Governments in many countries have turned against microlenders, with the prime minister of Bangladesh accusing them of "sucking blood from the poor."
Sheik Hasina Wazed ordered an investigation last month into Grameen Bank, which was one of the first to offer small loans to help the poor develop businesses, The New York Times reported. Neighboring India has passed legislation restricting microfinance.
Wazed was once an enthusiastic supporter of microlending, which has been championed by former U.S. President Bill Clinton. Mohammad Yunus, founder of Grameen Bank, won a Nobel Peace Prize in 2006.
When she ordered the investigation into Grameen Bank, Wazed said microlenders are "sucking blood from the poor in the name of poverty alleviation."
Microcredit has been expanding rapidly, especially in India. By 2009, 91 million people, about half of them in India and Bangladesh, had borrowed a total of $70 million.
The small loans have helped many borrowers, most of them women. But they have become less effective as microfinance gets bigger, and many borrowers, like those in advanced economies, get trapped in debt.
"Credit is both the source of possibilities and it's a bond," David Roodman, of the Center for Global Development in Washington, told the Times. "Credit is often operating at this knife's edge, and that gets forgotten."