My former boss and former professor on microfinance:
Just in case you have missed it and you are interested in the subject, I would like to mention that Karol Boudreaux and Tyler Cowen have an article on microfinance in The Winter 2008 issue of The Wilson Quarterly (see here). It offers a very good and thorough coverage of the issue.
Microfinance is one of the most important innovations in development aid in the last 30 years. Cowen and Boudreaux are right in saying that with microcredit “life becomes more bearable and easier to manage” for many poor people in developing countries.
However, as Stephen Daley and I have argued (see here, here, and here), if one judges microfinance (which encompasses microcredit) on its own standards, it has (so far) failed short of achieving its own goal (which is to lift people out of poverty into the formal economy—to help them graduate). While graduation is rare, microcredit can help families get a better life at the margin. This is probably enough to continue doing it (with private funds) and it is surely preferable to many other alternatives promoted by government aid agencies (see also Peter Boettke's post on Muhammad Yunus).
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