Employment, not microcredit, is the solution

This paper from the Ross School of Business at the University of Michigan, published in January 2007, explores the limited benefits of microcredit schemes and its impact on alleviating poverty. It argues that creating employment and increasing productivity is the best solution to poverty and emphasises the Government's role in providing basic public services that have a direct and significant impact on productivity.

Most studies suggest that microcredit is beneficial but only to a limited extent. The problem lies not with microcredit but rather with microenterprises. With low skills, little capital and no scale economies, these businesses have low productivity and lead to meager earnings that cannot lift their owners out of poverty. Creating opportunities for steady employment at reasonable wages is the best way to take people out of poverty.

Contact Information for Author:

ANEEL G. KARNANI
University of Michigan - Stephen M. Ross School of Business
701 Tappan Street
Ann Arbor , MI 48109
United States
email: akarnani@umich.edu

Ross School of Business Research Paper Series
email: ssrnsubmit@umich.edu