Like sex, microfinance can be safe if practiced responsibly. Recently, however, we've seen that not all participants in the microfinance industry are practicing safe microfinance. As happens with that other risky activity, the players in microfinance face temptations that lure them away from healthy long term relationships. One need look no farther than Andhra Pradesh, India, where the temptation for lenders to grow very fast in order to win market share, prestige and profits caused them to woo many clients into excessive debt -- with predictably bad consequences for both clients and lenders.
Safe microfinance rests on a handful of operational practices that remain just as valid today as they were before the crisis in Andhra Pradesh. These practices emerged in an early form at the start of microfinance in the 1980s.
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