6 myths about microfinance charity that donors can do without - A blog by The GiveWell Staff

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6 myths about microfinance charity that donors can do without - A blog by The GiveWell Staff

GiveWell is an independent, nonprofit charity evaluator. We perform in-depth research on charities to help people accomplish as much good as possible with their donations.
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The 3BL Media blog roll is a select list of the most influential, respected, and authoritative voices in corporate social responsibility. Compiled from the 3BL Media staff’s extensive contacts with longtime CSR commentators, these blogger soffer relevant news, opinions, and ideas about all things CSR in one convenient place.   

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Wednesday, October 28, 2009 - 9:39am

Is microfinance a good bet for a donor? We feel the answer is complicated, and that the many extreme exaggerations of microfinance’s impact get in the way of making an informed decision.

This post summarizes the differences between the stories you’ve probably heard and the reality according to available evidence.

Myth #1: the way microfinance charities help is by giving people loans to expand businesses. Success stories like Andrea’s, Lucas’s and Sophia’s are representative.

Reality: there isn’t much reliable information on how people are using loans, but the evidence there is suggests that “microloans” are often used for consumption purposes: food, visits to the doctor, etc. This isn’t a bad thing - the poorest people in the world face considerable financial uncertainty, and loans can empower them to manage their own lives.

So, however, can savings, which some scholars feel are more beneficial for the poor than loans. Funding institutions to help people save may not have the same sex appeal as “lending your money to help people grow their businesses,” but it might do more good.

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