From the Democracy Center, this blog post written by Adam Kemmis Betty profiles one such micro borrower. Betty works for microcredit banks in Boliva, and his work has him meet many borrowers. Betty draws some conclusions on microcredit and it's use as one big peace of the puzzle to fight poverty.
The real value of microfinance might be more subtle. A groundbreaking study published in 2009, which put together detailed financial diaries for over 250 families, shows that for someone such as Rosa, whose income and expenses are not only low but also seasonal and unpredictable, day-to-day cash flow management can be very complex.
Rosa, like most people in her economic position, needs to carefully manage her finances to ensure that she has enough to pay for everyday necessities, her journeys to the tropics, and to cover larger one-time expenses. Both savings and loans are important financial tools for poor households to have the money they need in hand when they need it, given the bumpiness of when they have income. This is one of the key values of MFI credit as opposed to informal sources.
In the end, is microcredit a magic wand that ends poverty? Not based on the current evidence, to be sure. But as in most markets, the real test of a product's value is whether there is a demand for it. Despite the high costs, the impoverished themselves clearly see a value in microfinance, as evidenced by strong demand and high repayment rates.
Twenty years of microfinance in Bolivia has not eradicated poverty, not by a long shot. But it has provided a large number of the country's poor with access to more reliable, and cheaper credit then they would have been able to obtain otherwise. And as a result many people have managed to lift themselves at least a little higher on the economic ladder as a result.
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