Great Expectations: Microfinance and Poverty Reduction in Asia and Latin America

Microfinance institutions (MFIs) are seen often by aid practitioners as an obvious means of improving the position of the poor. Despite this widely held view, detailed research studies have been much more guarded about the impact of MFIs. In particular several studies have raised doubts about the effectiveness of MFIs in reaching the 'core poor.'

This paper surveys the evidence from Asia and Latin America and contrasts experiences in the two regions. Studies on the former have been carried out more 'rigorously', but in both regions the evidence that microfinance is reaching the core poor is very limited.

This was originally published as an online Discussion Paper in November 2004. ADBI has now published this as an online and hard copy Research Paper without alteration to the original text.

The views expressed in this paper are the views of the author/s and do not necessarily reflect the views or policies of the Asian Development Bank Institute nor the Asian Development Bank. Names of countries or economies mentioned are chosen by the author/s, in the exercise of his/her/their academic freedom, and the Institute is in no way responsible for such usage.

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