: RePEc:wbk:wbrwps:8252
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    Cited by:

    1. Dean Karlan & Adam Osman & Jonathan Zinman, 2018. "Dangers of a Double-Bottom Line: A Poverty Targeting Experiment Misses Both Targets," NBER Working Papers 24379, National Bureau of Economic Research, Inc.

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    Keywords

    Inequality; Rural Microfinance and SMEs;

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