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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Friday, November 04, 2005

Is Microfinance an Effective Development Tool in the Context of Poverty Alleviation? Evaluating the Case of Rural China

Microfinance Development Gateway: "This paper is examining to what extent the ``win-win'' assumption of Microfinance is reality today by taking a closer look at the case of rural China. This assumption claiming that Microfinance can combine effective poverty alleviation with profitability has significantly contributed to the popularity of this new instrument of development finance. As a result, a standard model of Microfinance has emerged that is promoted globally as a ``best practice''. However, the analysis of the Chinese Microfinance environment in this work is revealing some special circumstances in this country, limiting Microfinance's impact as an instrument of poverty alleviation. Together with an empirical case study of a rural Microfinance program in China, this analysis of the environment is demonstrating the limitations of the ``best practice'' approach. Rather than transferring a standard model from one country to another, Microfinance has to adjust to the local environment by continued organisational and product innovation. The evaluation of the case study in terms of outreach, financial sustainability and impact is also exposing the existing trade-offs between these factors, questioning the above mentioned ``win-win'' assumption. In this context, the difficult environment in China shows that the effectiveness of Microfinance in terms of poverty alleviation is always depending on environmental features and the way Microfinance is able to adjust to those. "

Download the report (PDF,165 K)

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