Microcredit allows poor people to increase their incomes by starting new enterprises or expanding existing ones. Diversified sources of earnings make people more resilient in the face of external shocks. Savings and microinsurance services allow poor individuals to plan for future expenses, cope with sudden crises, and cover unanticipated expenses.
Studies of microfinance programs and their clients indicate the following impacts on poverty and hunger. (Click on the links to read the full studies.)
- In Indonesia, 90 percent of BRI clients surveyed on the island of Lombok had moved above the poverty line, with income increases averaging 112 percent.
See Panjaitan-Drioadisuryo et al.(1999)
- Extremely poor Zambian clients of Zambuko Trust, a local MFI, increased their consumption of high-protein foods at a time when food expenditures across the country as a whole were decreasing.
See Barnes (2001)
- In addition to increased economic well being, a study of SHARE clients in India documented a marked shift from irregular, low-paid daily labor to more diversified sources of income, with a strong reliance on small businesses.
See Simanowitz and Walters (2002).
- Studies of two separate MFIs in Bangladesh documented a similar shift from informal labor to self-employment among MFI clients. As a result, overall wage rates in the villages served by the microfinance programs also increased.
See Zaman(2000) and Khandker (1998).
Additional evidence on how microfinance reduces poverty and hunger can be found in the following studies:
- Remenyi, Joe, and Benjamin Quinones, Jr., eds. Microfinance and Poverty Alleviation: Case Studies from Asia and the Pacific. New York: Pinter Publishers, Ltd., June 2000: 79, 131- 34; 253- 64.
- Mustafa, S. I. Ara, et al. Beacon of Hope: An Impact Assessment of BRAC's Rural Development Programme. Dhaka, Bangladesh: BRAC, 1996.
- Hossain, M. Credit for the Alleviation of Rural Poverty: The Grameen Bank in Bangladesh. Research Report No. 55. Washington, D.C.: IFPRI, 1988.
- Chowdhury, A.M.R., and A. Bhuiya. Do Poverty Alleviation Programmes Reduce Inequity in Health: Lessons from Bangladesh. In Poverty Inequity and Health, ed. D. Leon and G. Walt. Oxford: Oxford University Press, 2001. (available for purchase)