The New Realism

August 16, 2011

The stream of microfinance reports never ends. Lately, I've been struck by a new, more careful tone. The U.K. All-Party Parliamentary Group on Microfinance published a report in June thinking through the government's role in microfinance:

The strongest message we want to send with this report is that in many (though not all) regions the sector is currently unbalanced. While access to loans has expanded massively, other financial services have lagged. Where the only product available is a loan, customers will take a loan even if it is not the most appropriate solution to their financial needs. Poor people need access to savings, perhaps even more than access to loans, as well as insurance, safe remittances and other services. Until we extend comprehensive financial services to all we cannot truly claim to be ‘democratising financial services’, let alone contributing fully to the fight against poverty. DFID and other donors must play a central part in refocusing the industry.
At almost the same time, Grantmakers Without Borders put out a thoughtful review of history and current directions in microfinance with an eye toward the role of private donors:
While Grantmakers Without Borders appreciates the significant value of the initial premise of microfinance—that poor families not be denied access to financial services---we are deeply concerned about the current state of affairs. As this guide has demonstrated, rigorous, critical assessment of the impacts of microfinance is urgently needed. Furthermore, if, as Muhammad Yunus argues, access to credit is a human right, how it is delivered must become a human rights concern.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.