Archive for: Portfolios of the Poor

Six practitioner networks published a statement last week in an effort to counteract negative publicity arising from recent randomized trials of the impact of microcredit.  These studies failed to find evidence that microcredit was producing gains in household income or consumption, at least over the short term.

Much of the networks’ statement was reasonable, but I thought it failed to hold water on a few key points, which have been ably analyzed in posts by David Roodman of CGD  and Sushmita Meka of IFMR.

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Last week CGAP hosted the first of a planned series of discussions on responsible finance in low-income financial services, with panelists Fe de la Cruz, Director of Corporate Affairs for the Central Bank of the Philippines, Denise Dias, CGAP staffer and formerly of the Central Bank of Brazil, and Daryl Collins, author of Portfolios of the Poor.

The hot topic at the table on Wednesday was the challenge of consumer rights, and maybe not for the reason you might think. It seemed, to hear our panelists tell it, that getting regulations on the book is the easier part of the responsible finance puzzle, and the real challenge is communicating these rights to consumers so they understand them and seek recourse when these rights are threatened. This is particularly challenging with the low-income users of financial services CGAP is focused on, as issues of culture, literacy, and power dynamics hinder the exercising of their rights.

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Since microcredit first came to public attention in the 1980’s, the usual story line has been that it funds creation and expansion of microenterprises, producing  additional income that lifts the borrowers’ households out of poverty.  But is it true?

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