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New Study Shows How Microlending has Gotten Off Track

Stumbling on Its Own Success

 

A new study reported by TCBH! journalist Dave Lindorff in the May issue of American Banker magazine details how the mission of microlending has gotten off track, and why helping impoverished women is getting harder to do.
 

In the three decades since Muhammad Yunos came up with the idea of microloans for women to start businesses as a way of combating poverty in the world's poorest societies, it has attracted widespread support, and even earned Yunos and his Grameen Bank a Nobel Peace Prize in 2006.

There are now roughly 2000 microfinance institutions around the globe, and, as of 2009, the last time a complete survey was attempted, an estimated 74 million borrowers had $38 billion of the tiny loans outstanding.

But microlending is becoming a victim of its own success. The big money that now flows into this niche has tended to transform microloans into more of a business enterprise than a social one -- which, a recent study shows, shifts the focus away from the poor in general and women in particular.

"A lot more money is doing a lot less good," says Tyler Wry, an assistant professor of management at the University of Pennsylvania's Wharton School of Business, who conducted the study with Eric Yanfei Zhao, a docoral fellow at the University of Alberta School of Business in Canada. they analyzed data from 1,800 microfinance institutions in 121 developing countries.

"There has been a strong pattern over time in many countries of these microloans moving away from targeting the poor and from focusing on women," Wry says. This is problematic because, he says, micofinance's original goal of lending to poor women is based on sound principles: women in impoverished societies are generally the most destitute of all, and giving them loans to start small businesses yields a substantial gain in family income and better outcomes for children...
 

For the rest of this article by Dave Lindorff please go to American Banker

Microloans, begun as a way to alleviate poverty through aiding women, is losing its way by seeking profitsMicroloans, begun as a way to alleviate poverty through aiding women, is losing its way by seeking profits

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