Microfinance as a socially acceptable tool is a definite yes but is it effective and does it actually help the poor it claims to release form the trap of penury into independence? This is a question that we need to ask at this stage.
Microfinance relies not only upon the poorer and weaker sections banding together to rescue themselves it also relies on the poorer and the weaker applying social pressure to engender compliance.
Microfinance relies not only upon the poorer and weaker sections banding together to rescue themselves it also relies on the poorer and the weaker applying social pressure to engender compliance.
Research is needed on whether and how successful microfinance has been in terms of impact and outcomes because I believe there is a marked lack of data to measure outcomes in this area and anecdotal evidence does not translate into hard data.
The cyclical nature of Micro finance funding has indeed been a major culprit of this particular tool for funding. Micro enterprises develop as lending and dependency networks. Small businesses invest to develop, then reapply for loans too further their initial business or repay the original loans using the same microfinance network while allowing itself breathing space to grow, The repeated cash injection in these models may not necessarily therefore indicate a positive growth story of increasing growth and development but a cyclical dependency on financing as a tool to remain afloat. therefore high uptake can indeed be a false indicator of growth and a more sinister indicator of hidden deficiencies in the growth pattern.
There are of course other issues that the process raises and it is important that these are robustly studied before furthering a microfinance agenda. Some of Microfinances inherent problems may prove detrimental in the long run due to its very nature of not having a safety net outside of the network thereby potentially leading to extremes of compliance or rejection .
- Does it increase independence or indebtedness?
- Does it provide easier access to finance or create parallel economies of exploitation and power?
- Does it enable life chances or does it restrict life chances by determining limits/ range and options available to users of their funds?
- When more than 80% well funded businesses fail in the first year of starting up how much of microfinances impact on businesses, ventures, investments and returns is studied dispassionately.
The cyclical nature of Micro finance funding has indeed been a major culprit of this particular tool for funding. Micro enterprises develop as lending and dependency networks. Small businesses invest to develop, then reapply for loans too further their initial business or repay the original loans using the same microfinance network while allowing itself breathing space to grow, The repeated cash injection in these models may not necessarily therefore indicate a positive growth story of increasing growth and development but a cyclical dependency on financing as a tool to remain afloat. therefore high uptake can indeed be a false indicator of growth and a more sinister indicator of hidden deficiencies in the growth pattern.
There are of course other issues that the process raises and it is important that these are robustly studied before furthering a microfinance agenda. Some of Microfinances inherent problems may prove detrimental in the long run due to its very nature of not having a safety net outside of the network thereby potentially leading to extremes of compliance or rejection .