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

Thursday, October 31, 2013

There is a clear rationale behind the emergence of several micro-lending firms around the developing world: the poor need access to funds, and they need it now. These are individuals who are unable to qualify for formal loans from top-tier banks. They also can’t depend on, or afford to wait for, the bureaucratic process of applying for government loans.

Private micro-lenders clearly fill a gaping need. And the hope has been that as a result, we would find more aspiring and struggling entrepreneurs realising their business potential. After all, one of the most cited reasons entrepreneurs in emerging markets give for struggling to launch their business is a lack of financing, not so?

The results surmised by the World Bank’s report, however, are counterintuitive.