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Markets, Globalization & Development Review

Abstract

Microcredit has grown dramatically over the last few decades and its supporters have made extravagant promises about its potential impact on reducing poverty. However, much recent research has shown that microcredit has no significant impact on reducing poverty. In this exploratory study we interview 205 clients of for-profit microcredit to better understand the causes of why microcredit has not lived up to its promise. We find the basic problem is that the lending policies of the microcredit organizations are designed to lower the costs and risks, and hence increase the profits of the organization, and are not responsive to the needs of the clients and their microenterprises.

Author Bio

Professor Aneel Karnani is faculty member of the Strategy group at the Ross School of Business, The University of Michigan. His teaching and research interests are focused on three topics: strategies for growth, global competition, and the role of business in society. He is the author of the book Fighting Poverty Together: Rethinking Strategies for Business, Governments, and Civil Society to Reduce Poverty, published by Palgrave Macmillan in 2011.

Seema Sahai is a recent PhD graduate from the Management Development Institute, Gurgaon, India.

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.

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