As new research starts to question the success microfinance on poverty reduction, it seems that supporters of the loan schemes are diluting their initial claims.

The CGAP (Consultative Group to Assist the Poor), a leading supporter of microfinance, issued a research note this month which looks into the findings of recent research publications.

The paper, by CGAP’s Richard Rosenberg, is remarkably upbeat despite none of the research papers that he mentions showing significant eveidence – if any – of loan recipients being lifted out of poverty. He argues that the research results are ambiguous and that more research is needed to capture the effects of microfinance.

CGAP’s research note does not defend any claims that microfinance permanently lifts the poor out of poverty but instead acknowledges that loans are being used for consumption smoothing rather than entrepreneurial activities.

But this is not a problem for Rosenberg. He cites Portfolios of the Poor by Jonathan Morduch et al in which the authors show that the poor have quite complex financial portfolios and use various financial instruments to smooth their income over time. This includes credit unions, rotating savings and credit schemes and of course borrowing and lending from friends. Rosenberg claims that microfinance can fit into this pattern of smoothing and be seen as another instrument for the poor.

This is some distance from the fervent fans of microfinance who claim that the loans will lift millions out of poverty. It seems that the supporters of microfinance might be clearing the ground for weaker claims as further research questions its poverty reducing qualities.