This week, nine leading economics researchers–from MIT, UC-Berkeley, Harvard, Yale, Boston University and the Chicago Booth School of Business–co-wrote a piece for the Financial Timesentitled, “Microcredit is Not the Enemy.”
In it, they support the principles of microfinance, defend it against the extreme attacks being leveled at the sector, and caution against undermining the financial services that their research has demonstrated “fill a vital need in developing countries.”
“Microfinance fills a vital need in developing countries: the provision of financial services to those on low incomes who lack access to formal banking.” -FT.com, 12/13/10
They state, “[Microfinance] is not a silver bullet that ends poverty, as is sometimes claimed. But studies have shown sound evidence that [microfinance] allows many of the world’s poorest people to develop businesses, insure against bad weather and illness, maintain employment, and smooth consumption.”
While they rightly express concern regarding over-indebtedness, they point out that, “rural indebtedness is mostly a problem caused by loans from non-microfinance sources, and, in particular, from old-fashioned money lending.”
Finally, they caution that by “taking aim at the occasional overstep, [politicians] may inadvertently destroy microfinance itself.” And they conclude, “that would be a disservice to the world’s poor, and their hopes of climbing out of poverty.”
You can access the full statement here.