The Global Financial Crisis: Counting the Social Costs

The World Bank estimates that because of the current global financial crisis 53 million people, who would otherwise have escaped poverty, will remain trapped. At a time when the world is questioning the foundations of finance and economics, one model that is bridging the gap between social responsibility and capitalism—microfinance—finds its mission suddenly harder to achieve.

Fortunately for the field, it has not been as integrated into banking and currency markets as the rest of the global financial system, though it is becoming more closely linked as the field grows. Its foundation in local markets, close-knit ties with the communities it serves, and a history of surviving past economic shocks positions it well to ride out the current turmoil. But the crisis may also hold many of the world’s poor in dire poverty, and microfinance can not reach them all.

One of the primary reasons for the field’s success—with or without a crisis—lies in working closely with the people it serves. The “double bottom line” for microfinance institutions (MFIs) means that one mark of success is its positive social impacts.

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