Edited by G. H. Fagan and Ronaldo Munck
Chapter 7: Small loans, big problems: the rise and fall of microcredit as development policy
From 2007 onwards many institutions within the international development community and a growing number of developing country governments began to abandon the microcredit development model. The focus of this chapter is to briefly explain this turn of events. The first section (Historical twists and turns) charts the heady rise to fame of the microcredit model following its ‘discovery’ in Bangladesh in the 1980s. Section two (But then the downfall begins) provides a summary of the key milestones in its rapid transition after 2007 into a failed development intervention, ultimately requiring its incorporation within the financial inclusion movement to help keep it alive. The third section (Three fundamental flaws of the microcredit model) first describes the two fundamental flaws in the basic microcredit model, before going on to point out the very significant flaws created by the turn to a new commercialized, or ‘neoliberalized’, microcredit model in the 1990s.
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