Skip to main content

Research Repository

Advanced Search

Effectiveness of microcredit for poverty alleviation: evidence from Indonesia

Arp, Frithjof; Ardisa, Alvin

Effectiveness of microcredit for poverty alleviation: evidence from Indonesia Thumbnail


Authors

Frithjof Arp

Alvin Ardisa



Abstract

Debate persists about the effectiveness of microcredit for poverty alleviation. We argue that much of this debate is due to discipline-specific research approaches and methodological complexities obscuring fundamental issues. Microfinance organisations do not operate in a vacuum: other forms of collateral-free lending must be taken into account. We illustrate our argument with a study of formal and informal collateral-free lending in the Yogyakarta region of Indonesia. Focused on the fundamental issue of competitive impact, we examine both forms of microcredit through triangulation from multiple perspectives, grounded in the experience of market participants. Importantly, our study includes current and previous borrowing across both formal and informal microcredit. We find two distinct informal schemes used by microbusinesses, both of which successfully compete with formal microfinance, one being perceived as significantly more effective. We also find a mismatch of incentives and strategic objectives in the formal microcredit scheme, compromising its effectiveness. We conceptualise borrower needs and microcredit schemes along financial and operational dimensions, and develop a framework of business and profit logics that helps identify how shifts therein influence the competition scenario. We discuss implications for microfinance policy and practice, and provide suggestions for further research.

Citation

Arp, F., & Ardisa, A. (2016). Effectiveness of microcredit for poverty alleviation: evidence from Indonesia.

Conference Name Workshop on Human Security in the Global South
End Date Feb 25, 2016
Acceptance Date Jan 17, 2016
Publication Date Feb 24, 2016
Deposit Date Jan 19, 2017
Publicly Available Date Jan 19, 2017
Peer Reviewed Peer Reviewed
Keywords Microcredit, Poverty, Alleviation, Collateral, Indonesia
Public URL https://nottingham-repository.worktribe.com/output/775378
Publisher URL https://doi.org/10.5281/zenodo.48216
Additional Information Institute of Asia and Pacific Studies (IAPS) and Nottingham University's Sustainable Development Research Priority Area (RPA)

Files




Downloadable Citations