Philadelphia and Boston — Mohammad Yunus, the founder of Grameen Bank in Bangladesh, transformed the lives of millions of poor women through unsecured micro loans or micro credit to self-help groups. Microcredit evolved into microfinance that also includes savings and basic forms of insurance and transfer mechanisms. Within a few years, microfinance became a global phenomenon. Although microfinance continues to grow, the enthusiasm for it shows signs of waning.
In recent years, there has been a great deal of scepticism regarding the "miracle" of microfinance. Critics have questioned whether the rhetoric has moved far ahead of the evidence, with some even suggesting that microfinance can spell the death of local economies. Meanwhile, its defenders present robust evidence to substantiate their claims that microfinance delivers enormous benefits. We argue that the miracle is largely intact but needs strengthening.
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