The Long Game: How Developing Countries Can Get Microfinance Right
In developing economies such as Myanmar, microfinance is often viewed as a means for lifting people out of poverty. As of 2015, small and medium enterprises (SMEs) comprised 99% of the country’s businesses, and many of those are micro-businesses.
Microfinance is often cited as an essential tool in helping women in particular rise from poverty. The theory goes that when you empower women to grow their businesses, they’re able to secure their families’ finances and create pathways toward education and improved quality of life for their children.
Despite this optimistic premise, however, NPR wrote last year that “based on the economic studies that have been done to date, it doesn’t appear that increasing access to microloans is an effective strategy for helping more women start businesses that will allow them to vault themselves out of poverty, at least not on a large enough scale to be detected.” That doesn’t mean that microfinance fails universally. But it does illustrate the complexities of getting microfinance right.
Photo courtesy of Aaron Gilson.