Microfinance: Hope and Hype
The rise, crisis, and reassessment of microfinance as a development tool -- what worked, what failed, and what comes next.
The Rise of Microfinance
Muhammad Yunus's Grameen Bank, founded in Bangladesh in 1983, promised a revolution: that tiny loans to the poor could enable entrepreneurship and lift families from poverty. The model spread globally, reaching over 200 million borrowers by 2020. Yunus won the Nobel Peace Prize in 2006. Microfinance was celebrated as the rare development intervention that was both morally compelling and commercially viable -- doing good while earning returns.
The commercialization wave brought private capital flooding in. Mexico's Compartamos IPO in 2007 made its investors rich, charging borrowers interest rates above 80% annually. The IPO exposed a tension at microfinance's heart: was it charity, development, or business? As commercial motives overtook social ones, the cracks widened.
