Recent years have witnessed growing complaints about what microfinance has failed to deliver. While field experiments have identified modest benefits associated with microcredit, commentators have expressed concerns both about over-indebtedness and a trend toward commercialization (with the attendant high interest rates and reduced targeting of the poorest clients). Is microfinance failing to deliver on its promise to provide affordable financial tools that can change the lives of the poor for the better?

In this talk, Bob Cull will draw on evidence from multiple sources to show that microfinance does provide benefits, but varies depending on how institutions fund themselves, the markets that they target, and the nature and pricing of the products they offer. Reaching the poorest remains quite costly, and thus subsidies will likely continue to play a role in reaching this population, though subsidies could be better allocated to support institutions that target the poorest clients.

Despite the complaints, microfinance is delivering on many fronts and thus an assessment of whether it is meeting its promise hinges crucially on how that promise is defined. While reducing the costs of providing financial services to the poorest remains a key challenge, research on alternative delivery channels such as mobile telephony and agent banking models shows they have promise.

Last Updated: Mar 02, 2015