Effectiveness of rural microfinance: what we know and what we need to know

Marr, Ana (2012) Effectiveness of rural microfinance: what we know and what we need to know. Journal of Agrarian Change, 12 (4). pp. 555-563. ISSN 1471-0358 (Print), 1471-0366 (Electronic)

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Abstract

The effectiveness of rural microfinance in improving livelihoods among people living in rural communities remains uncertain. This is not only because of weaknesses in the design and implementation of microfinance, but perhaps more critically because of constraints in the rural financial environment. Despite the existence of limited rigorous studies, this paper presents state-of-the-art evidence on the impact of microfinance on beneficiaries, with particular emphasis on issues of rural finance, and argues that for microfinance to be more effective, not only do new impact methodologies and more diverse types of financial services need to be developed, but also, primarily, risks and operating costs need to be reduced to make rural clients more attractive to financial intermediaries.

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