An excellent article in Foreign Policy entitles “How Microfinance Changes the Lives of Millions² has been published recently aiming to debunk the micro approach.
The author of the article, Shweta S. Banerjee, mentions that microfinance field is a pretty young field of expertise compared to macroeconomic level; therefore it cannot be judged hastly without letting it demonstrate that it can be an useful way to help people getting out of poverty.
It can look odd but poor people CAN save money. But to do it, they need some financial institutions that give them the opportunity to thrift. As she mentions in her article ²helping the poor save, before or along with providing credit, might be the missing piece to help solve the poverty puzzle.² Savings are the first step towards creating assets in a long term. Can you imagine yourself without a bank account? For sure not, those poor people need to prove that they can save money and eventually get loan to improve their life conditions and therefore their future.
So, let’s not be so dismissive of micro, and let’s give up the idea of going back to the old days of thinking only at the macro level. A million people here, and a million there, and pretty soon thinking small can have a very big impact indeed.
You can read the article here.