Great expectations: microfinance and poverty reduction in Asia and Latin America

Weiss, John and Montgomery, Heather (2004): Great expectations: microfinance and poverty reduction in Asia and Latin America. Published in: ADB Institute Discussion Paper No. 15

Abstract

Microfinance institutions (MFIs) are often seen by aid practitioners as a manifestly effective means of improving the position of the poor. Despite this widely held view, detailed research studies have been much more guarded about the impact of MFIs. In particular, several studies have raised doubts about the effectiveness of MFIs in reaching the “core poor”. This paper surveys the evidence from Asia and Latin America and contrasts experiences in the two regions. Studies on the former have been carried out more “rigorously”, but in both regions the evidence that microfinance is reaching the core poor is very limited.

• Item Type: MPRA Paper
• Language: English
• Keywords: microfinance; poverty; Asia; Latin America
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

References

Amin S., Rai A.S., Ropa G. (2003). “Does microcredit reach the poor and vulnerable? Evidence from Nothern Bangladesh”. Journal of Development Economics, vol.70, pp.59-82.

Banegas, O. Jarrin, S. Escobar de Pabon, S. Rojas, B. Nusselder, H and Sanders, A (2002). HIVOS Outreach and Impact of Microcredit: Case Studies of Banco Solidario (Ecuador) and Caja los Andes (Bolivia) Centro de Estudios para el Desarrollo Rural – Free University of Amsterdam, mimeo San Jose.

Burgess, R and Pande, R. (2003). “Do Rural Banks Matter? Evidence from the Indian social banking experiment” The Suntory Centre, Suntory and Toyota International Centres for Economics and Related Disciplines, Discussion Paper No. DEDPS/40, London School of Economics and Political Science.

Charitonenko, S., Campion A. and Fernando, N. (2004). “Commercialization of Microfinance: Perspectives from South and Southeast Asia.” Asian Development Bank.

Chen, M.A. and Snodgrass, D. (2001). Managing resources, activities, and risk in urban India: the impact of SEWA Bank. Washington D.C.: AIMS. September, 2001

Coleman B.E. (1999). “The impact of group lending in Northeast Thailand” Journal of Development Economics, vol.60, pp.105-141.

Coleman B.E. (2001). “Measuring impact of microfinance programs” Finance for the Poor, Asian Development Bank, December 2001, Vol.2 Number 4, pp.5-7

Coleman, B.E. (2004). “Microfinance in Northeast Thailand: who benefits and how much?” World Development forthcoming.

Dunn, E and Arbuckle, J.G (2001a). “Microcredit and microenterprise performance: evidence from Peru” Small Enterprise Development, vol 12, no 4 pp 22- 31.

Dunn, E and Arbuckle, J.G (2001b). The Impacts of Microcredit: a case study from Peru, Assessing the Impact of Microenterprise Services (AIMS), mimeo, Management Systems International, Washington DC.

Duong, Ph.B. and Izumida Y. (2002). “Rural development finance in Vietnam: a microeconometric analysis of household surveys”. World Development, vol.30, no.2, pp.319-335.

Fernando, N (2003). ‘Transformation of NGOs into Regulated Financial Institutions: expectations fulfilled? paper presented at ADBI Annual Conference, Microfinance in Asia: poverty impact and outreach to the poor, Dec 5th 2003, Tokyo.

Fernando, N (2004). ‘From niche market to mainstream: changing face of the microfinance industry in Asia’ paper presented at the Asian Development Bank Institute workshop on ‘Modalities of Microfinance Delivery in Asia’ Manila, 4-8th October; paper available at www.adbi.org

Fujita, K. (2000). “Credit flowing from the poor to the rich: the financial market and the role of Grameen Bank in rural Bangladesh”. The Developing Economies, vol.38, pp.343-373.

Gertler, P., Levine, D.I., Moreti, E. (2003). Do microfinance programs help families insure consumption against illness? University of California, Berkeley, Center for International Development Economics Research (CIDER), Working Paper no C03-129.

Gulli,H and Berger, M (1999). ”Microfinance and Poverty Reduction: evidence from Latin America” Small Enterprise Development, vol 10, no 3 pp 16-28.

Hulme, D. and Mosley, P. (1996). Finance Against Poverty, Volumes 1 and 2, Routledge: London. 1996.

