> Posted by Elisabeth Rhyne
Tim Harford’s Financial Times blog post “Perhaps microfinance isn’t such a big deal after all,” is missing the point. Microfinance’s purpose is not to cure the world’s poverty ailments. Its purpose is to include otherwise ignored people into the financial sector. You don’t need an impact evaluation to tell you what a valuable role financial services play in your own life – and it is the same for the clients of microfinance. Low income and informal individuals who would otherwise be at the doorstep of a neighborhood loan shark are instead able to find loans, savings programs, and, in some cases, other financial services to help them manage cash flow, expand their businesses, cope with emergencies, or save for the future.
Through these financial services, people can improve their quality of life. A family faced with a large medical expense can still keep the kids in school. A seamstress can purchase a sewing machine to multiply her daily output. Funeral expenses no longer mean wiping out a widow’s savings. This is success. And a big deal. Sure, it’s not THE one answer. Poverty is much too large a problem for a single solution. But, as ACCION’s CEO, Michael Schlein noted in his response, it’s a tremendous weapon in the arsenal.
As the microfinance sector grows, we at the Center for Financial Inclusion have launched the industry-wide “Smart Campaign,” dedicated to keeping the quality of services and treatment of microfinance clients foremost in the minds of microfinance institutions around the world. With already over 700 endorsers, this Campaign is one way of ensuring that microfinance remains focused on the client and serves an example of responsible banking.
To read Tim Harford’s post and Michael Schlein’s response, please click here >
To read a response to another article about these impact studies, please click here >
To learn more about The Smart Campaign, please click here >
For more information, sign up for updates from the Financial Inclusion 2020 campaign.