Defying the Odds: Banking for the Poor

Defying the Odds: Banking for the Poor

Defying the Odds: Banking for the Poor

Defying the Odds: Banking for the Poor


• Draws from the experience of selected creative microfinance programs in Asia, West Africa, and Latin America

• Unique view of microfinance from a political-economy perspective

Setting itself apart from other microfinance literature, this distinctive book focuses on the context of social and economic change in developing countries, claiming the poor do not create poverty. The book's focus on grassroots developmental entrepreneurship and alternative poverty-reduction strategies will be of interest to policymakers as well as students who are learning how microfinance has grown worldwide.


This book is about the poor and the specialized financial institutions that work with people who have no access to commercial banks. It is based on what I have learned during the time I spent with the clients and staff of selected microfinance institutions in South and East Asia, West Africa, and Latin America.

In writing this book I have four objectives in mind. The first, which is also the unifying theme of the book, is to draw the linkages between the rise of self-employment and informal activities, and the budget cuts and structural reforms which developing countries had to adopt to deal with the aftermath of external shocks and misguided economic policies. What makes this theme pivotal is that, in country after country, free-market policies, fiscal austerity, and cuts in programs for the needy have widened income inequality, and caused massive job losses and poverty. These are [the odds.]

My second objective is to show how, by financing income-generating activities, [banking for the poor] can stave off some of the effects of economic programs and policies that push or trap people in destitution, at the margin of society. Instead of handouts that perpetuate passivity and dependency, small loans for self-employment can help fight poverty and marginalization. They make people self-reliant, build their confidence, and empower those who are excluded from the mainstream of society. Encouraging self-reliance is also more cost-effective and equitable than the anti-poverty programs of international development agencies that take charge of people (and countries), tell them what is best for them, and usually bypass the neediest. Banking for the poor has become one of the central tenets of a new paradigm of socially oriented development. Much of its focus is on women and indigenous communities, whose needs are mostly ignored by conventional poverty-reduction strategies.

My third objective is to stress the importance of blending savings with credit. If impoverished households have sufficient incentives to save, even if . . .

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