Hulme,D (1999). “Impact Assessment Methodologies for Microfinance: theory, experience and better practice” Finance and Development Research Program, Working Paper no 1, IDPM, University of Manchester.

Kaboski, J. and Townsend, R. (2002). Policies and impact: an analysis of village-level microfinance institutions, mimeo University of Chicago.

Khandker, S. (1998). Fighting poverty with microcredit: experience from Bangladesh. New York: Oxford University Press for the World Bank.

Khandker, S. (2003). “Micro-finance and poverty: evidence using panel data from Bangladesh”. World Bank Policy Research Paper 2945, World Bank, Washington.

Lapenu, C. and Zeller, M. (2001). “Distribution, growth and performance of microfinance institutions in Africa, Asia and Latin America. Food Consumption and Nutrition Division Discussion Paper no.114, International Food Policy Research Institute. June 2001.

I. Matin and D. Hulme (2003). ‘Programs for the Poorest: Learning from the IGVGD Program in Bangladesh’ World Development, vol 31, no 3, pp 647-665.

Meyer, R.L. (2002). “Track record of financial institutions in assisting the poor in Asia.” Asian Development Bank Institute Research Paper 49, ADB Institute, December, 2002.

MkNelly, B., Watetip, C., Lassen C. A. and Dunford, C. (1996). “Preliminary evidence that integrated financial and educational services can be effective against hunger and malnutrition”. Freedom From Hunger Research Paper no.2. Freedom From Hunger. April.

MkNelly, B and Dunford, C. (1999). “Impact of Credit with Education on Mothers and Young Children’s Nutrition: CRECER Credit with Education Program in Bolivia” Freedom From Hunger Research Paper no.5. Freedom From Hunger, December.

Morduch, J. (1999). “The Microfinance Promise” Journal of Economic Literature, XXXVII December, pp1569-1614.

Morduch, J. (2003). “Can the poor pay more? Microfinance and returns to capital in Indonesia”, mimeo.

Mosley, P (2001). “Microfinance and Poverty in Bolivia,” Journal of Development Studies, vol 37, no 4, pp 101-132.

Navajas, S. Schreiner, M. Meyer, R. Gonzalez-Vega, C and Rodriguez-Meza, J (2000). “Microcredit and the Poorest of the Poor: theory and evidence from Bolivia” World Development, vol 28, no 2, pp333-346.

Park, A. and Ren, C. (2001). Microfinance with Chinese characteristics. World Development, vol.29, no.1 pp.39-62.

Patten, R.H, Rosengard, J.K and Johnson, D.E (2001). “Microfinance success amidst macro economic failure: the experience of Bank Rakyat Indonesia during the East Asian Crisis” World Development, vol 29, no 6 pp 1057-1069.

Pitt, M.M. and Khandker, S (1998). “The impact of group-based credit programs on poor households in Bangladesh: does the gender of participants matter?” Journal of Political Economy, vol.2, pp.958-977.

Pitt, M.M., Khankder Sh.R., Chowdhury, O.H., Millimet, D.L. (2003). “Credit programs for the poor and the health status of children in rural Bangladesh”. International Economic Review, vol.44, no.1, pp.87-118

Ramirez, A (2004). ‘The Microfinance experience in Latin America and the Caribbean’ paper presented at the Asian Development Bank Institute workshop on ‘Modalities of Microfinance Delivery in Asia’ Manila, 4-8th October; paper available at www.adbi.org

Rutherford, S.(2000). Money Talks: conversations with poor households in Bangladesh about managing money at IDPM website www.man.ac.uk/idpm

Rutherford, S.(2003). “Microfinance’s evolving ideals: how they were formed and why they’re changing”, paper presented at ADBI Annual Conference, Microfinance in Asia: poverty impact and outreach to the poor, Dec 5th 2003, Tokyo.

Schreiner, M. (2003). “A cost-effectiveness analysis of the Grameen Bank of Bangladesh”. Development Policy Review, vol.21, no.3, pp.357-382.

Wodon, Q.T. (1998). “Cost-benefit analysis of Food for Education in Bangladesh”. Background paper for the poverty assessment of Bangladesh at the World Bank, mimeo, World Bank, April 1998.

World Bank (2000). World Development Report 2000/01: Attacking Poverty, World Bank, Washington.

Wright, G.A.N. (2000). Microfinance systems. Designing quality financial services for the poor. The University Press Limited, Dhaka, Bangladesh.