"(Doing) Business With The Poor" - A Critical Analysis Of Microfinance In Peru

Since its rebirth in the 1980s, Microfinance has been implemented in various financial systems around the globe and microcredits became known as the silver bullet to combat poverty. In 2005, the United Nations launched the "International Year of Microcredits" and the international development community raised hopes that microfinance would help to make the Millennium Development Goal (to halve the amount of people who suffer from extreme poverty from 1990 until 2015) come true. Since a few years, the good image of microfinance has started to crack: Newspapers published stories of microloan debtors who committed suicide because they were pressured or could not repay their loans; documentaries provided pictures of microfinance clients whose living situation had not improved but worsened and Muhammad Yunus, the leading figure of microfinance and recipient of the Nobel Peace Prize in 2006 was fired from the board of his famous and influential microfinance Grammen Bank.
Against this background, this M.A.-thesis examines how microfinance is practiced in the supposedly best-developed microfinance market across the globe (as awarded by "The Economist" annually between 2009 a2013): In Peru. First, this thesis makes some theoretical remarks on development approaches as formulated by Amartya Sen and Muhammad Yunus, which, in a second step, are compared to the concept of and criticism on microfinance. In a next step, the findings of the case study are presented and analyzed: First, the distribution of microloans in Peru is discussed; second, the differences among microfinance players are scrutinized and finanlly, the impact of microfinance in Peru is evaluated. The conclusion sheds light on the question: Does microfinance really work?