Employment, Not Microcredit, is the Solution
Aneel G. Karnani
University of Michigan, Stephen M. Ross School of Business
Ross School of Business Paper No. 1065
Most studies suggest that microcredit is beneficial but only to a limited extent. The problem lies not with microcredit but rather with microenterprises. With low skills, little capital and no scale economies, these businesses have low productivity and lead to meager earnings that cannot lift their owners out of poverty. Creating opportunities for steady employment at reasonable wages is the best way to take people out of poverty. The government is responsible for providing public services that are critical for increasing the productivity and the employability of the poor.
Number of Pages in PDF File: 14
Keywords: Microfinance, bottom of pyramid, poverty reduction
JEL Classification: I30, O16
Date posted: February 14, 2007
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