Microfinance and the Business of Poverty Reduction: Critical Perspectives from Rural Bangladesh

Abstract

In this paper we provide a critical analysis of the role of market-based approaches to poverty reduction in developing countries. In particular we analyze the role of microfinance in poverty alleviation by conducting an ethnographic study of three villages in Bangladesh. Microfinance has become a popular 'base of pyramid' approach that aims to alleviate poverty by providing poor segments new opportunities for entrepreneurship. It also aims to promote empowerment (especially among women) while enhancing social capital in poor communities. Our findings, however, provide a different narrative. We found microfinance led to increasing levels of indebtedness among already impoverished communities and exacerbated economic, social and environmental vulnerabilities.