Microcredit and the Poorest of the Poor: Theory and Evidence from Bolivia

The authors construct a theoretical framework that describes the social worth of a microfinance organisation in terms of depth, worth to users, cost to users, breadth, length andscope of its output. The paper addresses three questions:

• Do microfinance organisations reach the poorest of the poor?
• Do group loans reach the poorest better than individual loans?
• Do rural lenders reach the poorest better than urban lenders?

It then analyses the evidence of depth of outreach for five microfinance organisations in Bolivia and concludes that:

• Most of the poor households reached by the microfinance organisations were the richest of the poor, those near the poverty line;
• Group lenders had more depth of outreach than individual lenders;
• The urban poorest were more likely to be borrowers and;
• Rural borrowers were more likely to be among the poorest.