GMU Microfinance Research

George Mason University's MERCATUS Center offers an argument against microfinance as a sustainable solution for reducing poverty. The paper titled "Microfinance in Action: The Philippine Experience" argues that microfinance often supports short-term consumption needs rather than providing long-term income security. Instead of microfinance initiatives, the paper makes the case for improving property rights as a more efficient method of small business finance.

The paper provides a convincing argument that microfinance can be a "band-aid" solution. However, the idea of the poor obtaining financing from mortgaging a land title is less appealing. Land is seldom titled among the poor because it is not economically efficient to do so. Although there is a large dollar value in the collective land value of any poor region, there is little economic benefit in the cost of researching title and perfecting a security. Additionally, land is often collectively owned by extended families or clan groups which delegate ownership rights by a means that is often different than is done by Western or National legal systems.