Six studies in four continents, including one in India, have shown no evidence of microcredit successfully alleviating poverty, researchers said on Friday.
Microcredit also had no impact on women’s empowerment, the findings showed, upturning one of the articles of faith of development policy, including in India.
Conducted by researchers affiliated to Innovations for Poverty Action (IPA) and The Abdul Latif Jameel Poverty Action Lab (J-PAL) at MIT, which has gained a global reputation for its field experimentation approach to finding solutions to poverty, the studies were done in Bosnia and Herzegovina, Ethiopia, Mexico, Mongolia, Morocco and India, with Hyderabad as the site. Researchers evaluated a group with access to microcredit with one that did not — both randomly chosen — to determine the effect of small loans on poverty and living standards.
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In some of the studies, microcredit allowed borrowers to expand small businesses to some extent, and change the way they earned money — cutting back on wage labour in Mexico, for instance. However, there was no clear evidence of increased profits, better consumption or better living standards. There was no impact on the rate of enrolment for children in schools or women’s empowerment.