Posted on March 2, 2010 - by James

WSJ: Microfinance’s Midlife Crisis…

From humble beginnings, microfinance—a system of providing tiny loans and savings accounts to the poor—has grown into a global industry attracting the interest of large multinational banks.

But the commercialization of the industry has sparked a fierce debate. Profit advocates highlight improved access to foreign capital and expertise; traditionalists say microfinance companies are in danger of becoming little better than predatory moneylenders.

There is little doubt that microfinance is now big money. In 2008 it attracted $14.8 billion in foreign capital, up 24% from the previous year. For the first time, the majority of the money came from private investors—including pension schemes and private-equity funds—rather than governments, according to the World Bank.

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