Article
March 18, 2015

Studies Suggest Microloans May Not Live Up to Expectations

A collection of six independent studies published in The American Economic Journal suggest that microlending may not be providing the income boost once expected, The Wall Street Journal reports.

While some critics of the studies say that the increasing popularity of microfinance programs over the last decade has helped lift millions of people out of poverty globally, the studies found that giving individuals loans tended not to result in better economic outcomes or positive social change. One study cited evidence that the loans may even encourage some families to remove their children from school so they could work.

The loans, which are intended to help the poor start businesses, were first tried on a broad scale by Muhammad Yunus’s Grameen Bank of Bangladesh. In 2006, Mr. Yunus and the bank were jointly awarded the Nobel Peace Prize.

While some critics of the studies say that the increasing popularity of microfinance programs over the last decade has helped lift millions of people out of poverty globally, the studies found that individuals given loans tended not to result in better economic outcomes or positive social change. One study cited evidence that the loans may even encourage some families to remove their children from school to work.

The loans, which are intended to help the poor start businesses, were first tried on a broad scale by Muhammad Yunus’s Grameen Bank of Bangladesh. In 2006, Mr. Yunus and the bank were jointly awarded the Nobel Peace Prize.