CGAP

Does microfinance help people build better lives, or trap them in cycles of debt?

For years, the debate has swung between those two extremes. But a generation of evidence suggests that both sides are asking the wrong question. The same loan can help one entrepreneur grow a business, leave another unchanged, and push a third into distress.

Why?

Drawing on more than 400 studies, CGAP's new Focus Note finds that the impact of inclusive credit is shaped by five factors:
✅ Who borrows
✅ How credit is designed and delivered
✅ What it finances
✅ Where it operates, and
✅ When outcomes are measured.

The implication is important. Instead of asking whether microfinance works, we should be asking what shapes its impact and what providers, funders, and regulators can do to improve and maximize outcomes.

Read the Focus Note: https://cgap.pub/4ap5LRO