economic networks

Microfinance, money flow and social impact

Posted on May 1, 2010 by Tara Thiagarajan in Blog, Microfinance, Writing. 1 Comment

The traditional thinking in microfinance is that it is a way to help people extricate themselves from the clutches of local moneylenders who charge exorbitant interest rates. As microfinance institutions, we believe, that by charging less we are doing great social service. Typically, when academics study the impact of microfinance, they look at people who have received microfinance compared to people who haven’t in order to see who is better off across various dimensions. Evidence suggests that even if individual borrowers are not actually making profits that exceed the interest charges, they might do better on other dimensions that relate to patterns of consumptions. Access to a lump sum of money at once, for instance, allows borrowers to afford goods and services they would otherwise not be able to that give them a better quality of life. However, if we … Read More »