The case for social investment in microcredit


Alliance magazine


Timothy Ogden, contributing editor to Alliance, today published his paper ‘The Case for Social Investment in Microcredit’ with the NYU Development Research Institute. It examines the recent research into microcredit impact, and based on this, goes on to argue for continued investment in microfinance.

Ogden writes, ‘social investors flocked to the sector, not just because there was a infrastructure and … a self-sustaining business model, but because investors believed  it was having a large effect on borrowers, allowing many to escape poverty.’

The piece acknowledges, however, that subsequent research has proved uninspiring on this critical measure. The most recent set of evaluations, published together in the spring of 2015, all pointed to similar conclusions: the average microcredit borrower saw very modest gains from access to credit.

In his paper, Ogden seeks to counter the doubt that ‘the combination of time and disappointment’ has caused in many social investors regarding microfinance. He claims there are ‘strong arguments for continued social investment in microfinance… based on – not in contradiction to – research, including the recent impact evaluations.’

He goes on to explore and analyse the existing research, arguing that drawing conclusions from research ‘requires understanding individual studies beyond a simple binary answer’. Ogden does concede that no regions have been transformed by microfinance, and most microenterprise hasn’t produced ‘the kind of returns to capital necessary for widespread poverty impact’. However, his support for continued investment does not waver, as he concludes that not only do most borrowers not experience harm, there some borrowers who see ‘marked gains’.

Comments (0)

Leave a Reply

Your email address will not be published. Required fields are marked *