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• Impact_of_microcredit abstract "The impact of microcredit is a subject of much controversy. Proponents state that it reduces poverty through higher employment and higher incomes. This is expected to lead to improved nutrition and improved education of the borrowers' children. Some argue that microcredit empowers women. In the US and Canada, it is argued that microcredit helps recipients to graduate from welfare programs. Critics say that microcredit has not increased incomes, but has driven poor households into a debt trap, in some cases even leading to suicide. They add that the money from loans is often used for durable consumer goods or consumption instead of being used for productive investments, that it fails to empower women, and that it has not improved health or education.The available evidence indicates that, compared to the number of microloans advanced, microcredit has facilitated the creation and the growth of a tiny number of businesses. Going further, the extremely high failure rate of most informal microenterprises often leaves the average individual micro-entrepreneur worse off into the longer run, when household assets, land and housing have to be sold off (often under duress) to repay an outstanding microloan. In addition, new poverty-push micro-entrepreneurs also take business away from already struggling microenterprises, which reduces the turnover in existing businesses, and so also net income. Taking both downside effects into account, this generally means that there is no NET positive impact arising from the application of microcredit. This is especially the case in the poorest locations where (by definition) there has always been very little demand from local people for the simple goods and services provided by the typical informal microenterprise that microcredit helps create. So, while microcredit has often generated some self-employment opportunities, it has not necessarily increased incomes after interest payments. In fact, the opposite tends to occur: the increasing poverty-push over-supply of simple informal microenterprises in the poorest communities is increasingly associated with falling average incomes. Because of this, in 2009, for instance, the ILO had to argue against further stimulation of the informal microenterprise sector as a response to the rising unemployment and poverty associated with the global financial crisis, since “As was the case in previous crises, this could generate substantial downward pressure on informal-economy wages, which before the current crisis were already declining”. In a growing number of developing countries the deployment of microcredit programs has simply driven large numbers of borrowers into a debt trap, such as in Bolivia, Andhra Pradesh state in India, Bosnia, Morocco, Nicaragua and, perhaps the most egregious case of all, in Peru where the population of 30 million has to date managed to absorb more than $US10 billion of microloans. There is no evidence that microcredit has empowered women. Moreover, there is growing evidence that the expanding informal sector actually undermines the growth and development of the much more developmentally important formal sector composed of small, medium and large businesses. Vargas has identified this 'crowding out' phenomenon in microcredit 'saturated' Bolivia In short, microcredit has achieved much less than what its proponents said it would achieve, if indeed it has not wasted scarce financial resources that could have been better invested elsewhere, though some still claim that its negative impacts have not been as drastic as some critics have argued. Microcredit is just one factor influencing the success of a small businesses, whose success is influenced to a much larger extent by local demand and how much an economy or a particular market grows. A critical review of 58 papers covering experiences in 18 countries concluded "there is no good evidence for the beneficent impact of microfinance on the well-being of poor people" and that "the greatest impacts are reported by studies with the weakest designs".The attempt to objectively evaluate the impact of microcredit on a global or a local scale is marred by numerous methodological challenges and the deliberate deployment of faulty and biased methodologies that are designed to identify only positive impact and to ignore negative impact. There are only few rigorous evaluations of microcredit, and much of the literature on the impact of microcredit is based in anecdotal reports or case studies that are not representative. Even among the rigorous evaluations many "suffer from weak methodologies and inadequate data", according to a systematic literature review of the impact of microcredit conducted in 2011 by a group of researchers on behalf of UKAid. A 2008 review of over 100 articles on microcredit found that only 6 used enough quantitative data to be representative, and none employed rigorous methods such as randomized control trials. Rigorous impact evaluations using control and treatment groups are difficult to undertake today, because microcredit is so common in developing countries today that few locations remain where such a research setting can still be applied.".
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• Impact_of_microcredit subject Category:Development.
• Impact_of_microcredit subject Category:Microfinance.
• Impact_of_microcredit comment "The impact of microcredit is a subject of much controversy. Proponents state that it reduces poverty through higher employment and higher incomes. This is expected to lead to improved nutrition and improved education of the borrowers' children. Some argue that microcredit empowers women. In the US and Canada, it is argued that microcredit helps recipients to graduate from welfare programs.".
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