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"The reality is that there has not yet been a controlled trial on the impact of the standard microfinance product a small loan given to a group of women who meet together weekly for repayment. Put another way, all of the above-mentioned 'received facts' about what is accomplished by giving people access to small lines of credit have been based on anecdote. The reality is that no one knows what impact, if any, micro-credit has on the lives of the poor."

What IPA is trying to do here is important. There are a lot of caveats that need to be applied here, please don't look at these results as definitive. The nature of the question being asked - "what is the impact of micro-credit on the lives of the poor?" - requires studies across multiple implementations and environments.

For example: "Take-up of micro-loans was relatively low at 17.5 percent among the sample this raises a question about whether demand is in fact as high as policy makers and lenders claim, or if there are other countervailing dynamics in play, such as risk aversion." Or, maybe the program was poorly marketed?

Or: "Loan-takers also spend more on home-based durable goods." Would this effect last if the observation was continued over multiple loan cycles, or was this a one-time "stocking up"?

But their final conclusion in this write-up, "we really know almost nothing about the real impact of micro-credit and how or whether it works," is certainly correct. Everyone who is interested in micro-credit and development should spend some time thinking about how difficult it can be to measure results.

The focus of One Acre Fund is different. While extending credit is core to the program, market access and training are just as important. The impact of programs that provide a business model as well as credit will have to be studied separately.


last timestamped: 12:46:09 15-Oct-2010
in categories:Commerce/Microfinance, Commerce/InternationalDevelopment, OneAcreFund

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