Failures in Microfinance

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Failures in Microfinance: Lessons Learned from Failed Experiences in Latin America

It is impressive how the microcredit industry has changed since its humble beginnings just 40 years ago! However, not everything has always been perfect. In fact, some microfinance institutions (MFIs) have failed. With this in mind, we should also be ready to tell the stories where success was not achieved in order to learn from those mistakes.

During times of crisis, deficiencies become more evident. In this context, given the depth of the latest international financial crisis, from 2007 to the writing of this paper, it is not surprising that we have recently seen several cases of MFIs that have suffered important shortcomings in their net worth – institutions that, in short, have failed.

This document has been prepared as part of an effort to acknowledge, analyze, and learn from the mistakes made by MFIs by studying ten critical cases from Latin America and drawing lessons and cautionary tales that can hopefully be applied globally. The white paper was co-funded by IADB/MIF, Deutsche Bank and IAMFI.

Written by: Beatriz Marulanda, Lizbeth Fajury, Mariana Paredes, Franz Gomez. June 2010.