Rethinking microfinance’s role in fight against poverty

Wednesday, August 28, 2013

By Jean-Marc Debricon

Much has been said about microfinance. Heralded once as the ultimate tool for alleviating poverty worldwide, it was badly hit by accusations of illegal and immoral practices in India’s Andhra Pradesh in 2010-2011 and, since then, has lost some of its shine.

Can we still look at microfinance as the ultimate tool in the fight against poverty or should we agree with its detractors that it is useless? I believe that the middle ground is closer to the truth. This opinion was forged through Green Shoots Foundation’s own experience with microfinance and explains why we eventually changed our mission and the way we look at microfinance.

Green Shoots Foundation was set up late 2010 as a UK charity whose mission was to help develop microfinance Greenfields by providing fairly priced and customer-centric microfinance to those who needed it most. Two years later, Green Shoots Foundation’s mission was changed so that the implementation of microfinance was no longer an objective per se but merely one of the tools in our fight against poverty. How did we get there?

As a charity, our fight has always been against poverty. So, let’s start with the basics, what is poverty?

Reducing poverty to an economic condition, for instance a poverty line threshold expressed in dollars per day, does not even scratch the surface. The impoverished are not just suffering from a lack of economic empowerment, they are also more exposed to illness/disease, to natural catastrophes, to violence, to deprivation of the most fundamental rights and this has a disastrous psychological impact. It makes them feel “unworthy” and entraps them in some sort of pernicious fatalism. Just imagine the frame of mind of a mother or father unable to provide their children with the most basic needs! Poverty should therefore be seen as complex and multi-dimensional.

Source: Thomson Reuters Foundation (link opens in a new window)

microfinance, poverty alleviation