Finance and Financial Management Commons^™

The Macro Drawbacks Of Microfinance, Meghan E. Guy

Student Publications

For decades, microfinance has been utilized as a tool to reduce global poverty rates. Many communities become entangled with microfinance institutions (MFIs) with the hope of achieving the financial independence, security, and empowerment that these institutions promise their clients. This paper highlights the negative consequences of relying on microfinance institutions to improve the development status of nations. Specifically, high interest rates attached to microloans, strict loan repayment schedules, and corrupt microloan officers threaten the safety and increase stress on majority-female microloan borrowers. MFIs fail in their mission to transform economic and social structures in developing nations.