Do Microloans Eliminate Poverty? Solutions Journalism Helps Provide the Answer.
Microfinance. Microloans. Microcredit. They are known as tools that are widely thought to help alleviate poverty. But is this accurate?
Ben Casselman, in his solutions journalism article titled “Microloans Don’t Solve Poverty” evaluates this assertion.
Microfinance or microcredit, is a financial service that offers loans, savings, and insurance to entrepreneurs and small-business owners who do not have access to traditional sources of capital in the forms of banks or investors. Microloans are often given to people in Third World countries to help them with their entrepreneurial ventures.
Nearly 20 years ago, the idea of microfinance as a poverty reduction tool produced hope that it would “transform economic and social structures.” The World Bank published an article which began by explaining how microcredit had been “expected to bring about change at the household level.”
However, now research is questioning whether this is a valid claim and whether microcredit is an effective tool for fighting poverty.
Casselman addresses the international development issue of poverty and its response: using microloans to combat poverty. He does this using a solutions journalism framework.
To determine if a story is solutions-oriented, the Solutions Journalism Toolkit has outlined five criteria. Below are examples from Casselman’s piece to demonstrate its classification as a solutions journalism piece:
It focuses in depth on a response to a social problem. Casselman’s piece focuses on microloans and microcredit as a response to the social problem of poverty.
It examines how the response works in meaningful detail. Casselman explains what microcredit is, how thoughts regarding its effectiveness and impact have evolved over time, and uses specific examples and quotes from organizations and experts such as from FINCA, a nonprofit organization that makes small loans to people in developing countries, and Jonathan Morduch, a New York University economist.
It focuses on effectiveness, not good intentions, presenting available evidence of results. Casselman cites recent research examples, a series of six independently conducted randomized controlled trials, whose findings detail how a variety of microlending programs had little to no effect on participants’ income or financial well-being.
He cites facts and figures from the World Bank, including how microcredit is a $60 billion plus industry, that reaches 200 million borrowers on a global scale, even though it lacks evidence that it “actually achieves its goals.”
Additionally, he explains both sides of the issue, with people supporting as well as criticizing the use of microloans in fighting poverty. He provides additional evidence in the form of news articles linking suicides in India to the stress of struggling to pay back microloans and the success of the Grameen Bank, a Bangladeshi community development bank created by economist and social entrepreneur Muhammad Yunus.
It provides not just inspiration, but insight that others can use. By explaining what is working and what is not, Casselman is providing his audience with necessary information to become more knowledgeable about the topic. He provides organizations, websites, and individuals one can reach out to, to learn more about the subject or to become involved.
It discusses what’s not working about the approach. Casselman does not shy away from how the “commonly cited benefits of microcredit” were not found to have significant increases. He also cites researcher’s possible explanations for “microcredit’s apparent failure” along with evidentiary support in the form of additional studies and expert opinions.
Broader coverage of the issue of poverty and microloans caters to the notion that they are extremely impactful tools, without any evidentiary support. These stories may discuss poverty, but not what is being done to combat it or if it works. Traditional journalism does not discuss what has been tried or is being tried or its success or failure. Solutions journalism, Casselman’s article, does.
By addressing this issue of microloans affecting or impacting poverty from a solutions journalism framework, Casselman is empowering the community to work on improving this model and to create lasting and sustainable change regarding fighting poverty.
This aligns with David Bornstein’s, co-founder of the Solutions Journalism Network, idea regarding solutions journalism being a way to generate corrective action by individuals because “people need to know what they can do- and how.”
