Does Microcredit Really Help Poor People?
Microcredit began to capture public attention a quarter-century ago, rising to prominence with reports that tiny loans were enabling millions of poor borrowers, mostly women, to start or expand microbusinesses, and that the new income from those businesses was lifting many out of poverty. There have been hundreds of inspiring stories of poor people who lifted themselves into the middle class with income from businesses they financed with microloans. Rosenberg asks, “Do these individual anecdotes represent the general experience of the hundreds of millions who have gotten microloans over the years? Is microcredit being oversold?” In the paper, Rosenberg notes that it is difficult to conduct reliable scientific testing on the impact of microcredit on its clients. People who eventually take out microloans may be fundamentally different from the general population—for instance they may be more entrepreneurial, more motivated, and less risk-averse. “If this is true, those people might be ex
