Who Gets Half the Sky?

If you’ve been paying attention to global development at all for the last ten years, then you know all about the “miracles” of microfinance.  In developing countries, particularly rural areas, microfinance strategies have been touted as something of a magic bullet for poverty alleviation and the promotion of women’s rights. Testimonies have spurred greater interest in microfinance development strategies; the enormously popular book and documentary Half the Sky touts this brand of economic empowerment as the best source of hope for women and girls around the world.   By giving the people who make up the “bottom of the pyramid” the opportunity to invest in a business startup, donors and lenders can increase access to markets which leads to greater agency over an individual’s life.  Or so the story goes.

Many people have benefited from microfinance programs, some have even been able to move out of poverty into stable jobs and living situations.  However, this development strategy rests on the idea of new business startups—a risky economic activity in the most developed countries.  One criticism of microfinance programs highlights evidence that the marginal return on investment for entrepreneurs often hides the very limited overall return, resulting in the inability for borrowers to expand their businesses to become stable profit-making ventures (Banerjee & Duflo, 2012).  Another criticism, from my own experience interviewing orphaned young adults in Addis Ababa, is that the structures of these programs often assume a certain level of informal social support and some financial literacy skills on the part of the borrower—assumptions that are not always true.  This results in either disqualification for microfinance programs or a lack of skills necessary to start a successful business and pay back the initial loan.

The history of microfinance as a development strategy is a familiar one: an innovative program is successful and is rapidly scaled up to be implemented in a myriad of contexts to serve a diverse array of people.  In the process, non-pertinent factors contributing to the vulnerabilities of communities are overlooked or unaddressed, and stories of non-success are rarely analyzed to improve program participation and efficacy.  This is not to say that microfinance initiatives are inherently bad or that they should be abandoned; there are a lot of individuals and communities that have greatly benefited from these programs.  But as with all development strategies, microfinance should be meticulously evaluated so as to make sure that it delivers on its promised outcomes and identify best (and not-so-good) practices. 

Most importantly, we should remember that microfinance, nor any one development strategy, is a cure-all for poverty, conflict, or gender inequality.  Sustainable change will incorporate the best development strategies for specific contexts and include intervention programs on a variety of levels and in diverse areas.