Conference: Is microcredit the right instrument to tackle poverty?

Globally, opinions about microcredit are currently verging on the euphoric. But does it really contribute to the fight against poverty and is it efficient? The Centre for International Banking, Insurance and Finance (CIBIF) of the Faculty of Economics and Business of the RUG is organizing a conference on 7 and 8 December to discuss these matters. In addition to scientific presentations, there will also be a public debate about the role of the private sector – increasing numbers of western banks and pension funds are starting to advance loans to poor people. ‘The question is whether this is a good thing or not’, according to organizer Prof. Robert Lensink.

‘Microfinance: What Do We Know?’ is the central theme of the conference. ‘We cannot yet answer the question of whether microcredit programmes are financially viable or whether they will remain accessible to the poor in the future in the affirmative’, says Lensink, professor of Finance. ‘We need more convincing empirical proof.’ Top international economists in the field of microcredit will give papers at the conference.

Bridge between science and practice

The conference will also mark the founding of the CIBF research centre of the faculty. Lensink: ‘The centre will concentrate on research and contract research for financial institutions, both commercial and charitable, both in the west and in developing countries. We are thus going to form a bridge between scientific knowledge and actual practice.’ After the conference in December on developing countries, there will be one on the stability of financial institutions in western countries in May 2008.

Spreading the risk is beneficial

During the conference, an influential study by Walter & Kraus of NYU will be presented and discussed. They conclude that investing in microcredit can be beneficial because the investment risk is spread out better. The returns on microcredit, for example, show little relationship to the returns on shares and bonds. In addition, microcredit is virtually immune to conjectural developments. Spreading risk is one of reasons why commercial banks (in NL the ABN/AMRO, ING, Rabobank and SNS, among others) are becoming increasingly interested in microfinance. ‘The question now is whether the very poorest are going to suffer as a result’, says Lensink, ‘because commercial institutions are expected to choose only the most hopeful projects.’

Microcredit in perspective

The researchers of the CIBIF are of the opinion that microcredit is certainly playing an important role in the battle against poverty, but also that it has to be seen in perspective. Lensink: ‘More is needed before the problem of poverty is solved, for example access to education and health care, and improvement to the infrastructure and the legal/institutional framework in a country. But microcredit certainly plays a part and the attention it is receiving is definitely justified. More scientific understanding will help to form a better judgement.’


Note for the press

For further information: Prof. Robert Lensink, b.w.lensink rug.nl, T: +31 50 363 37 12/36 85