Microfinance in Trouble?

Microfinance has been touted as a critical input to entrepreneurial activity in developing countries. But the financial crisis and subsequent downturn have hurt the microlending industry, particularly in India. More than one commentator has compared microfinance to subprime lending (e.g., here and here, but see this for balance). Now the Economist sees Big Trouble for Microfinance. What’s next? Will tighter credit requirements stifle nascent entrepreneurs, or provide a more efficient allocation of scarce capital that spurs economic growth?

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