Microfinance was once applauded as the world’s most powerful tool for eliminating poverty. But it is now on a slippery slope, moving from good to bad. Microfinance is facing trouble because the purity of its mission has been diluted. When it started, microfinance was a financial tool being used for social good. Now it has increasingly become a social tool used as a way to generate money, which is why it has lost a lot of its original sheen. This is one reason why microfinance often runs into heavy weather and hits periodic roadblocks and default crises.
Born out of the simple notion that the poor can save and are bankable, microfinance is an approach to financial inclusion based on providing small denomination loans and other financial services to the working poor and others who lack the collateral, credit history, or other assets and are not served by conventional banking. It has generated considerable enthusiasm, not just in the development community but also at political levels. It has infused an entrepreneurial spirit in tiny business like clay-brick makers, seamstresses, and vegetable sellers.
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