When micro-loans are used to fund new businesses, budding entrepreneurs tend to encounter a lack of consumer demand

Far from being a panacea, small loans add to poverty and undermine people by saddling them with unsustainable debt, argues anthropologist Jason Hickel

I ‘m always amazed at how many students show up each year in the classrooms of the London School of Economics, where I teach, quivering with excitement about microfinance and other bottom-of-the-pyramid development strategies. Like eager young missionaries, they feel they’ve stumbled upon the One Idea that is sure to save the world.

Would that it were true. What’s so fascinating about the microfinance craze is that it persists in the face of one unfortunate fact: microfinance doesn’t work. Of course, there are some lovely anecdotes out there about the transformative power of micro-loans, but as David Roodman from the Center for Global Development put it in his recent book, The best estimate of the average impact of microcredit on the poverty of clients is zero. This is not a fringe opinion. Read more