Helping or Hurting: What Role for Microfinance in the Fight Against Poverty?

This report is based on the All Party Parliamentary Group on Microfinance’s inquiry into the U.K.’s role in supporting the microfinance sector worldwide. The purpose of the inquiry was to use the evidence submitted by academics, practitioners and funders in order to build up a picture of what microfinance is now and to provide recommendations for how the sector should progress from here.

The report offers practical suggestions for how to take a more nuanced approach to the sector which will allow investors, donors and other stakeholders to make better decisions on how to engage with microfinance.

This report makes nine key recommendations, namely:

• More investment is needed in research;
• Need to recognize the limitations of commercial microcredit;
• Investors must recognize that investing in microfinance does not always automatically mean the investment is socially responsible;
• All MFIs should be pushed to implement independently verified social performance monitoring;
• Product diversification must be increased;
• Need for innovation;
• Enthusiasm for microfinance should not ‘crowd out’ investment in other financial sectors;
• Donor assistance should target the poorest and most marginalized people wherever they live.