The Economics of Microfinance

by Beatriz Armendáriz

An accessible analysis of the global expansion of financial markets in poor communities, incorporating the latest thinking and evidence.

The microfinance revolution has allowed more than 150 million poor people around the world to receive small loans without collateral, build up assets, and buy insurance. The idea that providing access to reliable and affordable financial services can have powerful economic and social effects has captured the imagination of policymakers, activists, bankers, and researchers around the world; the 2006 Nobel Peace Prize went to microfinance pioneer Muhammed Yunis and Grameen Bank of Bangladesh. This book offers an accessible and engaging analysis of the global expansion of financial markets in poor communities. It introduces readers to the key ideas driving microfinance, integrating theory with empirical data and addressing a range of issues, including savings and insurance, the role of women, impact measurement, and management incentives. This second edition has been updated throughout to reflect the latest data. A new chapter on commercialization describes the rapid growth in investment in microfinance institutions and the tensions inherent in the efforts to meet both social and financial objectives. The chapters on credit contracts, savings and insurance, and gender have been expanded substantially; a new section in the chapter on impact measurement describes the growing importance of randomized controlled trials; and the chapter on managing microfinance offers a new perspective on governance issues in transforming institutions. Appendixes and problem sets cover technical material.

Genres: Economics, Finance, Nonfiction, Business, Reference, International Development

496 pages, Kindle Edition

First published January 1, 2005

Reviews

[Theresa Leone Davidson · Rating 3 out of 5]

After a somewhat reckless youth, in which I spent too much and saved nothing, I learned, relatively early, the importance of money, investing it wisely (and conservatively), and living well, well below my means, in order to save the maximum. This, by the way, was learned by watching others: my parents when I was young (but from whom I did not learn enough, otherwise I wouldn't have been reckless later on), and a very good friend, Sharon M., who knew how to save and inspired me to do the same, and my husband, who taught me how to invest and live well but not extravagantly. The point being that money has always interested me, and while I've read a few books about finance, and thought I knew quite a bit, this book makes me feel like I know nothing. While I did finish The Economics of Microfinance with an understanding of how microfinance plays a key role in the economies of many developing countries, providing small-scale entrepreneurs with the access to financing that is so often unavailable from commercial and state banks, a lot of it was too technical and advanced for me to understand more. The evolution of microfinance and the theories behind it were interesting, well written, and somewhat comprehensible; nevertheless, I will have to seek out, next time, something along the lines of Microfinance for Dummies.

[Aleksander Prifti · Rating 3 out of 5]

Cracking open the hardcover of The Economics of Microfinance by Beatriz Armendáriz and Jonathan Morduch was like stepping into a dimly lit vault where the secrets of poverty’s undoing are stashed—a electrifying journey that strips away the mystique of microfinance and lays bare its raw, transformative power. With every page, I felt like an explorer unearthing a subversive truth: that small loans, wielded with cunning precision, can topple the towering lies we’ve been fed about the poor being helpless. Armendáriz and Morduch wield economic rigor like a torch, illuminating the mechanics of interest rates, repayment dynamics, and social impact with a clarity that’s as gripping as it is liberating, revealing a world where finance isn’t a privilege of the elite but a weapon for the margins. I emerged from this book buzzing with delight, as if I’d been let in on a grand conspiracy—one where the dismal science turns rogue, rewriting lives and defying the underworld of despair with every calculated penny.

[Thu Nga Le · Rating 3 out of 5]

On the surface read for those who are fresh to the topic

[Jesse Morrow · Rating 3 out of 5]

Good intro into Microfinance. Specifically a text book geared toward a grad student or someone with at least Intermediate Microeconomics. It takes a fresh look into the realities of lending, scale, financing, management, gender bias and even subsidies.

Great clear eyed view. But if you haven't had at least two semesters of microeconomics, I'd probably skip this and only read Yunnus's Banker to the Poor.

[Megan · Rating 5 out of 5]

A great text-book or reference book, masterfully written, but certainly not to be undertaken lightly. It unfortunately killed discussion at my microfinance book club for mostly laymen and women - too technical for that forum, as most might guess from the title.

[stephanie · Rating 4 out of 5]

you might not actually enjoy this too much unless you're really into econ/development and have very little idea about microfinance, but it's staying on my must-read list. non econ ppl might prefer billions on bootstraps.

[Chase · Rating 4 out of 5]

If you want to understand microfinance, this is a great place to start. It helps you understand the fundamental economics issues microfinance grapples with and has a balanced view of the success and limitations of microfinance.