Microfinance institutions (MFIs) provide a public good: they provide income-creating financial services to un-bankable people. If MFIs create and deepen markets where none existed before, there may be a case for public support. While subsidies are generally not favorably seen in financial sector development, being difficult to target and possibly distorting the local financial market, there may be situations where the net social benefits of micro-finance may exceed those of not doing anything and of alternative anti-poverty programs. Under such circumstances longer-term public support may be justifiable. This book is based on a study of forty-five MFIs carried out by ILO, in partnership with the Universities of Geneva and Cambridge. The application of factor analysis and cluster analysis shows that MFIs form clusters in terms of social and performance. Within each cluster there is one institution that is most efficient on both scores. Public support should ensure that the relative efficiency of MFIs is enhanced, it should not prod MFIs to modify their mission and position between poverty outreach and profitability.

Microfinance institutions (MFIs) provide a public good; if MFIs create and deepen markets where none existed before, there may be a case for public support. This book is based on a study of 45 MFIs, and applies factor analysis and cluster analysis to show that MFIs form clusters in terms of social and financial performance.

According to the author, rather than alleviating poverty, microfinance financialises poverty. By indebting poor people in the Global South, it drives financial expansion and opens new lands of opportunity for the crisis-ridden global capital markets. This book raises fundamental concerns about this widely-celebrated tool for social development.

A major source of financing for the poor and no longer a niche industry Over the past four decades, microfinance—the provision of loans, savings, and insurance to small businesses and entrepreneurs shut out of traditional capital markets—has grown from a niche service in Bangladesh and a few other countries to a significant global source of financing. Some 200 million people globally now receive support from microfinance institutions, with most of the recipients in the developing world. In the beginning, much of the microfinance industry was managed by non-governmental organizations, but today the majority of these institutions are commercial and regulated by governments, and they provide safe places for the poor to save, as well as offering much-needed capital and other financial services. Now out of infancy, the microfinance industry faces major challenges, including its ability to deal with mobile banking and other technology and concerns that some markets are now over-saturated with microfinance. How the industry deals with these and other challenges will determine whether it will continue to grow or will be subsumed within the larger global financial sector. This book is based on the results of a workshop at Lehigh University among thirty-four leaders in the industry. The editors, working with contributions from more than a dozen leading authorities in the field, tell the important story of how microfinance developed, how it has met the needs of hundreds of millions of people, and they address key questions about how it can continue to meet those needs in the future.

Since its emergence in the 1970s, microfinance has risen to become one of the most high-profile policies to address poverty in developing and transition countries. It is beloved of rock stars, movie stars, royalty, high-profile politicians and ‘troubleshooting’ economists. In this provocative and controversial analysis, Milford Bateman reveals that microfinance doesn’t actually work. In fact, the case for it has been largely built on hype, on egregious half-truths and – latterly – on the Wall Street-style greed of those promoting and working in microfinance. Using a multitude of case studies, from India to Cambodia, Bolivia to Uganda, Serbia to Mexico, Bateman demonstrates that microfi nance actually constitutes a major barrier to sustainable economic and social development, and thus also to sustainable poverty reduction. As developing and transition countries attempt to repair the devastation wrought by the global financial crisis, Why Doesn’t Microfinance Work? argues forcefully that the role of microfinance in development policy urgently needs to be reconsidered.

An accessible analysis of the global expansion of financial markets in poor communities, incorporating the latest thinking and evidence. The microfinance revolution has allowed more than 150 million poor people around the world to receive small loans without collateral, build up assets, and buy insurance. The idea that providing access to reliable and affordable financial services can have powerful economic and social effects has captured the imagination of policymakers, activists, bankers, and researchers around the world; the 2006 Nobel Peace Prize went to microfinance pioneer Muhammed Yunis and Grameen Bank of Bangladesh. This book offers an accessible and engaging analysis of the global expansion of financial markets in poor communities. It introduces readers to the key ideas driving microfinance, integrating theory with empirical data and addressing a range of issues, including savings and insurance, the role of women, impact measurement, and management incentives. This second edition has been updated throughout to reflect the latest data. A new chapter on commercialization describes the rapid growth in investment in microfinance institutions and the tensions inherent in the efforts to meet both social and financial objectives. The chapters on credit contracts, savings and insurance, and gender have been expanded substantially; a new section in the chapter on impact measurement describes the growing importance of randomized controlled trials; and the chapter on managing microfinance offers a new perspective on governance issues in transforming institutions. Appendixes and problem sets cover technical material.

The purpose of the 'Microfinance Handbook' is to bring together in a single source guiding principles and tools that will promote sustainable microfinance and create viable institutions.