Kiva Grapples with Research on Impacts

Last week on the Kiva blog, Kiva vice president Isabelle Barres reviewed what we know about the impacts of microfinance:

Despite the limited evidence around whether microfinance lifts people out of poverty, evidence shows that microfinance is critical to help poor people cope with poverty, by smoothing consumption and allowing to better deal with emergencies.

I think Barres does a much better job summarizing one of my areas of expertise than I would summarizing the challenges of being a VP for microfinance strategy at a peer-to-peer microcredit group---and a better job of writing in my language than I would in her native tongue. (She has three languages while I'm still working on my first.)But I sense two important and unspoken implications of this review. If poor people often use microfinance to smooth consumption (think: procure enough to eat every day) and deal with emergencies, then:

• Why does Kiva call all the borrowers "entrepreneurs"? I continue to feel that this labeling is misleading for Kiva users and condescending toward Kiva borrowers.
• We can't assume that an exclusive focus on credit, especially with rigid repayment schedules, is the best way to help the poor. Better services are in operation in some countries; but providing them is not easy, and easy access to outside money for microcredit discourages the search for alternatives. The book cited by Barres, Portfolios of the Poor, points out how Grameen Bank, for example, has led the way in making its services more flexible and in offering savings alongside credit. Safe savings accounts also help people smooth consumption and handle emergencies--but without the risk, indeed inevitability, that some clients will get in trouble with credit. This is not to say that there is no place for microcredit, only to point to a live, unmentioned issue about the danger of overmphasizing it.