Does micro-credit really work?

A commentary from Nepal;

Playing the devil's advocate, one could argue the poor performance of the micro-credit sector is largely due to marginalizing or not recognizing the importance of support services needed to manage credit. And looking at the success of micro-credit institutions critically, is it possible that the poor are paying up their dues through desperate means like selling assets, repaying through loans from the informal sector, repaying through income generated from working as laborers or remittance from family members. If we are seriously considering addressing income poverty through the micro-credit sector, there are two main issues which need to be explored. Development practitioners and micro-credit advocates must be convinced that micro-credit is actually addressing poverty and not merely highlighting livelihood case studies of people buying and rearing goats, pigs and chickens. The other issue which needs to be explored in-depth is "what has gone into micro-credit organisations claiming 100% repayment rates". Is it forced/compulsive repayment at any cost to save being a social outcaste or repaying through genuine engagement in enterprises of profitability?

Looking at the Micro-Enterprise Development Programme (MEDEP), a joint initiative of the UNDP/Nepal and the Nepal Government to address rural income poverty, its significance appears to be questionable when looking at the success rates (100%) projected by some micro-credit institutions. MEDEP has been providing a comprehensive package of services needed for poor people's engagement in rural business development (to address poverty) including creating market linkages, providing entrepreneurial awareness and skills training, technological inputs and micro-credit support; yet its accomplishment do not go beyond 95% in successfully establishing sustainable enterprises amongst the poor. However, micro-credit institutions whose operations are only centered on micro-credit alone have been able to achieve 100% rate of return on investments to the poor. Hence, the dilemma is not a question of belief and credibility of statistic of successful micro-credit operations but the doubt is "Are poor people actually benefiting from micro-credit and coming out of poverty"?

Statistics show that poverty in Nepal decreased from 42% to 31% over the past ten years and micro-credit advocates claim that micro-credit is one actor which had brought about this progress. No one can challenge the ability of micro-credit to make a difference in the lives of the poor, but advocating micro-credit and promoting it as an end in itself to the poor may place the poor in more susceptible situation and danger than they already were. Likewise, development financing institutions such as the World Bank and the Asian Development Bank and our Rural Microfinance Development Centre could seriously consider exploring beyond skin deep the realities of micro-credit and convince themselves that positive alterations are taking place amongst the larger sections of the poor and not just focused on individual case studies