Rehabilitation and attack: microcredit helps the poor after all

Friday, April 18, 2014

FOR years the reputation of microfinance—which gives tiny loans to the poorest—rose and fell in tandem with relations between Grameen Bank and the Bangladeshi government. In 2006 the bank and its head, Muhammad Yunus, won the Nobel peace prize for reducing poverty and Mr Yunus toyed with setting up a political party, supposedly with the government’s blessing. Since then several studies have found limited or no benefits from microfinance, and in 2011 (for different reasons) a new government forced Mr Yunus to resign from the bank he had founded.

Now the pattern has been broken: on April 6th the government took one more step in its assault on the bank by taking the power to appoint its own board members away from Grameen and giving it to the central bank. This has happened just as the biggest study of microfinance so far, by the World Bank*, rehabilitates the reputation of the practice as a means of helping poor people, especially women.

The new study is distinctive because of its size (it covers more than 3,000 households in 87 villages) and longevity: interviews took place over 20 years. Previous studies have mostly been smaller or just snapshots.

Source: The Economist (link opens in a new window)

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microcredit, microfinance, poverty alleviation