The challenge
Poor people lacked access to credit to start or grow small businesses.
The case
Microcredit was celebrated in the 2000s as a way to lift millions out of poverty, and lenders expanded rapidly with government and donor support. Researchers then ran randomized evaluations of microcredit expansions in Bosnia and Herzegovina, Ethiopia, India, Mexico, Mongolia and Morocco. Across all six, access to credit helped some people start or grow businesses, but it did not produce transformative increases in household income, consumption or children's schooling.
Why the results were mixed
Microcredit gives poor households more flexibility, which has value, but it is not the poverty cure it was marketed as. Big claims made before rigorous evidence existed shaped policy for years.
Sources
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