Inadequate growth, over-indebtedness, and crises in microcredit: what have we learned?

Microcredit markets and institutions have experienced a certain number of major crises over the last decades. This paper aims to understand the dynamics that have led to those crises, including latent crises, by analysing a set of factors at three levels: customers, institutions, and markets. Based on multidisciplinary research, it provides a holistic and systemic understanding of microcredit crises and a graphic representation of the main causes and interactions. It calls for a broad conception of sustainability, which should be understood not only as a financial issue, but also as a sociocultural and political issue, at the level of both microfinance institutions (MFIs) and clients. The paper also identifies some of the key questions that anyone should ask when getting involved with microcredit programmes or institutions in order to avoid crises.