Microfinance Focus, December 6, 2011: According to a new paper published by CGAP, not all microfinance borrowers want to grow a business and their ability to capitalize on opportunities vary greatly.

The paper ‘Latest Findings from Randomized Evaluations of Microfinance’ claims that poor households clearly have other financial needs that go beyond working capital loans to microentrepreneurs.

Recent experimental evidence from three randomized impact evaluations suggests that while increasing access to credit does not produce the kind of dramatic transformations conjured in the popular imagination, it does appear to have some important—though more modest—outcomes for some people.

“This new paper reviews a range of new studies that help us understand why some people get more out of savings, microfinance, and microinsurance than others,” said CGAP senior manager Jeanette Thomas, one of the authors of the report.

“They point to the importance of designing financial products that address the particular needs of the poor, starting with very simple concepts like tying a savings account to a specific goal, or insuring against risks, such as changes in rainfall that can make or break a farmer’s season”, he said.

The paper was released by CGAP in conjunction with researchers from the Financial Access Initiative, Innovations for Poverty Action, and the Abdul Latif Jameel Poverty Action Lab (J-PAL) at the Massachusetts Institute for Technology.