A solution amongst others to support development
We must note that microcredit activities do not eliminate humanitarian programs that cover emergency aid, and development through donations. Microcredit is funded by solidarity savings and does not “compete” directly with other types of long term developmental actions. It is often advisable to connect microcredit loaning to other developmental tools; the two mechanisms being more complementary than substitutable.
While microcredit might improve the poorer population's condition, measuring the effectiveness of microcredit's impact is hard to achieve. No single econometric study has reached a global consensus on the matter. Although individual success stories through microfinance are frequent, it is still hard to generalize its efficiency due to various reasons:
How can we be sure that the beneficiary could not have reached the credit market with the help of an IMF? If that is the case, success cannot be attributed to micro-finance.
How to make sure whether the money was invested in value-added projects, or if this may have occurred in any case through informal savings?
Some believe that the microcredit system serves more as a
means of savings and insurance rather than being a mode of investment. The households may take advantage of these funds to use them as a financial protective shield and avoid having to invest their savings in productive activities. These downsides do not affect the usefulness of microcredit and micro-finance, but they do however reduce the possibilities of creating jobs and the anticipated side-effects that follow this, which is much awaited by microcredit supporters.
An effective tool in developed countries also
In developed countries, the microcredit system serves against banking exclusion and social exclusion. In France, for instance, microcredit is present in two forms:
Professional microcredit; whereby the amount loaned is usually below 25000 Euro and is destined to those interested in either creating or resuming a business without having sufficient funds to apply and get regular banking loans.
To be eligible for a microcredit loan, the applicant should be accompanied by a competent and specialized support network or by an NGO. These networks are to help applicants structure their project, investigate their application and develop their activity.
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