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Microfinance and the Challenge of Financial Inclusion for Development

Author

Listed:
  • Jayati Ghosh

    (Jawaharlal Nehru University)

Abstract

Within a relatively short time, perhaps just a decade, microfinance has gone from being hero to zero in the development discourse: from being lauded as the silver bullet to solve the problems of development and poverty reduction, to being derided as the progenitor of financial instability and enhanced vulnerability among the poorest people. The mushrooming of microfinance institutions of both non-profit and profit varieties was very quickly followed by crises in many of the same developing countries that were earlier seen as the most prominent sites of success. In this context, it may well be argued that it is fine to reject microfinance as the means for either poverty reduction or economic diversification, but then how do policy makers address the problems of the exclusion of the poor from formal financial institutions? Since it is clearly not the silver bullet to solve development problems, microfinance needs to be treated as one small element of a broader set of financial strategies for development.

Suggested Citation

  • Jayati Ghosh, 2012. "Microfinance and the Challenge of Financial Inclusion for Development," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(67), pages 7-34, December.
  • Handle: RePEc:bcr:ensayo:v:1:y:2012:i:67:p:7-34
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    Keywords

    development; development banking; financial crisis; financial regulation and supervision; India; microcredit; microfinance; poverty;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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