Money Matters: Understanding Microfinance

Publication Date: 1999
Published by: Save the Children
Document Type: Paper

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This working paper from Save the Children is available for purchase at Amazon.co.uk.

Can microfinance eliminate poverty or transform social relations?

Sees that microfinance can be an important tool for social and economic development, though it cannot alone eliminate poverty or transform social relations. Microfinance is not always the most appropriate development intervention - in very isolated areas with limited development of markets it may have less potential and alternative approaches to support the poorest people's livelihoods, including training, basic services and grants are often needed

Gives evidence that suggests that there are both positive and negative aspects to microfinance. Overall, the positive effects outweigh the negative and there are a number of ways in which negative impacts can be countered, often through re-designing programmes. Finds that the microfinance currently faces the twin challenges of expanding the quantity and improving the quality of services and to some extent there is a trade-off between them

The paper concludes that further analysis needs to address:

• the ways in which savings and consumption loans can protect livelihoods and their efficacy in doing so
• the significance of microfinance in challenging social exclusion and disadvantage
• the comparative effectiveness of minimalist and integrated microfinance programmes
• the cost-effectiveness of microfinance compared to other approaches to poverty reduction and social development
• circumstances in which microfinance is ineffective and more relevant alternatives
• linkages between women's control of microfinance and children's wellbeing.