IslamicFinance.de

What’s so fascinating about the microfinance craze is that it persists in the face of one unfortunate fact: microfinance doesn’t work. As David Roodman from the Center for Global Development put it in his recent book, the best estimate of the average impact of microcredit on the poverty of clients is zero. A comprehensive DFID-funded review of extant data comes to the same conclusion: no clear evidence yet exists that microfinance programmes have positive impacts. In fact, it turns out that microfinance usually ends up making poverty worse. The reasons for this are fairly simple. Most microfinance loans are used to fund consumption – to help people buy the basic necessities they need to survive.