David Roodman has done a great service to the microfinance community, showing us where our words do not match our evidence. Unfortunately, he painted with too broad a brush in his March 11 Outlook article, “Why loans for the poor don’t end poverty.” He used a small amount of evidence to draw conclusions for a large and diverse industry.
By 2011, more than 3,600 institutions reported providing loans to 205 million people. These institutions ranged from small, village-based savings and loan groups in rural West Africa to banks in Latin America valued at more than a billion dollars. Some organizations focus on providing their clients with a range of services (credit, savings, insurance, health, education) that open pathways out of poverty. Others provide one financial product to as many clients as possible, helping them make their poverty more manageable. And a few others seek to make as much money as quickly as they can.
So when Mr. Roodman said, “Microfinance rarely transforms lives,” which group of microfinance organizations was he talking about?
The impact of financial services depends a lot on how those services are provided and the other types of support the clients receive. We should study and learn from those microfinance providers who can show that their clients are moving out of poverty.
Larry Reed, Oak Park, Ill.
The writer is director of the Microcredit Summit