Recent Developments in Microfinance and the Impact of the Financial Crisis

Abstract

The present contribution offers a critical discussion of the current trend of commercialization of microfinance. It draws attention to some of the said commercialization’s potentially negative effects, such as increasing indebtedness, rising interest rates, and reduced access to credit for the poorest of the poor. These issues have recently given rise to ethical debates with respect to the microfinance industry. The article also argues that due to the commercialization microfinance institutions are much more sensitive to international financial crises. Some preliminary evidence for this is provided on the basis of an analysis of the impact of the current economic and financial crisis on microfinance institutions (MFIs). The results indicate that, as a consequence of the crisis, MFIs face significant negative shifts in performance indicators related to profitability, growth, and portfolio quality.