The Impact of Microfinance on Employment: what do we know?

In Africa over 48% of the labour force is engaged in informal activities, in Central and South America 45% and in Asia 33%2 . They are own account workers or micro-enterprises engaged in a variety of survival activities. It is this clientele operating in the informal economy that use micro finance institutions (MFIs). How has microfinance – after several decades of successful, and often growing operations – changed the living and working conditions of the poor? Have loans and other financial services helped to create jobs? Is microfinance a strategy for job creation? Has it changed the demand for labour in the informal economy? Employment is key to the attainment of the Millennium Development Goals, without access to productive employment and decent work poverty will not be halved by 2015. Logically the question comes up: what can microfinance, the strategy for poverty reduction par excellence, can do to help job creation? After all, microfinance is attractive and in many cases superior to alternative anti-poverty strategies, for several reasons: it has rapid, massive and verifiable effects; it can be measured and evaluated; it can often be scaled up quickly; it can be targeted with precision at the poor and sometimes even the very poor; unlike grant or transfer-based programs in poverty reduction, microfinance recycles financial resources, they do not get lost but stay in the local economy. But above all: microfinance treats the poor as autonomous individuals who are expected and want to take charge of their lives.

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