Despite around $34 billion in funding and numerous microfinance initiatives to help entrepreneurs in the world’s poorest countries, informal moneylenders and predatory loan sharks continue to thrive. Designed to help alleviate poverty in some of the world’s poorest countries, microfinance initiatives provide loans to entrepreneurs and small businesses, hoping this will help the poor to work themselves out of desperate poverty.

But if microfinance cannot compete with informal lenders, can we be confident that it really works?

Research on microfinance sits somewhat uncomfortably across disciplines — finance, economics, management and development studies, among others — and many research projects studying the effectiveness of microfinance schemes are driven by academics’ need to publish in high-ranking academic journals. This can lead to research that applies highly complex and discipline-specific quantitative methods to large samples of microfinance borrowers without focusing on more fundamental questions such as why predatory lenders still thrive.

Fortunately, some researchers and governments are starting to realize that we know less about these schemes’ effectiveness than we might think.

Read the full article about informal moneylenders and whether microfinancing works by Frithjof Arp at Scroll.in.