"Financial Inclusion and Its Discontent"

"Despite the influence of these arguments, a growing number of skeptics have questioned the purported benefits of financial inclusion, at least in the form presently pursued by its prominent advocates.[5] Skeptics have pointed to a large body of evidence that financial-inclusion, micro-finance, and micro-credit initiatives have, at best, failed to live up to their promises and,  at worst, have resulted in dramatic explosions in high-interest, oft predatory lending to low-income households, and in significant reductions in the welfare of borrowers and their communities.[6] If these critics are correct, the present focus by leading actors in international development on financial inclusion is misplaced, and fundamentally new thinking about the relationship between financial developments and broader improvements in economic performance is urgently needed.

This paper provides a summary review of the salient arguments in these debates. It contends that financial inclusion initiatives have indeed failed to live up to their promise, primarily because that promise was founded on the naive view that financial development will always and everywhere make positive contributions to growth."

http://privatedebtproject.org/view-articles.php?Financial-Inclusion-and-Its-Discontents-16

FB: I remember how excited I was about Kiva when I was in high school. This makes me sad, but also makes a lot of sense when you think about it  "It also betrays a common, and remarkably narrow, understanding of economic development as something primarily involving microeconomic, localized processes that may be promoted by commensurately small policies and interventions, like micro-finance, micro-credit, micro-enterprise, etc.[7] But poverty and underdevelopment are neither primarily caused by lack of access to finance, nor are they fundamentally micro-level, local problems.[8] In low-income communities, regions, or economies, there are manifold systemic obstacles to the development of transformative, high-productivity investment undertakings. Profit-driven intermediaries will not generally find it profitable to finance such enterprises."