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Micro Finance and Poverty Reduction in Asia: What is the Evidence?

ABD Institute Research Paper No. 53

24 Pages Posted: 30 Apr 2009 Last revised: 22 Aug 2011

John Weiss

Asian Development Bank Institute

Heather Montgomery

International Christian University (ICU)

Elvira Kurmanalieva

Asian Development Bank Institute

Date Written: December 1, 2003

Abstract

Despite the extensive spread of micro finance, studies on the actual impact of MFIs are often more ambivalent about its impact than is the aid community. Much has been written on the range of institutional arrangements pursued in different organizations and countries and in turn a vast number studies have attempted to assess the outreach and poverty impact of such schemes. However, amongst the academic development community there is a recognition that perhaps we know much less about the impact of these programs than might be expected given the enthusiasm for these activities in donor and policy-making circles.

In recognition of this uncertainty this paper aims to bring together some of the recent evidence that has been accumulating on the impact of microfinance activities on poverty reduction. In particular we ask what is the evidence on three specific issues:
– the extent to which microfinance initiatives have made a lasting difference in pulling households out of poverty on a permanent basis;
– the extent to which microfinance programs reach only the better-off amongst the poor, leaving the ‘core poor’ unaffected;
– how far micro finance is a cost-effective means of transferring income to the poor.

The evidence surveyed here suggests that the conclusion from the early literature, that whilst micro finance clearly may have had positive impacts on poverty it is unlikely to be a simple panacea for reaching the core poor, remains valid. Reaching the core poor is difficult and some of the reasons that made them difficult to reach with conventional financial instruments mean that they may also be high risk and therefore unattractive microfinance clients. Hence there is a need to continually improve design and outreach and to see MFIs as part of the package for targeting the poor, rather than the whole solution.

Keywords: Asia, microfinance, poverty, impact

JEL Classification: G21, O16, O17

Suggested Citation

Weiss, John and Montgomery, Heather and Kurmanalieva, Elvira, Micro Finance and Poverty Reduction in Asia: What is the Evidence? (December 1, 2003). ABD Institute Research Paper No. 53. Available at SSRN: https://ssrn.com/abstract=1396983 or http://dx.doi.org/10.2139/ssrn.1396983

John Weiss

Asian Development Bank Institute ( email )

Kasumigaseki Building 8F 3-2-5
Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

Heather Anne Montgomery (Contact Author)

International Christian University (ICU) ( email )

Osawa 3-10-2
Mitaka-shi
Tokyo, Mitaka-shi 181-8585
Japan

HOME PAGE: http://www.icu.ac.jp/index_e.html

Elvira Kurmanalieva

Asian Development Bank Institute ( email )

Kasumigaseki Building 8F 3-2-5
Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

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