Trickle-Up Economic Development: A Critical Examination of Microfinance Programs

Jonathan H. Westover, Utah Valley University

Abstract

With the Muhammad Yunus being recently awarded the Nobel Peace Prize for his pioneering approach and sustained effort in addressing the problem of poverty, microfinance programs have continued to grow in usage and popularity. There are numerous studies that demonstrate the tremendous successes of such programs throughout much of the underdeveloped world. However, the universal effectiveness of microfinance institutions in alleviating poverty is still in question, and not free from debate. Much of the evidence cited for the successes of microfinance and microcredit are merely anecdotal or involve in-depth case-study approaches, which provide vivid examples and rich details of the impact and effectiveness of specific programs in specific locations at a specific time, but generally fail to achieve a more rigorous standard that would allow for research findings to be widely generalized. Some more rigorous studies have been conducted and more are surely to follow, but in the meantime, NGO leaders and government policy makers must exercise caution and restraint in applying the microfinance approach universally as a means of alleviating poverty. This article reviews some of the recent research into the effectiveness of microfinance programs and proposes areas for future directions in the continued research of microfinance programs.