Does Microcredit Really Help the Poor? Take II
I appreciate the vigorous discussion on microcredit impact. A few responses:
–(for Michael) When people think about “getting out of poverty,” they are usually thinking in terms of income and/or consumption. Most impact studies focus on these variables rather than wealth, so I’m not aware of evidence bearing one way or the other on your interesting suggestion that housing microfinance may be more helpful.
–(for Elie Hassenfeld) The statements about loan demand and desertion rates were based on my and my colleagues’ anecdotal experience. I know of no source for broad data on these topics. Many individual MFIs keep such data, but I have no idea which ones might be willing to share it.
–(for V. Rengarajan) The question of how far down the poverty scale microfinance reaches is an important but difficult one. The Microcredit Summit publishes data about millions of “poorest” clients–that is, people in the bottom half of the group below the poverty line, or living on less than $1 a day. I have been told (I can’t vouch for it myself) that with the exception of Fonkoze in Haiti, most of the MFIs that are studied using the Grameen/CGAP or IRIS/USAID poverty scoring tools turn out to have far fewer extremely poor clients than their management has thought. Let’s not assume that reaching such clients is always and necessarily beneficial. It’s far from obvious that indebting people who aren’t likely to have the regular cashflow to make payments on the loan is a good thing for them.
–(for Sophie Chitedze) Randomized controlled trials aren’t the only way to know about microfinance helping poor people. The private knowledge of experienced people like you is also an important source of knowledge. The problem is in the public forum: it’s a lot easier for a third party (like me, for instance) to assess the reliability of an RCT than it is to assess the reliability of often-conflicting reports of personal experience.
–(For FCRWizard)So far I’ve heard of only one RCT study of microfinance plus, and my recollection is that the people who got the “plus” did better than the people who just got the loan. I hope that there are many more studies of this question using rigorous methodology.
–(for Anita Sharma) I certainly agree with you that we need to look more broadly than just income changes. On another point, I think that your overall feel about the findings of the Banerjee study may be a bit more optimistic in tone that the authors’overall conclusions were.
For those who are interested, the topic of this blog is treated in more detail in CGAP’s Focus Note No. 59: ‘Does Microcredit Really Help Poor People?’