Paper

Helping Socially-Conscious Investors Maximize the Humanitarian Impact of their Investments

Using microfinance to fight global poverty
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This paper introduces the poverty/microfinance incidence map that correlates global poverty with microfinance activity. The map is based on data from UNDP’s Human Development Report 2006, Microfinance Summit Report and Microfinance Exchange Data Base.

Although microfinance has emerged as a powerful poverty alleviation tool, few mechanisms exist for calculating its social impact. The paper notes that many investors consider all investments in microfinance as the same regardless of regional differences in poverty levels and availability of microfinance. The map aims to determine where the most severe poverty is, identify where the strongest microfinance coverage is, and examine whether the two datasets match. Key findings from the map include:

  • Although poverty is endemic, extreme poverty is only concentrated in a few regions;
  • Microfinance coverage only moderately correlates with extreme poverty prevalence;
  • Latin America and Central/Eastern Europe enjoy high microfinance coverage though they are free from extreme poverty, whereas only a few countries in the world’s poorest region, namely, Sub-Saharan Africa, receive sufficient coverage.

The paper states that all microfinance activity does not generate the same social impact, and recommends that social investors consider regional disparities while determining where to invest.