On Friday, June 12, 2026, The Wall Street Journal published an article critiquing the microfinance approach to international development. In response, Five Talents CEO Liz Ha released the following statement:
Last week, The Wall Street Journal published an excellent article critiquing the microfinance industry, including borrower overindebtedness, predatory lending practices, and research suggesting that some forms of microcredit have not delivered the poverty reduction once promised.
The concerns raised in the article are among the reasons Five Talents transitioned many years ago from a credit-led microfinance model to a holistic savings-led model that focuses on long-term resilience.
After many lessons learned (and still learning), Five Talents developed our methodology because it has benefits that go beyond economics. There are critical distinctions between the two approaches that I thought were important to highlight, which include:
While both approaches seek to expand access to capital for people who are excluded from formal banking systems, there is an important difference. Traditional microfinance typically relies on outside capital that is lent into a community. Five Talents does not provide loan capital. Instead, we teach community members with business training to form Savings Groups, pool their own savings, and manage their own financial resources. To use the old adage, it’s the difference between giving a person a fish and teaching a person how to fish.
In a Five Talents Savings Group, members are taught to save regularly and collectively build a fund from which they can borrow and invest. I know the idea of teaching an individual to save might sound odd from a Western perspective, but for someone who has been living in the trauma of extreme poverty with a scarcity mindset, the slow discipline of saving carries a significant learning curve.
Admittedly, this approach might be a longer, more rigorous path out of poverty, but it also ensures that there is skin in the game for each of our program participants and it mitigates the risk of bad debt. Also, every member is an investor in every microloan given out, which is a powerful motivator. As one woman, Leoni from South Sudan, proudly shared, “I am transformed from a beggar to a giver.”
The Savings Group elects its own leaders, establishes its own rules, decides what interest rates are fair and feasible, sets loan terms, and makes lending decisions. Unlike the credit-led model critiqued in the article, our approach is designed to minimize the risks of overindebtedness. Group members know one another personally, make lending decisions locally, and often recognize financial distress long before an outside lender could. When hardship strikes, the group can respond with flexibility, support, and accountability rather than coercion.
This local ownership is one of the model's greatest strengths. Unlike credit-led programs that depend on a continuing supply of outside capital, Savings Groups grow through members' own contributions and can eventually operate sustainably and independently. Group participants are all members of the same community, which contributes to a strong loan repayment rate (which is, on average, approximately 93%).
Additionally, as many of those who participate in Savings Groups have been marginalized due to their poverty, but in their group they come to a group where they are welcomed, supported, and mentored. Groups also create “mercy funds” to help participants with sudden emergencies, such as when flooding wipes out a harvest or a family needs help to pay for medical expenses when a child has fallen ill. For someone who has been isolated by poverty, this level of community support and investment are life changing.
As Odessa from Rwanda shared when her husband was imprisoned with a life sentence, she struggled to know how to provide for her three children. She said, “I had nothing; no clothes, no food, the children - nothing. I was so sad, lonely, and hopeless.” With the support of her group, she started to slowly make life changes. Odessa eventually was able to access a loan, start a joint mushroom business with some of the other women in her group, and provide for her family. Eventually, she even became the Savings Group President. “Alone, I could not manage, but with my group, I can do anything!”
Why does this matter? Because poverty is about way more than a lack of money. The drivers of poverty are complex, nuanced, and interrelated. Trauma, lack of education, lack of agency, shame, gender dynamics, violence, displacement: the list could go on.
As the article confirms, giving someone access to a loan before they are prepared to take on this risk can create dangerous cycles of dependency rather than agency. That has certainly happened in the microfinance industry’s attempts at poverty alleviation.
As a faith-based organization, we believe people living in poverty first and foremost have intrinsic value as image bearers of God, and that they hold great worth simply by being human. In Savings Groups, participants encounter a new narrative about themselves: that they are seen, capable, and worthy of investment. This new narrative repairs a broken relationship with self, with God, with community, and with the world.
This mindset shift helps individuals gain the confidence to take on (wise) risk well and it better prepares them to start acquiring new skills, such as literacy and numeracy, which are the foundation of our programs. We see this remarkable transformation even with illiterate grandmothers who enter our program, work toward reading and writing, and eventually become entrepreneurs.
Even before business skills training is introduced in a Savings Group, we facilitate discussions through the Asset Based Community Development (ABCD) model. This approach asks members to think of their already existing skills, talents, and resources in themselves and within their community. Again, this shifts the mindset from scarcity to abundance and helps participants imagine and develop businesses that meet needs within the community. Assessments are carried out in communities to help determine other training that may be beneficial in Savings Groups, which has helped us contextualize our approach to meet specific community needs, building on their assets.
For instance, Savings Groups in South Sudan that have experienced violent conflict have trauma and peacebuilding training incorporated, because groups can be composed of members of rival tribes that have caused each other real harm. How do you save with someone you can’t trust? In Burundi, where two-thirds of the population is under 25, with an approximate fertility rate of 5 children per woman, Savings Group programs include parenting workshops. Savings Groups in Kenya have climate-smart agriculture training to help improve approaches for agribusinesses impacted by extreme climate trends.
We have found that these contextualized and holistic approaches better address the complex and dynamic issues surrounding poverty. This means they are also better able to promote long-term resilience towards human flourishing. And in all things, we are continuing to learn and learn from our successes and mistakes and improve our approach so we can better serve the most marginalized communities.
For those of you who have reached out in recent days to thank us for taking a different approach, we are so grateful for your words of encouragement and support! Your partnership helps make this work possible. Together, we are helping families build resilience, opportunity, and hope for the future. If you have any questions, please feel free to reach out.
