November 2011
By Jonathan Bauchet and Jonathan Morduch
Is Micro Too Small? Microcredit vs. SME Finance
The original promise of microcredit was to reduce poverty by fostering self-employment in low-income communities, an idea first promoted at mass scale in Bangladesh (Yunus 1999). But critics of Muhammad Yunus and the Bangladesh microcredit model argue that supporting larger businesses (small and medium enterprises or SMEs) may instead create more and better jobs for poor individuals (e.g., Karnani 2007, Dichter 2006). That’s only possible, however, if those larger enterprises employ poor workers in large numbers. We argue that that can’t be assumed.