Microfinance and poverty reduction - evidence from Latin America

Abstract

Are all entrepreneurs poor? Do all entrepreneurs see a lack of credit as their main constraint? Is poverty reduction the main objective of all microfinance institutions? Does lending methodology affect outreach? Can financially sustainable microfinance institutions (MFIs) reach the poorest of the poor? Do MFIs only reach petty traders? Do MFIs reach poor and remote areas? This article is structured around a discussion of common beliefs and assumptions regarding poor people and microfinance programmes. It reveals that many microentrepreneurs in Latin America are not poor, and many microfinance institutions lend mainly to non-poor clients. The microfinance industry consists of various market niches, with different services and varied objectives, and this diversity is necessary for achieving poverty reduction overall.