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Abstract

This paper is about microfinance and its contribution to the eradication of poverty for millions of the world's poorest people. The Millennium Development goals set a critical challenge of halving absolute poverty in the world by 2015. Microfinance can make an important contribution to these goals by reducing income poverty, vulnerability, and empowering women to choose when and how to access other development services such as health and education. Donors should invest in poverty-focused microfinance as a key part of their Millennium Development strategies. Practitioners should explore how to ensure that programs become more effective in working with the poorest. The paper demonstrates the fallacy that microfinance cannot be an appropriate strategy for the poorest. It is not the poverty level of potential clients that determines access and impact, but the design of the services provided. Not all people need microfinance, but most groups can benefit. There are trade-offs between social and financial objectives, but MFIs can and do reach and impact on the poorest and achieve financial self-sufficiency.

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