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Undermining Sustainable Local Economic and Social Development With Microfinance: Evidence from Croatia

The international development community has increasingly positioned microfinance as one of its most important poverty reduction, local labour market and local economic and social development policies. The enormous appeal of microfinance is based on the widespread assumption that simply providing access to credit will automatically catalyse poor individuals into entrepreneurial activity, thereby establishing a sustainable ‘ bottom-up’ economic and social development trajectory based upon rafts of new and expanding microenterprises. However, it is increasingly coming to be recognised that such claims for the power of microfinance are actually backed up by very little solid empirical evidence. In this paper we report on a survey of the microfinance sector in Croatia. Our results suggest that the microfinance model has actually undermined the chances of sustainable economic and social development in Croatia.

Microfinance; sustainable development; Croatia; poverty reduction; microenterprise; informal sector

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