The New School Graduate Program in International Affairs

Microcredit is a tool to alleviate poverty, but just how deep into poverty does it and can it reach? Can microcredit be used to help the poorest of the poor in society? Who are the poorest of the poor? In attempting to answer these questions, I present some alternative understandings of poverty and some different ways to identify and target the poorest of the poor. I have found that microcredit, as it is fundamentally a financial relationship, is mostly targeted on the less-poor people, who are above a structural break in the dimensions of poverty, i.e., without the severe non-financial deprivations that characterize the "poorest of the poor" who are below that structural break. To assist the latter group out of poverty requires an explicitly multifaceted approach, probably excluding credit per se but rather grants to handle the financial dimension of the program. Most microfinance institutions (MFIs) do not give themselves such a broad anti-poverty mission, but are rather focused on providing basic financial services to people who areusually without access to them but are "bankable". A case is given of BRAC, a Bangladeshi MFI that does take the more holistic approach in a specially designed program for the poorest.