Title: Microfinance Charity | GiveWell
Headings: Microfinance Charity
Microfinance Charity
How do charities help?
What are the challenges of finding a great microfinance charity?
Giving to microfinance organizations

Content: What are the challenges of finding a great microfinance charity? There does not appear to be strong direct evidence that microfinance improves clients' incomes (or other measurable aspects of well-being), and the highest-quality studies of microloans in particular do not appear to show strong effects. ( See our discussion of these studies on our blog as well as a more recent update by David Roodman of the Center for Global Development, whose work in this area we are very familiar with and believe to be of high quality. 2)
Most microlending institutions do report data on their interest rates and repayment rates, and one take on microfinance is that when clients are taking out loans at relatively high interest rates and paying them back, this itself is evidence that the clients are being empowered (see our discussion with David Roodman). However, in examining microlending organizations, we have generally seen high dropout rates (i.e., many clients seem to pay back their loans but drop out of the program), and have seen some reasons to be concerned that loans can do harm as well as good to the borrowers. ( See our discussion on our blog .) Previously, we examined microfinance organizations using a set of critical questions both about microlending and microsavings. In searching for institutions with strong answers to these questions, we found that: The large U.S. microfinance charities were rarely clear about their value-added. To the extent that we were able to obtain and review due diligence on partners (most of which is unfortunately confidential), it seemed focused on financial performance, with much weaker examination of social impact-related questions. (