Evidence of Microfinance’s Contribution to Achieving the Millennium Development Goals

Modern microfinance has roots in the cooperative movement dating from the nineteenth century, in the rural finance experience post-World War II and in the microenterprise development sector starting in the 1970s. These diverse roots intertwine with at least five common objectives: a. microenterprise development: by providing financial inputs and services to informal-sector entrepreneurs building their tiny businesses to the point of employing not just family members but others as well. b. innovation/investment promotion: by offering credit as both incentive and enabler; for example, to small-scale farmers to adopt new inputs, practices and technologies to increase productivity of labor and land leading to more food production and/or farm income—or more broadly in the population, to promote behavior change for better health and nutrition. c. Consumption-smoothing: by providing poor families with relatively inexpensive credit and convenient savings services that effectively help the family have enough cash through the year to reduce the impact of the annual hungry season; major expenses, such as school fees or weddings; and/or the devastation of major economic shocks due to family illness, death of a breadwinner, loss of livestock or a crop, or a natural disaster. d. women’s empowerment, and more generally, building of social capital, to support self-help efforts at the family and community levels and to 2 strengthen the voice of women and other marginalized groups as rights holders and agents of local development. e. financial systems development, or financial sector deepening, both of which seek to lower the cost and increase the convenience of financial services so that the “unbanked”—even the very poor—can be reached by commercially viable enterprises.

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