Show Summary Details

Page of

PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice).

date: 13 November 2019

Abstract and Keywords

By surveying the latest literature, this chapter aims to contribute to the recent discussion on the successes and failures of microfinance. We argue that the question “does microfinance work?” is neither important nor informative. What matters is knowing when, and in which conditions, microfinance works—and for whom. We claim that the answers to these questions depend on the details of the microcredit contract as well as on the range of services that microfinance institutions provide (including non-financial ones). We point at two important reasons why the impact of several microcredit programs is lower than expected: (1) the rigidness of credit contracts, and (2) the human capital of end-users. As reforming contract terms and building human capital via business training and technical assistance are costly, we argue that perhaps subsidies are needed. We focus on studies dealing with end-users, and pay specific attention to the evolving discussion on group lending and the role of joint liability to reduce asymmetric information problems and improve repayment rates. We also discuss the literature focusing on the recent shift of several microfinance institutions to individual lending, and the related trend toward commercialization of microfinance.

Keywords: commercialization, group lending and joint liability, human capital, impact, microfinance, subsidies

Access to the complete content on Oxford Handbooks Online requires a subscription or purchase. Public users are able to search the site and view the abstracts and keywords for each book and chapter without a subscription.

Please subscribe or login to access full text content.

If you have purchased a print title that contains an access token, please see the token for information about how to register your code.

For questions on access or troubleshooting, please check our FAQs, and if you can''t find the answer there, please contact us.