MICROCAPITAL BRIEF: Freedom from Hunger Research Team in Davis, California, Attempts to Reconcile Opposing Arguments Regarding the Effect of Microfinance

The Freedom from Hunger Research Team in Davis, California has released an opinion piece in an effort to mediate the two sides of an argument regarding the influence of microfinance. Bloggers such as Tim Ogden, David Roodman and others have countered an open letter released by leaders of the microfinance organizations ACCION International, FINCA, The Grameen Foundation, Opportunity International, Unitus and Women’s World Banking entitled “Measuring the Impact of Microfinance: Our Perspective” [1]. In short, ACCION, et al have argued that microfinance is “…one mechanism in the toolkit of global poverty alleviation … one that has clearly demonstrated scale, sustainability, results, and enormous further potential” [2] while critics suggest that microfinance’s effects are likely not as meaningful as the open letter argues [3].

In the opinion piece, which seeks to reconcile the two arguments, authors Chris Dunford, Megan Gash and Bobbi Gray Kotara argue “the claim that microfinance very often helps poor entrepreneurs and households to manage cash flow and smooth consumption has not been refuted by research to date. But these impacts seem quite modest compared to the grander claims of microfinance enthusiasts” [1]. In other words, microfinance does appear to help make consumption consistent over time, yet it is not an all-encompassing solution to poverty.

Mr Dunford, et al do not think that scrapping microfinance is the correct solution. They state that progress is inevitable if organizations “keep on innovating and learning how to do better microfinance, better research, better marketing communications and better journalism” [1]. Mr Dunford, et al imply that if organizations learn from potential mistakes, use randomized trials for research and are more accurate in reporting, then this will prevent some from looking to microfinance for unrealistically drastic outcomes within a short time-frame.

By Julia Korn, Research Associate

About Freedom from Hunger:

Freedom from Hunger is based in Davis, California. First called “Meals for Millions,” it is an international development NGO that operates in seventeen countries around the world. Its microfinance programs service approximately two million families worldwide. It works with local partners to alleviate hunger and poverty [3].

Sources and Additional Resources:

[1] Freedom From Hunger: Dunford, Chris, et al. “Different Levels of “Knowing” the Impact of Microfinance” April 30, 2010: http://www.freedomfromhunger.org/blog/

[2] ACCION International. “Measuring the Impact of Microfinance: Our Perspective” http://www.accion.org/Document.Doc?id=794

[3] Roodman, David. Center for Global Development. “Don’t Expect Miracles & Don’t Give Up Easily,” April 16, 2010. http://blogs.cgdev.org/open_book/2010/04/dont-expect-miracles-dont-give-

[4] Freedom from Hunger: http://www.freedomfromhunger.org/about/

MICROCAPITAL BRIEF: Six Microfinance Organizations Release Document Citing the Advantages of Microfinance as Response to “The Miracle of Microfinance? Evidence From a Randomized Evaluation” by Abhijit Banerjee, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan, by Julia Korn, May 26, 2010. http://www.microcapital.org/microcapital-brief-six-microfinance-organiza…

The Harvard Business Review. “Beware of Bad Microcredit” by Tim Ogden and Steve Beck. http://hbr.org/2007/09/beware-of-bad-microcredit/ar/1

MicroCapital Paper Wrap-Up: “The Miracle of Microfinance? Evidence From a Randomized Evaluation” by Goda Thangada, June 22, 2009. http://www.microcapital.org/microcapital-paper-wrap-up-the-miracle-of-mi

MicroCapital Universe: Opportunity International. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Opp

MicroCapital Universe: FINCA. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=FIN

MicroCapital Universe: Unitus. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Uni

MicroCapital Universe: ACCION International. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=ACC

MicroCapital Universe: Women’s World Banking. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Wom

MicroCapital Universe: Grameen Foundation. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Gra

Browse the MicroCapital Universe and add your entry to the wiki at http://www.microcapital.org/microfinanceuniverse/

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