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- Title
Microfinance, the Labour Market and Social Inclusion: A Tale of Three Cities.
- Authors
Mosley, Paul; Steel, Lucy
- Abstract
Great hopes have been held out for microfinance and other community development finance institutions (CDFIs) in industrialized countries as an instrument of“financially sustainable welfare provision”, following on from their success in many developing countries. Using interview data drawn from an exploratory sample of 45 clients, this paper examines the social and economic impact of three microfinance institutions in Glasgow, Sheffield and Belfast. The tentative conclusion is that most loans we examined do hit the target of the“financially excluded but bankable”, and exert an impact on poverty and social exclusion through the labour market and through helping to build social networks which reduce interpersonal risk. Our initial estimate is that each loan studied here was responsible for about 0.67 exits from unemployment over the two years 2000–2. If this ratio holds good outside the sample (and we emphasize the limitations of small sample size), this could mean that in the absence of microfinance services, the national unemployment total would be higher by some 2.4 per cent (or 22,000 individuals). The loans we have examined also save about£0.4 million on what would otherwise have been social security payments; grossed up again to all microfinance organizations, this implies an annual saving of about£250 million (1.4 per cent) on the total social security budget. However, to achieve this optimal impact microfinance institutions need to diversify their product: for example by switching from business loans into consumption loans, micro-insurance, and equity, particularly in the rehabilitation of run-down council estates.
- Subjects
FINANCING of community development; COMMUNITY development credit unions; FINANCIAL institutions; REGIONAL planning; ASSIMILATION (Sociology); SOCIAL networks; MICROFINANCE; DEVELOPING countries
- Publication
Social Policy & Administration, 2004, Vol 38, Issue 7, p721
- ISSN
0144-5596
- Publication type
Article
- DOI
10.1111/j.1467-9515.2004.00415.x