The microfinance phenomenon

In the 1990s, microfinance has captured the imagination of opinion leaders, governments, and donor agencies. Suppor ters have argued that microfinance institutions (MFIs) can not only have a major impact in the fight against poverty, but can do so on a sustainable basis. At the same time, a number of critics have emerged. In this paper, Paul McGuire, consultant, and John Conroy, Executive Director of the Foundation for Development Cooperation, Brisbane, Australia, consider the achievements of microfinance to date. They find that most, but not all, of the evidence suggests that microfinance can play a role in reducing poverty. On the other hand, while it has become generally accepted that MFIs can and should become financially self-sufficient, few have actually done so. It may be appropriate for well-managed programs to receive some ongoing level of subsidization if they can be shown to be effective in reducing poverty. There is a continuing role for donors in the development of microfinance, but it is important that donors focus on quality rather than quantity.