Microcredit and Development — a Critique

Following my economic observations and reflections on Development Aid here in Tanzania, I did some reading on microcredit, which seemed to me now maybe one of the most sensible things to do to stimulate development. My first-hand impression of some other obvious choices has not been very good so far — I am quite doubtful of the real-life benefit of the secondary education the students get in the school I am teaching in, for instance.

The articles I found convinced me that I wasn’t wrong entirely thinking microcredit could help. But there’s a big BUT, or a number of them actually. An article in the New Yorker from 2008 titled What Microloans Miss provides a very readable introduction, but my primary source is an article called Microfinance Misses Its Mark from Aneel Karnani, published in the 2007 issue of the Stanford Social Innovation Review. It says that, first of all, microcredits help the not-so-poor better than the poorest:

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