Evaluating Microfinance

Do small loans for poor entrepreneurs help end poverty?

  • By:Sarah Glazer
  • Content Type: Report
  • Publisher: CQ Press
    • Publication year: 2010
    • Online pub date:
  • DOI: https://doi.org/10.4135/cqrglobal20100400


Since the 1980s, millions of impoverished people around the world without access to banks have been able to take out tiny loans to start businesses. Nobel Prize-winning economist Muhammad Yunus, who established the first microfinance bank in Bangladesh and launched the modern microlending movement, claims microloans have lifted millions — especially women — out of poverty and spurred economic growth. But recent studies cast doubt on microcredit's effectiveness. Borrowers have been saddled with multiple loans at exorbitant interest rates, often having to borrow from loan sharks to make their microcredit payments. Economists fear overindebtedness could make borrowers even poorer and that a possible credit bubble could burst. Others worry that in recent years, for-profit investors have swarmed to the field, attracted by high returns on ...

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