Microfinance Has Not Failed. Poorly Designed Credit Has.

You may have seen the recent Wall Street Journal article arguing that microfinance has failed to reduce poverty. I want to address it directly.

The article raises real and troubling examples of harm from poorly governed lending. The failures described in Cambodia should concern anyone committed to serving families living in poverty. When credit is pushed aggressively, disconnected from client well-being, secured against essential household assets, or designed without safeguards, it can cause real harm.

But the article’s broader conclusion is wrong.

It treats the worst failures of credit expansion as though they represent the whole of microfinance. They do not. The lesson is not that microfinance has failed. The lesson is that credit, like any financial tool, must be designed responsibly, delivered appropriately, and paired with the right support.

Modern financial inclusion is not simply about making small loans. At its best, it helps families who have been excluded from the formal economy for generations gain access to the tools, training, protection, and support they need to build more stable lives.

CGAP, a global partnership housed at the World Bank, makes this point clearly in its June 2026 research, Opening the Black Box on the Impact of Inclusive Credit. Asking whether credit “works” is like asking whether a medication works. The better question is: which formulation, for which household or business, at what dose, and under what circumstances?

That is the question responsible practitioners now ask. Credit is not right for every household. For families facing extreme poverty, repeated shocks, or chronic income gaps, grants, savings, insurance, social protection, or more intensive support may need to come first. For more stable households and existing businesses, well-designed finance—often paired with training, savings, insurance, market access, and consumer protection—can help people invest, manage shocks, grow businesses, and build resilience.

That client-centered approach is central to our work at Opportunity International.

We believe financial services must be designed around the real needs, strengths, and risks of the people they are meant to serve. A smallholder farmer, a school owner, and an urban microentrepreneur face different challenges and opportunities. They need different products, different support, and different pathways to success.

That is why Opportunity combines access to capital with training, savings support, education, client protection, and practical tools that help people use finance productively. We also work with financial institutions to design products that serve clients well, rather than simply disbursing loans at scale.

This distinction matters. The problem is not commercial capital itself. Responsible capital has helped bring financial services within reach of millions of people who were long excluded. The problem comes when financial inclusion becomes debt expansion, when repayment rates matter more than client outcomes, when pricing is opaque, when loan sizes exceed repayment capacity, and when consumer protection is too weak to restrain harmful incentives.

The evidence points to a better path.

The 2025 60 Decibels Microfinance Index, based on survey responses from more than 24,000 clients across 39 countries, found that 86% of clients reported improved quality of life from microfinance services. Among low-income entrepreneurs, 60% reported decreased financial stress, and 74% reported an improved ability to manage their finances.

Opportunity's own results are even more direct. Among Opportunity clients surveyed by 60 Decibels in 2025, 90% reported increased business income, and 92% reported improved quality of life. Those numbers reflect what we see every day: women growing businesses, farmers investing in stronger harvests, school owners expanding access to education, and families becoming more resilient.

Economic mobility is not created by a loan alone. It is created through trust, training, responsible financial services, local partnership, and a deep commitment to the dignity and potential of every client.

That means starting at the last mile. It means providing critical supports like financial literacy education, business training, and savings groups. It means working with financial institutions committed to helping local entrepreneurs succeed.

And it demands accountability not for how much credit is disbursed, but for whether clients are safer, more resilient, and better able to pursue real opportunities.

I have seen this work up close—in the determination of women building businesses, farmers preparing for stronger harvests, and school owners creating better futures for children in their communities.

At a time when foreign aid is under pressure and families are facing overlapping economic and climate shocks, abandoning financial inclusion would be a mistake. The sector has evolved, and the task now is to keep strengthening what works: human-centered strategies, strong safeguards, effective regulation, and financial institutions committed to investing in their own communities and building stronger local economies.