MICROFINANCE AND ECONOMIC INEQUALITY IN THE PERUVIAN HIGHLANDS

Abstract

Microfinance programs have increased across the globe to help reduce poverty through access to small-scale capital. The spread has often dovetailed with structural adjustment policies in an attempt to address the financial needs of those in the informal economy. While microfinance institutions grow wealthier, their ability to enhance the financial stability of borrowers is tenuous. Research on microfinance programs in the rural highlands of Peru illustrates how they can undermine the financial security of borrowers, increase economic inequality, and decrease food security. Research findings also suggest that microfinance programs are unable to address the needs of women in the informal sector and that it is necessary to evaluate the effects of microfinance programs beyond that of the individual borrower.