Microcredits: an efficient tool for poverty alleviation?

Details

Supervisors

Desmet, Carlos

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion

Abstract

The United Nations declared the year 2005 as the « International Year of Microcredit ». One of the former UN Secretary-Generals, Kofi Annan, even claimed microfinance to become a « weapon against poverty and hunger ». Back then, it was commonly believed that poverty alleviation would be impossible if the poor would be unable to save or have access to credits (Njiraini, 2015). The microfinance sector prided itself on job creation, through innovative group loans and women empowerment (Matsangou, 2016). Regardless of its soaring popularity in developing countries, microfinance soon showed its limits. In fact, in some case, it seemed to make poverty worse, pushing borrowers into a vicious circle of debt, forcing them to take new loans to reimburse old ones (Karnani, 2007). In the meantime, microcredits quickly became highly popular in Belgium. In 1994, Crédal introduced the first professional microcredit in Belgium. Other initiatives followed, such as microStart which also launched microcredits fifteen years later. Since then, thousands of microcredits have been granted to individuals living in Belgium (Alter Echos, 2014). Since it has become clear that microcredits are no panacea in the fight against poverty in the South, one can wonder whether it was a good idea to extrapolate this concept to the North. This raises the central research question of this thesis: Are microcredits an efficient tool for poverty alleviation in Belgium? During the process of answering this research questions, following questions will also be discussed: How does poverty in developed countries, and more specifically in Belgium, differ from poverty in developing countries? How does microfinance function in Belgium? Do the same pitfalls exist as in Southern regions? Why are there no crowdmicrofinance platforms in Belgium? The answer to these sub-questions will provide an answer to the central research question.