As It Turns Out, Lending Tiny Sums Of Money To Poor People May Not Bring Peace or Propsperity

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It was kind of exciting that a bank and a banker won the Nobel Peace Prize this year. We thought we were being a bit mean spirited when we pointed out that we couldn't quite figure out what making tiny little loans had to do with peace. Turns out we weren't skeptical enough. As Richard Posner points out on the Becker-Posner Blog, microfinance is probably way overrated.

The evidence for the efficacy of microfinance in stimulating production and alleviating poverty is so far anecdotal rather than systematic. The idea of borrowing one's way out of poverty is passing strange. And I am unaware of any historical examples of nations that climbed out of poverty on the backs of small entrepreneurs financed by credit.

Microfinance and Third World Poverty and Development [Becker-Posner Blog]

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