Over on CGD's main blog, my colleagues Jenny Aker and Michael Clemens explain Why MFIs Shouldn’t Be Freaking Out (Yet) about recent studies finding little clear sign that microcredit makes people better off:
Privately and publicly, donors, MFIs and practitioners are expressing concern about the impact of these studies on the future of microfinance. Are they right to be worried?Not yet.
The post is about why you shouldn't generalize too much from one or two studies. This is the "Sure, air-dropping insecticide-treated bed nets into rural upper-middle-northwestern Uganda in the spring worked great for stopping malaria there, but will it work in central Laos in the fall?"
challenge.I
would add: It also important to think through what we mean by "success" in microfinance. Suppose microfinance is not having much average impact on poverty, but is giving millions of people a modicum of greater control over the lives, and doing so by building innovative, accountable, relatively self-sustaining institutions. Is that so bad by the standards of aid? This is why the heart of my book outline is three chapters,
Development as Proven Poverty Reduction,
Development as Freedom, and
Development as Institution-Building. The middle of these three chapters is out in draft and the first will be very soon.Perhaps like Jenny I've had several conversations recently that have made me realize that many in the microfinance world are searching for a proper response to those bombshell randomized studies. I see now that it's taking a while for the effects to sink in. It will be interesting to see how the industry eventually responds---to these studies, and to more on the way.For my reviews of these and other studies, see
impacts. On the strengths and limits of randomized studies, see
RCTs.
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