Impact of microcredit
[2][3] They add that the money from loans is often used for durable consumer goods or consumption instead of being used for productive investments, that it fails to empower women, and that it has not improved health or education.
Even among the rigorous evaluations many "suffer from weak methodologies and inadequate data", according to a systematic literature review of the impact of microcredit conducted in 2011 by a group of researchers on behalf of UKAid.
[6] A 2008 review of over 100 articles on microcredit found that only 6 used enough quantitative data to be representative, and none employed rigorous methods such as randomized control trials.
[5] Pulitzer prize winner Nicholas Kristof quotes another study by Abhijit Banerjee and Esther Duflo covering loans by Spandana in India.
The film highlighted the purported continued poverty of Sufiya Begum, the original loan recipient of Grameen, in Jobra Village.
"As in any lottery or game of chance, a few in poverty do manage to establish microenterprises that produce a decent living," he argues, but "these isolated and often temporary positives are swamped by the largely overlooked negatives."
"[3] Professor Anu Muhammad of Jahangirnagar University in Bangladesh, a Marxist and critic of microcredit, claims that "according to different studies" which he does not name, "you cannot find more than 5–10 per cent people who could change their economic conditions through micro-credit.
"[18] German journalist Kathrin Hartmann relates tales of women who she met in 2012 while visiting Kurigram District in Bangladesh trapped in debt.
She was told by rural women of brutal methods to enforce debt repayments, including the forced sale of goats, cows, house utensils and land.
Heavily indebted men and women even sold their kidneys to organized groups in order to be able to repay loans, as discovered by the police in summer 2011.
The real average portfolio yield cited by the sample of 704 microfinance institutions that voluntarily submitted reports to the MicroBanking Bulletin in 2006 was 22.3% annually.
However, annual rates charged to clients are higher, as they also include local inflation and the bad debt expenses of the microfinance institution.
[21][22][23] In India microfinance institutions have been criticized for creating small-debt traps for the poor in Andhra Pradesh with high interest rates and coercive methods of recovery.
[26] A 2008 study in Bangladesh showed that some loan recipients sink into a cycle of debt, using a microloan from one organization to meet interest obligations from another.
Field officers who are in a position of power locally and are remunerated based on repayment rates sometimes use coercive and even violent tactics to collect instalments on the microloans.
Foreign and corporate capital investment take advantage of emerging and developing economies across Asia and Africa, introducing new forms of collateral requirements; individuals borrowers sometimes end up in even more debilitating debt and poverty than when they started.
By the early 2000s, however, the situation deteriorated until "the typical loan amount [to] now exceed the average annual household income and require land-based collateral".
In 2020, as the pandemic ravaged Cambodia's economy, "six of the country's eight biggest microfinance companies posted record earnings," while loanees were driven into devastating amounts of debt due to skyrocketing interest rates.
For example, a 1996 study in Bangladesh claims that the "success" of reaching women with microcredit was "highly impressive", but also notes that loans are often given over to male relatives or husbands.
[32] The President of Grameen Foundation USA suggested in 2005, based on a review of various studies, that "there is strong evidence that female clients are empowered".
[36] A 2005 review published by the U.S. Grameen Foundation summarizes scores of studies, concluding that "society-wide benefits that go beyond clients' families are apparently significant".
