Editor's note

The concept of microfinance has been hailed as both a critical innovation for tackling poverty and a risky practice that can plunge vulnerable families into debt.

A new study using data from 106 developing countries shows that access to credit has reduced not just how many households live in poverty but also how poor they are. Author Quanda Zhang argues that just a 10% increase in the gross microfinance loan portfolio could help lift more than 10.5 million poor households out of extreme poverty.

Catesby Holmes

Global Commissioning Editor

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The first microloans were made to women in rural Bangladesh in the 1970s. Banesa Khatun (far left) here in 2006, was still using Grameen Bank 30 years later. Rafiquar Rahman/Reuters

Yes, microlending reduces extreme poverty

Quanda Zhang, RMIT University

A new study finds that giving small loans to very poor people reduces both the incidence and depth of poverty in the developing world.

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