The document summarizes and critiques Karol Boudreaux's essay on the impact of microcredit in developing societies. It discusses some of the challenges microcredit faces, including natural risks for farmers, high interest rates charged by lenders, and changing policies that negatively impact borrowers. While microcredit aims to alleviate poverty, these issues may prevent it from achieving massive changes. The document suggests regulating private lenders and revisiting loan terms and conditions to make microcredit more effective at reducing poverty.

1. BOURDREAUX’S MICRO MAGIC OF MICROCREDIT: ILLUMINATING DARK
PLACES
ADEPOJU, Oluwaseun David (201612073)
KDI School of Public Policy and Management, Sejong-si, South Korea.
Introduction
One would not stop to wonder why Karol Boudreaux’s write up on the micro magic of
microcredit ended with series of questions. It is almost impossible to decipher the level of the
dilemma of stance with which he ended the piece. However, it is important to point out that the
write-up is all about the impact of microcredit in the eradication of poverty in poor societies. He
also established the world’s acceptance of microcredit as a route of escape from poverty. He
supported his claim by stating the empirical data of an increase in private investment through
special microfinance investment vehicle from 513million dollars to 981million dollars in 2005.
Moreover, two major questions were left answered at the end of his essay. The questions are
whether microcredit can achieve the massive changes its proponents claimed and that are
microcredit really a solution to poverty in the developing world.
Illuminating the Dark Sides
The author wishes to state that based on the content of Boudreaux’s piece and his final
questions, microcredits may not have accomplished the purpose of the establishment because of
natural risks, repayment interests and borrowing institutions changing policies. The author would
like to say that farmers in the rural area who takes micro credit always stands the risk of asset
destruction due to natural disasters such as floods, cyclones and pest invasion (United Prosperity
Organization, 2008). An inference from these shows that most poor societies live on agriculture

2. and they get micro credits as farmers loans, seed subsidies and mechanization loan. This can be
corroborated by World Bank, (2008) which stated that agriculture is one of the most important
sectors in all developing countries. However, agricultural processes revolve round natural
occurrences which are not predictable. It is not impossible that these naturally
unpredictableoccurrences have contributed to the unsuccessful implementation of microcredit
most developing countries.
A study on loan repayment by farmers in Nigeria by Ezihe and Hyande (2014) showed
that 33.3% of respondents claimed high-interest rate as the reason for defaulting loan return.
Loan issuing bodies and credit organizations are profit oriented. Banking on poor people’s need
of financial assistance for exploitation is notan impossibility by credit organizations and loan
banks. Exorbitant interest rate would always violate the initial intention of microcredit
establishment which is poverty eradication. Long and unending interest rate puts loan takers
under a form of debt prison instead of financial freedom.
It has also been noticed that credit bodies do change their policies once the loan has been
given out. More often than not, these policies are always detrimental to the creditors. A policy
such as an increment in interests has been the most occurring. World Bank (2008). The first
passion in micro financing should be to get poor people out of misery and poverty not to exploit
them. This is also a possible factor that has hampered the success of microcredit in developing
societies.
Microcredit would no longer be a micro magic but rather a mega magic if the United
Nations and World Bank can revisit the terms and conditions attached to micro credit issuance.
There is the need for proper monitoring and removal of exorbitant interest rate. Profit oriented

3. private loan firms should also be checked and put under control in order to unnecessarily exploit
poor citizens.
Conclusion
This paper has been able to make a critical analysis of Boudreaux’s essay on microcredit
by giving an overview of its content and questions. Issues such as high return rates, natural risks
and changing policies of lending bodies were discussed as possible factors militating against the
success of microcredit policy in developing societies. The author ended by making suggestions
of possible ways to explore for the successful implementation of microcredit policies in
developing societies such as regulating the excesses of private profit oriented loan bodies.
Microcredit has the potency to eradicate poverty and raise the standard of living in developing
societies if the excesses of the policy can be checked and revisited.
References
Ezehi J.C and Hyande A. A.2014. Loan repayment among small holder maize farmers in kanke
local government area of plateau state, Nigeria. Current Agriculture Research Journal.
Karol C. Boudreaux and Tyler Cowen. 2008. "The Micromagic of Microcredit" The Wilson
Quarterly Vol. 32 Iss. 1. http://works.bepress.com/karol_boudreaux/22/
United Prosperity Organization, 2014. United States of America,
http://www.unitedprosperity.org
World Bank Agriculture for Development, 2008. World Bank Development Report,
http://siteresources.worldbank.org/INTWDR2008/Resources/WDR_00_book.pdf. (2008).