Critique of microfinance raises questions about efficacy, donor support of the industry

The microfinance industry is once again coming under fire for failing to deliver on poverty alleviation, income generation, education and women’s empowerment impacts — this time as the result of a broad survey of microfinance programs.

The survey, released recently by the Abdul Latif Jameel Poverty Action Lab and Innovations for Poverty Action, looked at the impacts of microfinance using seven randomized control trials in different regions of the world during the course of nine years. The study examined a wide range of contexts and borrower types and found that while microfinance does not have harmful effects on borrowers, it doesn’t help their livelihoods, either.

While it strongly challenged microfinance’s poverty-alleviating potential, the study also said that the industry remains a useful financial tool because it can provide low-income households with more freedom over how they manage their money.