A challenge to the orthodoxy concerning microfinance and poverty reduction

Marr, Ana (2003) A challenge to the orthodoxy concerning microfinance and poverty reduction. Journal of Microfinance, 5 (2). pp. 7-42. ISSN 1527-4314

Abstract

As a response to many partial and simplistic theoretical and empirical studies, this paper presents a more comprehensive analytical framework to assess the success of microfinance in achieving its dual objectives
of financial sustainability and poverty reduction. By giving center stage to the study of group dynamics and using principles of imperfect information and social psychology, the paper argues that microfinance not only has failed to solve the original problems of information asymmetries between borrowers and lenders but also, in its pursuit of financial sustainability, is destroying the very foundations of these schemes by disrupting the social fabric of communities, creating more poverty, and excluding the poorest and most vulnerable from any given group.

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