Is Microfinance an Effective Strategy to Reach the Millennium Development Goals?

Donor agencies are orienting their programming around the attainment of the United Nations Millennium Development Goals (MDGs), such as to reduce hunger and poverty, eliminate HIV/AIDS and infectious diseases, empower women and improve their health, educate all children, and lower child mortality.

This paper shows that access to credit and savings services for poor households (microfinance) is a critical contextual factor with strong impact on the achievement of the Goals. In particular, it assesses impact in the areas of:

• Eradicating poverty;
• Promoting children's education;
• Improving health outcomes for women and children;
• Empowering women.

Finally, the note addresses the feasibility of reaching significant numbers of the absolute poor with financial services on a sustainable basis and on a massive scale. The role of microfinance in achieving these goals is important but it should be implemented with complementary policies. Finally it recommends that:

• Access to financial services forms a fundamental basis on which many of the other essential interventions depend;
• Some of the poorest require immediate income transfers or relief to survive;
• Financial services thus reduce poverty and its effects in multiple concrete ways: improvements in health care, nutritional advice, and education.