Emergic: Rajesh Jain's Blog

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Microcredit

May 2nd, 2004 · No Comments

NYTimes writes:

Today there is a growing push for the nonprofit groups and banks that run such programs to reach deeper into the ranks of the poor, though there is little rigorous evidence juding whether the very poor benefit from microcredit, economists say.

Since 1988, the United States Congress has appropriated $2 billion for such programs. In new rules to take effect next year, it has put teeth into a requirement that half of American aid for these loans defined as $1,000 or less in Europe and Eurasia, $400 or less in Latin America and $300 or less in the rest of the world go to the very poor living on less than $1 a day.

The new rules have stirred strong opposition from other donors and a range of microfinance institutions, which contend that the industry may grow faster and ultimately help more very poor people by aiming at a wider pool that ranges from people who are struggling but not poor to those much further down the economic ladder.

Researchers for Bangladesh’s largest microlender, the Bangladesh Rural Action Committee, or BRAC, have found that people near the poverty line are the main users of microfinance and are more likely to get more and bigger loans and build successful microenterprises.

By contrast, BRAC has found that the very poor are more likely to drop out of microcredit programs.

But the group’s leaders say the microcredit industry needs to try new approaches to help the poorest people. They have coupled small loans with skills training and grants of food.

Tags: Deeshaa (Rural Development)

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