NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, May 8, 2013

Microlending has lost a lot of its shine in the seven years since Muhammad Yunus won the Nobel Peace Prize for delivering small loans to help poor women start businesses. Starting in 2009, randomized trials (PDF) suggested that the benefits of microfinance had been oversold and that small loans have limited power to lift people from poverty. The next year, borrower suicides in India followed overreach by for-profit microlenders, punctuating the point.

The world now has a well-developed, decades-old system of getting small loans to poor people in many remote places. But mechanisms to offer them additional financial products common in the developed world—insurance, savings accounts, and easy ways to move money—are still in their infancy.