The largest crisis in the history of microfinance is now unfolding in India. After five years of growth so fast it has been described as “indescribable,” and after a lucrative initial public offering (IPO) by the leading firm, the government of the state of Andhra Pradesh has cracked down. Amid reports of microcredit-linked suicides, the state has urged borrowers to stop repaying, and millions have heeded the call. Bankruptcies of some of the world’s largest microcreditors are now a realistic possibility.
What is the reality of microcredit in India? Is the backlash an engineered campaign to protect a government-run (and World Bank–financed) finance program from private-sector competition? Or has the fast growth in credit ensnared the poor in debt? Some of each?
And what lessons does the crisis hold for actors worldwide, including microfinance institutions and investors ranging from the World Bank to Kiva users? When is microcredit—and investment in it—too much of a good thing?