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Microfinance may not be the magic bullet to fight poverty after all, some experts are saying. The practice of extending small loans to entrepreneurs has been intensively promoted as the solution for poverty since the mid-1990s. In Myanmar the sector was small and operated in a legal grey area until 2011, when a microfinance law was approved by parliament.
But after crises in India, where heavily indebted lenders had difficulty repaying their loans, experts are questioning whether microfinance actually has an impact on poverty.
“The best studies we have aren’t suggesting a big impact on poverty one way or the other. The impact is approximately zero. What really reduces poverty is industrialisation and emigration. Both have been more important in Bangladesh for reducing poverty than microcredit,” says David Roodman, a senior fellow at the Center for Global Development who focuses on microfinance, debt relief and aid effectiveness.