Posté par Pascal Petitjeanil y a 4 annéespas de commentaire

cass-color Logo Western Sidney University

New research shows that microfinancing is exacerbating
cycle of debt in poor communities


New research from Western Sydney University and Cass Business School has analysed the impact of business loans to those in third-world poverty. The research found that far from entrepreneurs’ kick-starting jobs, microfinancing led to a higher level of debt among already impoverished communities.

Poverty is big business globally, worth (US)$33 billion a year comprising of payday loans, credit cards and microfinance. Between 1.2 and 1.5 billion people are still living in poverty, and microfinance has been viewed by more than 60 countries as a sound poverty reduction strategy.

The research, Microfinance and the business of poverty reduction in Human Relations focuses on three villages in Bangladesh – indicative of a wider global trend – looking at how microfinance affects the daily grind of the rural poor and the choices that they have to make to stay financially afloat.

“The theory behind microfinancing poor nations is that it will encourage entrepreneurial skills, increase income generating activity and empower the poor. This will in turn increase access to health and education. However, our research tells a different story, »

said Dr Laurel Jackson, from Western Sydney University’s School of Business.

Despite there being some entrepreneurs who use microfinancing to their benefit, the research revealed that the vast majority of third-world poor do not possess the skills and creative visions that are required for successful entrepreneurs. It even deems it as « unreasonable and unrealistic » that the third-world poor would use the loans to make wise business decisions that would generate long term income. It also cites that the inability to pay back loans has led to “hundreds of suicides among borrowers in India”.*

Professor Bobby Banerjee, from Cass Business School, said, the findings show that vulnerabilities were exacerbated as a result of taking out the loans in the name of self-financing.

“We therefore need to change the conversation about market-based development by changing the lens with which we view poverty reduction. Not from the perspective of the providers, government organisations or NGOs, but from the perspectives of the receivers of microfinance,”

Professor Banerjee said.

Better social and economic outcomes could be achieved if investment was directed at building hospitals and schools, supporting local businesses to provide employment, and a steady income for family members or fair and equitable access to land for farming. The study concludes that a collectivist approach, rather than individual finance, could potentially be the answer.

« If impoverished communities are to truly be empowered, we need to provide more opportunities for these communities to tell their own stories about the real situations to help with their real needs. Basically, we can start to empower them by listening,” said Dr Jackson.


About Cass Bussiness School

Cass Business School, which is part of City University London, is a leading global business school driven by world-class knowledge, innovative education and a vibrant community. Located in the heart of one of the world’s leading financial centres, Cass has strong links to both the City of London and the thriving entrepreneurial hub of Tech City. It is among the global elite of business schools that hold the gold standard of triple-crown accreditation from the Association to Advance Collegiate Schools of Business (AACSB), the Association of MBAs (AMBA) and the European Quality Improvement System (EQUIS).

The faculty at Cass are experts in their fields, producing cutting-edge research with real-world impact. The recent Research Excellence Framework results assessed 84% of Cass research to be world leading or internationally excellent.

Cass educates nearly 4,000 students each year on globally renowned programs across all levels of study from undergraduate, to masters, to Executive Education.  On graduating, students join a 38,000 strong alumni community across more than 160 countries.

Cass Business School blends academic excellence, extraordinary experiences and career progression to foster life-long learning.


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