Paper

Microfinance and Poverty Reduction in Asia: What is the Evidence?

Do MFIs really reach the 'core poor'?
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Aid practitioners often view microfinance institutions (MFIs) as a manifestly effective means of improving the position of the poor. Despite this widely held view, detailed research studies have been more guarded about MFIs' impact. In particular, several studies have raised doubts about the effectiveness of MFIs in reaching the 'core poor'. This paper surveys the evidence from a number of recent studies on MFIs in Asia, exploring:

  • Extent to which microfinance initiatives have made a lasting difference in pulling households out of poverty on a permanent basis;
  • Extent to which microfinance programs reach only the better-off amongst the poor, leaving the 'core poor' unaffected;
  • How far micro finance is a cost-effective means of transferring income to the poor?

The paper finds that that whilst micro finance clearly may have had positive impacts on poverty, it is unlikely to be a simple panacea for reaching the 'core poor'. It concludes that there is a need for continual improvements in program design and outreach.

About this Publication

By Weiss, J. & Montgomery, H. & Kurmanalieva, E.
Published