The Limits of Microcredit— A Bangladesh Case
By Jason Cons and Kasia Paprocki of the Goldin Institute
Winter 2008 -- Volume 14 -- Number 4
Since its emergence in the 1970s, microcredit has grown in popularity as a tool for development. Today, microcredit organizations have assets well in excess of $22 billion USD and serve more than 113 million clients.1 Microcredit has enormous potential as a tool for poverty alleviation. Yet as this strategy moves into the development mainstream there is an urgent need to reflect on its role in market-led development initiatives and its limitations, as well as its historic successes. There is significant risk in microcredit’s often uncritical adoption. This risk is compounded by the systematic failure of many microfinance institutions (MFIs) to engage the communities where they work in the process of designing and evaluating
microcredit programs. As with many development programs, the voices of communities and individuals who are the supposed beneficiaries of microlending are conspicuously absent from the projects that seek to determine their futures. As debates over the pros and cons of microcredit rage and donor support encourages rapid adoption, it is crucial to evaluate the impact of microcredit from the perspective of those who have the most to gain and lose — the recipients.
This Backgrounder outlines the results of a study on the impact of microcredit on recipient livelihoods in rural Bangladesh.