Microcredit: One of Many Intervention Strategies

April, 2002     Joan Parker, Doug Pearce

Microcredit is one of many intervention strategies designed to alleviate poverty, generate income and promote employment. Due to its current popularity among donors, however, microcredit risks becoming a “one size fits all” intervention solution.

In choosing the most appropriate intervention tool for a specific situation, microcredit should be carefully evaluated against the alternatives. In many cases, savings and insurance services, micro-grants, infrastructure improvement, employment and training programs, and other non-financial services may be more effective tools for poverty alleviation and employment generation. Microcredit is generally most appropriate where ongoing economic activity and sufficient household cash flow already exist, as it may otherwise create and excessive debt burden.