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Submitted by Salim Rashid on
Microfinance is micro finance---it is finance writ small. If finance works, microfinance works. Surely the only meaningful question is the actual magnitude of the gains from MF. Much of the statistical jumble arises from the failure to recognise that the data comes from MFI's---who give out significant amounts of non-productive loans---and from borrowers---who many times use money in ways they were not supposed to. In completing the first study of MF in Urban Bangladesh, I had many specific MF type enterprises interviewed. The 'profit' rates were never below 100%.The rates fall sharply as the capital increases. As long as small loans have these spiked productivities, MF must be beneficial. btw, Jonathan Swift got MF to work in Ireland in the 1720's and Dugald Stewart wondered about the high productivity of small enterprise in the 1790's. Neither the success of MF, nor the productivity pattern that sustains it, is new.