July 23

Microfinance Loans Could Spell Disaster in the Time of Coronavirus

By Vincent Guermond, Laurie Parsons, Nithya Joseph and Nithya Natarajan

When the Nobel Peace Prize was awarded to Bangladeshi economist Muhammad Yunus in 2006 for his concept of microfinance, it brought what began as a local policy experiment in the 1970s to global attention.

Microfinance programmes—small-scale lending programmes targeted at low-income households that normally fall through the cracks of formal lending systems—were supposed to provide the poor with the capital they need to open a street stall, invest in their farmland, or buy materials to make handicrafts.

Up until the late 2000s, microfinance was hailed as a financial magic bullet by many. It would lift the world’s poor out of poverty and empower women. Only, it hasn’t quite turned out that way.

Photo courtesy of Gunnar Salvarsson.

Source: (link opens in a new window)

Coronavirus, Finance
global development, microfinance, poverty alleviation, research