Microcredit: from hope to scepticism to modest hope

After its introduction in the late 1980s and its fast expansion thereafter modern microfinance, and specifically microcredit, raised the hope that it could combine access to (semi-) formal credit for the poor with financial sustainability of the new microfinance institutions, and that it would contribute to increased micro-entrepreneurial activity, consumer welfare, and the empowerment of women. More recently scepticism about the operation of microfinance institutions and their impact has arisen. Based on the literature, we discuss the possibility of combining outreach to the poor with financial sustainability, microfinance crises, and the findings of recent impact studies. Our conclusion is that microfinance is not a panacea for development, but that it is a tool poor households can use in their fight for survival.