Growth of Microloans and Borrowers’ Debt Spawn Backlash

After years of goodwill and support from global political leaders and philanthropists who viewed it as a powerful tool to fight poverty, microfinance is getting a black eye in several of the countries where it is most prevalent, The New York Times writes.

The rapid growth of microfinance, which involves tiny loans to help start small businesses in poor countries, has spawned accusations of profiteering by lenders, some of which are increasing their business by up to 100 percent a year. Analysts say many borrowers, rather than escaping poverty, find themselves trapped in a spiral of debt.

In Bangladesh, home of the Nobel Peace Prize-winning Grameen Bank, the prime minister, Sheik Hasina Wazed, who once praised microlending now says it’s “sucking blood from the poor in the name of poverty alleviation.” The Indian state with the highest incidence of microloans enacted restrictions on the practice, and politicians in Bolivia, Nicaragua, and Pakistan are backing calls for borrowers not to repay their loans.