This paper attempts to provide a critical appraisal of the debate on the effectiveness of microfinance as a universal poverty reduction tool. It argues that while microfinance has developed some innovative management and business strategies, its impact on poverty reduction remains in doubt. Microfinance, however, certainly plays an important role in providing safety-net and consumption smoothening. The borrowers of microfinance possibly also benefit from learning-by-doing and from self-esteem. However, for any significant dent on poverty, the focus of public policy should be on growth-oriented and equity-enhancing programs, such as broad-based productive employment creation.
The state of the debate -- Explaining the expansion of microfinance -- Assessing the contributions of microfinance -- Concluding Remarks -- Appendix: Employment generation as a poverty reduction strategy: lessons of history.

13 p.

Includes bibliographical references (p. 10-11).
Also available on the UN Department of Economic & Social Affairs website (viewed 29 Apr. 2010).