Microfinance was hailed as a market‑driven antidote to poverty, gender gaps and educational barriers. Yet six randomized trials published in 2015 found loans failed to lift borrowers’ income, consumption or micro‑enterprise profits. Despite the evidence, commercial capital and development banks kept pouring money into the sector. The model promised self‑sufficiency, but default rates remained low while repayment schedules strained household cash flow.

Between 2014 and 2022 the World Bank Group allocated roughly $30 billion to financial‑inclusion projects, many centered on microfinance. By 2025 the outstanding loan book swelled to almost $220 billion across more than 140 million clients, with the average borrower owing $1,381. Average loan size rose to $1,381, sparking concerns about borrower over‑leverage.

The sector’s commercialization sparked backlash from early champions; Nobel laureate Muhammad Yunus now likens for‑profit lenders to loan sharks. In 2007 Compartamos Banco raised about $450 million in an IPO, paving the way for dozens of listings. Investors must weigh loan volumes against weak impact evidence; the business model strains its original development mandate. Regulators in markets are reviewing caps on interest rates and transparency rules.