Assumptions about Microenterprise Lending as a Precondition for Development: A Critical Review

Abstract

There exists a current debate on whether provision of microenterprise credit to
the poor could change the social equation and conditions in which the poor live. Proponents of microenterprise lending argue that targeted credit is a mechanism for poverty eradication, enhancing the poor people\'s existing socio-economic conditions and changing the relations between gender and class. However, critics argue that while a marginal increase in income and assets can enhance the well-being and socio-economic security of the poor, the increase may be too little to affect the pervasively entrenched political and
economic relations. Literature tends to report positive impacts of microenterprise lending on the poor, creating the belief that it is a necessary condition for economic development. This article identifies the five assumptions inherent in the arguments in favour of microenterprise detriments development by exploring its possible benefits and detriments. The article
argues that empowering the poor and attaining social and economic development requires more than provision of microenterprise loans. It calls for a holistic development strategies and other comprehensive programmes that address the Poor\'s lack of access to and control of productive resources, difficulties in accessing labour opportunities, formal education and work skills, and the gender disparities in developing countries.

EASSRR Vol. 24 (1) 2008: pp. 109-134