Microcredit: when market-driven social innovations go wrong

The microcredit model was once widely seen as one of the most successful anti-poverty interventions of all time. However, from around 2010 the microcredit model's legitimacy and popular support was under serious threat and it had to be urgently reinvented under the term 'financial inclusion' in order to survive. This chapter provides an explanation. It first shows that, paradoxically, the modern microcredit model is intimately linked to the goals and strategies of the radical political philosophy - neoliberalism - that emerged in the 1980s and which is, by definition, anti-poor. The predictable result was the creation of a commercialised global microcredit industry that not only failed to seriously address the causes of global poverty, it actually helped to undermine and block any real progress in this direction in favour of amply rewarding those individuals and institutions that self-interestedly came to own and control the global microcredit industry. A final section refers to the many community-based financial interventions that have long existed and would likely have had a much greater positive impact than the evidence shows the 'neoliberalised' microcredit model appears to have had.