Journal of Microfinance / ESR Review

Article Title

Smart Subsidies


This essay is a reprint of Morduch's article “Smart Subsidy for Sustainable Microfinance,” published in the December 2005 issue (Vol. 6 No. 4) of Finance for the Poor, the quarterly microfinance newsletter of the Asian Development Bank.
Smart subsidy might seem like a contradiction in terms to many microfinance experts. Worries about the dangers of excessive subsidization have driven microfinance conversations since the movement first gained steam in the 1980s. From then on, the goal of serving the poor has been twined with the goal of long-term financial self-sufficiency on the part of microbanks, aiming for profitability became part of what it means to practice good microfinance.


Jonathan J. Morduch is an associate professor of public policy and economics for the Wagner Graduate School at New York University. Morduch received his PhD in economics from Harvard University. His focus is on the challenges of economic and social development in lowincome countries. Recently, he has coauthored a book entitled The Economics of Microfinance, published June 2005 by the MIT Press. In 2003, Morduch was named Chair of the United Nations Steering Committee on Poverty Measurement. He has also been a consultant for the World Bank and the U.S. Agency for International Development, and has worked with a variety of nonprofits and NGOs. Currently, Morduch is an advisor to the board of Pro Mujer, an innovative provider of microcredit for poor women in Latin America.



Journal Title

ESR Review

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