Uncovering microfinance myths: Does country-wide age matter?

Based on stylized facts and empirical findings, this paper focuses on three questions pertaining microfinance activity and outreach. We argue that there is not robust evidence to sustain the hypotheses that the extent of poverty, the degree of international donor support, and/or high population densities determine microfinance activity and outreach. Instead, until now the "age" of microfinance activity as proxied by the number of years since microfinance was first started in a particular country seems to matter the most when attempting to explain scale, scope and rapid growth of microfinance activity and innovation. This may in turn explain why accelerated microfinance growth is disproportionally concentrated in two relatively small countries, namely, in Bangladesh and in Bolivia. By dispelling those three myths on microfinance, we attempt to guide empirical research in a direction largely unexplored so far. In particular, this paper suggests that: a) current empirical research should systematically control for country-wide age of microfinance industry, and systematically treat Bangladesh and Bolivia as "special cases"; b) further research on these two countries is needed in order to learn about potentially replicable leading-edge innovations, and c) using theory, such as learning-by-doing growth models à la Lucas (1988) can be a step in the right direction. © De Boeck Université. Tous droits réservés pour tous pays.