top of page
Crunching the Numbers
The goal of microfinance institutions is to serve customers that are otherwise not serviced by the commercial banking system. Microfinance providers have challenged convention and achieved rapid growth in scaling to reach 211 million customers worldwide in 2013. However, although growth has been significant, evidence collected from recent studies has shown the benefits to customers using microfinance institutions has been less dramatic than expected. According to a series of six trials aimed at understanding various impacts of microloans on customers, changes in the income and consumption levels of borrowers have been minimal. On the flip side, positive influence was recorded in the areas of occupational choice, consumption choice, business scale, female decision-making power, and risk management.
Does this Mean That Microfinance Has Failed?
Given these moderate results, one could decide to write out microfinance as a viable business, but this would be a hasty decision, and maybe even a mistake. The microfinance business model is not necessarily a failure. We need to consider the costs incurred versus the benefits, specifically if the costs are small and the returns modest. This will enable us to assess the model in a different and more accurate light. While the benefits to borrowers may be slight, they are part of a broader ratio. If the costs are also minimal, a central premise of microfinance, the benefits may be better than they seem at first glance.
bottom of page
Comments