Micro Finance And Its Impact On Poverty

970 words - 4 pages

Despite the growing body of literatures about the microfinance and its impact on poverty, there are counter growing criticisms against microfinance in issues such as reaching the poor, unchanged poverty level, high interest rate, brutality in repayment processes, financial sustainability, and women empowerment. (Hossain, 2010).
In terms of poverty reduction and reaching the poor people, the studies edited by (Hulme & Mosley, 1996) on the impact of microfinance on poverty found that poor people do not benefit from microfinance; it is only non-poor people who do well with microfinance and achieve positive impacts. (Morduch & Haley , 2002) points out that studies that have been conducted to examine the microfinance targeting and impact illustrate that MFIs show considerable diversity in their ability to reach poor people and the MFIs that have excellent financial performance do not imply excellence in outreach to poor people. However, (Odell, 2010) thinks it’s impossible to answer the question, does the microfinance work? (Odell, 2010) argues that the microfinance is a collection of tools and there are different types of MFIs, clients, and offered services .MFIs work in different environments, in different countries and it’s not correct to generalize the findings of a single impact study on the microfinance on the world. In addition, the measurement of microfinance impact is surprisingly difficult, because it’s not easy to isolate the impact of microfinance from other factors (CGAP). Fore instance, if the clients who got microfinance services are not doing better in their business than those who didn’t, this not means this caused by the microfinance services. There are other factors that could be involved in this impact such as the client’s skills. The microfinance clients don’t have the same level of entrepreneurial skills, vision, creativity, and persistence to be entrepreneurial.
Also, it must be noted that the different definitions of the poverty and the different poverty dimensions that included in the impact studies lead to diffident findings and conclusions. “Voting with their feet” is evidence used by the microfinance supporters to demonstrate how important the microfinance to the poor people.(Rosenberg, 2010) argue that the high repayment rate, high retention rate, and willing to pay high interest rates are strong reasons to believe that poor people around the world value the microfinance services that provided by MFIs. (Rosenberg, 2010) conclude “Whether or not financial services lift people out of poverty, they are vital tools in helping them to cope with poverty. The poor use credit and savings not only to smooth consumption, but also to deal with emergencies like health problems and to accumulate the larger sums they need to seize opportunities (occasionally including business opportunities) and pay for big-ticket expenses like education, weddings, or funerals”.
It’s should be noted that the many of microfinance promoters believe...

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