Does microcredit fuel investment?

This page in:

Cato released a new study today, "A Second Look at Microfinance", that considers the history of economic development and questions whether microcredit can do much to promote investment and growth. In it, author Thomas Dichter finds that economic growth usually comes first, and then credit becomes available more widely; even then, that credit is for consumption, not investment. From the conclusion:

The average poor person in the past (and today) is not an entrepreneur, and when he or she has access to credit it is largely for consumption or cash flow smoothing. The average entrepreneur prefers to start with informal credit or savings rather than formal credit.

Join the Conversation

The content of this field is kept private and will not be shown publicly
Remaining characters: 1000