The COVID-19 Crisis as an Opportunity to Break With the Failing Global Microcredit Industry

The COVID-19 crisis is putting the future of the global microcredit industry at serious risk. Among other factors, this is because the poor are increasingly unable to repay the large volumes of microcredit that they have accessed in recent years. Since the international development community believes that the microcredit model has made a hugely positive impact in addressing poverty and can do so going forward, the industry has begun to receive significant financial support in order to continue to operate.

However, with even mainstream economists now accepting that the microcredit model has in fact failed to address global poverty, this chapter argues that these emerging bail-out efforts will amount to nothing more than "throwing good money after bad." There is now an opportunity to plot a new trajectory towards community-owned and controlled local financial institutions. Economic history shows that these alternatives have a vastly better track record of addressing poverty, economic development and inequality, as well as usefully promoting greater democracy and participation in society.