PROs and CONs of Microfinance: An Overview

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PROs and CONs of Microfinance: An Overview
Elwin Poortman, Analyst, Netherlands, Premium Member
Microcredit has been seen as the magic bullet that can help the poor to escape poverty, however in recent years the flaws of microcredit schemes have become more clear and have shown that not everything about lending to poor is beneficial. The authors of Poor Economics elaborated on these pros & cons, and the major ones are explained below.

Benefits of Microfinance:
  1. Opportunity to invest and gain access to markets & industries that were inaccessible before, due to a financial threshold.
  2. Empowerment, especially for females, since they are less financially and therefore socially dependent.
  3. Microfinance often takes place in groups so that each individual is responsible for the entire groupís investing behavior, which is called joint liability. This increases social capital such as sharing knowhow, partnerships and trust building.
  4. Changing financial markets: The moneylende...Sign up

Another Disadvantage of Microfinance
Karl West, Accountant, United States, Member
Hello Elwin, I would submit that innovation cannot occur with microcredit.
While innovation itself is truly powerful in pulling people out of pov...Sign up

Good Support is Needed for Microfinance
jorge anibal hoyos hoyos, Manager, Colombia, Member
Good results depend upon the good advise and monitoring accompanying the investor in marshaling the resources from the bankers helping them out. Witho...Sign up

Support of a Regional Development Scheme
Niko, Consultant, Slovenia, Member
@Karl West: Micro credit does not aim to start innovation. It helps to develop small business opportunities based on...Sign up

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