ABSTRACT
In the 1970s a few pioneering organizations in places as far away as Bangladesh, El Salvador, the Philippines and Indonesia began to provide loans to poor individuals with explosive success (Ashe 1985; Chen 1983; Farbman 1981; Tendler 1987). Among them was Grameen bank. Barely 15 years later microfinance has spread widely and become an established industry in several countries (e.g. Bolivia). Mohamed Yunus, Grameen’s founder, has been awarded the Noble Peace Prize (2006) and microfinance is heralded as the silver bullet of poverty alleviation policies. Move forward to 2012 and, while microfinance has grown into a global industry, it has also fallen into disgrace. Methodologically sound impact evaluations have raised questions about microfinance’s ability to increase the income of its clients (Roodman and Morduch 2009), the industry has gone bust in several countries (such as Morocco, Nicaragua or Pakistan), and news of borrowers committing suicide in Andre Pradesh, India, make front-page news in the most reputed newspapers worldwide.
