You Asked, We Answer: Can Microloans Lift Women Out Of Poverty?

Friday, November 4, 2016

That’s the question our readers wanted us to look into.

You’ve probably heard the stories. A desperately poor woman in a poor country gets a tiny loan — a couple hundred dollars. It’s the break she’s always needed. With that money she can finally buy the materials to start a small business. She turns a profit. Her income rises. Now she has money to expand her business even further, buy her kids more nutritious food, pay their school fees. Over time, she lifts her whole family out of poverty.

That’s the vision often associated with microloans in the popular imagination.

But is it the reality?

It’s certainly possible that plenty of women have successfully used microloans for a small business purpose. But 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.

Still that doesn’t mean microloans don’t help poor people in all sorts of other ways.

Source: NPR (link opens in a new window)

Impact Assessment
poverty alleviation