Six randomized trials found modest business effects but no transformative rise in income or well-being.
What the evidence shows
Microcredit — small loans to poor entrepreneurs — was hailed as a revolution against poverty, earning the Grameen Bank and Muhammad Yunus the 2006 Nobel Peace Prize. The strong claim was that access to credit would let the poor build businesses and escape poverty.
A coordinated set of six randomized evaluations across different countries (Banerjee, Karlan & Zinman, 2015) told a more sober story: microloans modestly increased business activity and gave households useful flexibility, but did not produce meaningful gains in average income, consumption, health, education, or women's empowerment. Microfinance is a useful financial tool with real, limited benefits — not the poverty cure it was sold as. Verdict: mixed.
Sources
Banerjee, A., Karlan, D., & Zinman, J. (2015). Six randomized evaluations of microcredit: Introduction and further steps.
American Economic Journal: Applied Economics, 7(1), 1–21
Across six countries, microcredit modestly boosted business activity but did not significantly raise income, consumption, or broader well-being.
DOI: 10.1257/app.20140287 →