Poverty versus Inequality

Poverty reduction and microfinance are generally referred to in the same breath by microfinance institutions (MFIs) and by the organizations supporting them at the international level, through multilateral or bilateral cooperation or through large private foundations, or nationally. In national strategic poverty reduction plans, microfinance is the preferred means of achieving the Millennium Development Goals. It is usually presented as a package of financial services for poor people that aims chiefly to enable those people substantially to improve their lot in life. Of the various poverty reduction instruments, microfinance is considered one of the most promising, in particular because it can be used on an unprecedented scale thanks to its supposed capacity rapidly to become self-sustaining. Let us start by briefly defining the two terms in the equation: microfinance and poverty.