Microfinance has come under a lot of scrutiny in recent years and increasingly challenging questions are being asked about the impact that microfinance actually has on ending poverty.
Whilst there are many inspiring stories out there about how the lives of entrepreneurs have been transformed through access to savings, loans and other financial services, as well as the impact that microfinance has had on the health, education and empowerment of clients and their families, robust evidence of a wider impact on poverty alleviation is in short supply leading some to ask whether the benefits of microfinance have been oversold.
One very vocal opponent of microfinance is Milford Bateman who has recently joined the Overseas Development Institute (ODI) in London as a Senior Research Fellow.
Earlier this month, Milford Bateman presented his new book ‘Why doesn’t microfinance work?’ which suggests that microfinance is actually a major poverty trap and that almost all of the main claims made on behalf of microfinance are myths.Bateman argues that microfinance has largely undermined sustainable local economic and social development but it has been valued and promoted because of its supreme ideological and political usefulness in the era of neoliberalism. Click here to read his argument in more detail and here to see the presentation that he made to the ODI.
You can also watch or listen to Milford Bateman present his case followed by reflections and comments from Ha-joon Chang and Mark Napier by visiting the ODI’s website.
RESULTS has been a champion of microfinance for over 20 years and the feedback that we hear from microfinance organisations and clients reinforce our belief that it is a powerful tool for helping poor people manage irregular and uncertain incomes and ultimately improve their lives and livelihoods. Like most other advocates of microfinance, RESULTS would never suggest that microfinance is sufficient on its own for ending poverty but is part of a set of tools.
Whilst we are not convinced by all of his arguments, we welcome the challenge presented by Milford Bateman and others to build a stronger evidence base for microfinance. This is particularly important if we are to convince the new Coalition Government that microfinance is a smart investment. The new Secretary of State for International Development, Andrew Mitchell MP, has regularly repeated the mantra that all UK aid must demonstrate ‘results, impact and value for money’. Without more evidence and better monitoring and evaluation of their impact, UK-based microfinance organisations will find it hard to raise additional funds from donors.
What do you think? Are you persuaded by Milford Bateman’s arguments or do you think there is evidence that microfinance works? Please post a comment to let us know.