For a while, microfinance was the hottest trend in global development. The promise? That you could transform a poor person’s life with a very small loan that would let them start their own business — and then the lender gets their money back, which could then go on to transform someone else’s life.
That early promise proved to be inflated. Microfinance did not, in fact, solve global poverty. But it wasn’t a complete failure either. Under the right circumstances, it does seem to improve conditions for some poor people.
This month, a new study affirmed that finding in an unlikely place: New Jersey.
The Grameen Bank, one of the pioneers of microfinance, which has been operating its program in Bangladesh since the 1970s, released a study on one of its programs in New Jersey. The program works like this: Low-income women apply for a microloan as part of a small group, and all members of the group are accountable for ensuring each member makes payments (that’s the approach Grameen has found does the most to increase repayment rates).
Read more at Vox