Can microfinance aid poverty reduction? This question has been asked so many times on different occasions. You might wonder what more is there to say. However, the fact is, after decades of debate, experiment and research, experts still have not reached a conclusion on this topic. At the beginning of December, 500 microfinance practitioners, regulators, associations, scholars and journalists from eight different countries gathered in Beijing, China, to discuss the prospect of microfinance in the 2016 China International Microfinance Summit. Themed “Openness and Inclusion”, the conference assessed microfinance as a method of helping individuals to lift themselves out of poverty and injected some new thoughts such as technology microfinance.
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Muhammad Yunus, who started a project to lend small amount of money to people in poverty. His theory was that microloan can deliver poor people new impetus and opportunities to offer a decent education for their children or to run a small business, which will benefit their long-term well-being. The concept of microcredit was celebrated as the pivotal key to defeat poverty all over the world. However, fierce criticism followed the high expectations. Years after Yunus practices, many doubted the impact of microfinance in alleviating global poverty, compared to earlier claims. Some even went far to suggest that microfinance caused harm, rather than good, to the poorest families by exploiting them, as if landlords utilize their tenant farmers and masters abuse their slaves. It was clear that poor people needed more than only credit, and there were problems in the …show more content…
Good news is that recent technological development is ready to trigger a difference, which is also a feature topic on the freshly-ended 2016 International Microfinance Summit. Nowadays, the use of smartphones allows MFIs to reach far more people, which benefits potential clients who are located in remote and backward areas. Technology has also brought down the entry barrier in the MFI field as well as cost of function, which may allow more participants and competition in the industry, and thus better service to customers. For example, Kenya’s biggest mobile operator, Safaricom, created a mobile banking platform in 2007 for making payments and transfers via phones at no extra cost or monthly fee. This marks a dramatic advance in the access and delivery of microfinance offerings to customers, even in the country’s most unreachable corner. Considering the vital role that technology is playing to provide financial access to people in need, microfinance has a promising and bright future.
Finally, the third group of criticism is over the impact of microfinance. Through quantitative research, Yale development economist Dean Karlan reveals in 2011 that microloans have little effect on average monthly expenditure per capita and does not influence the likelihood of starting a new business and therefore is not a good
Muhammad Yunus, who started a project to lend small amount of money to people in poverty. His theory was that microloan can deliver poor people new impetus and opportunities to offer a decent education for their children or to run a small business, which will benefit their long-term well-being. The concept of microcredit was celebrated as the pivotal key to defeat poverty all over the world. However, fierce criticism followed the high expectations. Years after Yunus practices, many doubted the impact of microfinance in alleviating global poverty, compared to earlier claims. Some even went far to suggest that microfinance caused harm, rather than good, to the poorest families by exploiting them, as if landlords utilize their tenant farmers and masters abuse their slaves. It was clear that poor people needed more than only credit, and there were problems in the …show more content…
Good news is that recent technological development is ready to trigger a difference, which is also a feature topic on the freshly-ended 2016 International Microfinance Summit. Nowadays, the use of smartphones allows MFIs to reach far more people, which benefits potential clients who are located in remote and backward areas. Technology has also brought down the entry barrier in the MFI field as well as cost of function, which may allow more participants and competition in the industry, and thus better service to customers. For example, Kenya’s biggest mobile operator, Safaricom, created a mobile banking platform in 2007 for making payments and transfers via phones at no extra cost or monthly fee. This marks a dramatic advance in the access and delivery of microfinance offerings to customers, even in the country’s most unreachable corner. Considering the vital role that technology is playing to provide financial access to people in need, microfinance has a promising and bright future.
Finally, the third group of criticism is over the impact of microfinance. Through quantitative research, Yale development economist Dean Karlan reveals in 2011 that microloans have little effect on average monthly expenditure per capita and does not influence the likelihood of starting a new business and therefore is not a good