The Quiet Revival of Microfinance: Why The Sector is Poised for Greater Growth and Impact in 2025 and Beyond

After starting in the 1970s, the microfinance industry had become a global sensation by the early 2000s, only to see its momentum wane over the subsequent decade due to concerns about high interest rates and poor borrower outcomes. But according to Kris Coppock at Five Talents, a number of data points reveal that microfinance has quietly turned a corner in recent years. He explores how the sector is emerging from the malaise that defined the past decade, driven by a lending approach that treats access to capital as just one part of a wider toolkit for building resilience, opportunity and dignity.After starting in the 1970s as a newfound method for fostering women’s entrepreneurship, the microfinance industry became a global sensation in the early 2000s, as microloans were lauded for their ability to lift millions out of poverty and boost entrepreneurial growth. By the time microfinance’s pioneering practitioners, Muhammad Yunus and Grameen Bank, won the Nobel Peace Prize in 2006, the sector was widely seen as a promising — perhaps even game-changing — tool for poverty alleviation and global development. However, by 2010, this momentum had begun to wane, as rising loan delinquency raised concerns about the social impact of microcredit, and growth and investment had begun to slow. Critics pointed to issues such as high interest rates and poor borrower outcomes in some cases — particularly where clients were unable to convert credit into sustained income gains. Yet a number of data points reveal that microfinance has turned a corner since that time, with the sector slowly but steadily beginning to emerge from the malaise that has defined its recent history.    A Resurgence of Global Interest in Microfinance For starters, global interest, as measured by Google search results for terms like “microfinance,” is now returning to levels last seen in the mid-late 2000s, as innovative models have emerged that are addressing the sector’s past shortcomings and paving the way for sustainable growth. ​But the gradual resurgence of microfinance can be seen more substantively in the growth it has experienced across key industry metrics in the past 15 years. Data highlights significant increases in global market size, loan disbursements and investments in microfinance institutions (MFIs), underscoring the sector’s expanding reach and impact in this period.​ The global microfinance market is also projected to see robust growth in the coming years. It is predicted to grow from around $216 billion in 2024 to over $240 billion in 2025, at a compound annual growth rate (CAGR) of 11.6%. This growth is projected to continue in the coming years, with the market size reaching $368 billion in 2029, indicating a CAGR of 11.2%. These figures show a clear upward trajectory in microfinance investments and services globally.​ This expansion is driving the increasing availability of microfinance services among underserved populations.​ For example, in India, the microfinance industry has increased its reach by incorporating more women clients, adding 8 million mostly female clients across 729 districts in 2022-23 alone. This demonstrates the sector’s commitment to financial inclusion and empowerment, particularly among women in rural areas.​ And this commitment is having an impact: For instance, in 2023, survey data from 21 MFIs across 13 countries indicated that microfinance contributed to the creation of over 1.4 million jobs. Its global employment impact is clearly far higher, highlighting its role in fostering economic development.  These data points collectively reinforce the narrative that microfinance has regained its footing after the turbulence it experienced in the early 2010s, marked by increased investments, expanded services and a broader global footprint. This renewed momentum comes at a critical time. As the world faces widening economic inequalities, ongoing financial exclusion and the disruptions of a growing array of global crises, microfinance is uniquely positioned to tackle these key challenges.   How Has Microfinance Made a Difference? The revival of microfinance isn’t just about microloans’ return to prominence, it’s about recognising the transformative impact they’ve had over the decades. These small-scale financial tools have helped individuals and families move from subsistence to opportunity, catalysing change in two critical areas: economic growth and social progress. At their best, microloans don’t simply provide access to capital. They create pathways to resilience, opportunity and sustainable development. Whether it’s a rural farmer investing in tools, a small shop owner rebuilding after a natural disaster or a group of women pooling resources to fund their businesses, microloans have proven their ability to uplift lives. The numbers, as reported by different providers across the sector, remain compelling: 70% of BBVA Microfinance Foundation customers rose above the poverty line after five years. 77% of borrowers in a global 60 Decibels study report that loan repayments are “not a burden.” Microloans have been particularly transformative for women, who make up 57% – 61% of borrowers globally. But encouraging as these achievements are, they serve as a foundation for what’s coming next. The more exciting story isn’t just about microloans helping people survive. It’s about how the entire microfinance model is evolving to help them thrive.   Beyond the Loan: Why Microfinance Had to Evolve As impactful as traditional microloans have been, the model has faced legitimate criticism over the past two decades. Critics have raised concerns about high interest rates, unsustainable repayment structures, limited borrower support, and a focus on outputs (like loan disbursement volume) rather than outcomes (like long-term poverty reduction). In many cases, microloans were treated as a silver bullet to reduce poverty, handed out with minimal financial education or follow-up, leaving borrowers vulnerable to debt cycles or struggling to build profitable enterprises. These shortcomings became especially clear in regions where microfinance was rolled out rapidly, without enough local grounding or support systems. That’s why many organisations have pivoted towards a new kind of microfinance: one that treats access to capital as just one part of a wider toolkit for building resilience, opportunity and dignity. The most exciting evolution in the microfinance space isn’t just about more loans, it’s about better systems. The traditional model of lending small amounts of capital is giving way to a new generation of programs designed to build long-term resilience, skills and community power. This integrated approach weaves together financial access with education, peer support and local ownership. It’s already showing transformative results. The Five Talents programme in Burundi is a powerful example of this shift in action. Over two decades, the initiative has trained more than 144,000 people in financial literacy, business skills and group savings structures. Notably, 78% of those who achieved formal literacy qualifications were women, a clear indication of the model’s impact on gender equity. But what sets this programme apart is its sustainability: 84% of savings groups are still running independently, without external funding. Participants aren’t just repaying loans, they’re creating jobs, with nearly all now employing at least one other person. 99% of female and 97% of male participants report discovering personal gifts or skills they hadn’t recognised before. 98% of female and male participants now actively speak out against gender-based violence. This model doesn’t treat poverty as a lack of money. It treats it as a lack of opportunity, agency and connection. And that’s what makes it so effective. Together, these shifts suggest a new blueprint: one that views microfinance not as a product but as a platform for community transformation and structural change, which powers sustainable growth.   A Path Forward The revival of microfinance represents more than a return to an old idea. It signals a new era of innovation and inclusivity in global finance. While traditional microloans have delivered undeniable benefits, emerging community-driven models take the concept even further, fostering resilience, trust and sustainability. By focusing on local solutions and peer-driven lending, these new approaches ensure that microloans not only lift individuals out of poverty but also strengthen the social fabric of communities. As we move into 2025, the potential for microloans to drive transformative change has never been greater.   Kris Coppock is Co–Chief Executive Officer at Five Talents. Photo credit: EU/ECHO/Edward Echwalu     You May Also Be Interested In:A Roadmap to Modern Energy in Rural Africa: How Minigrids…The Stories That Change Our World: How Narrative Fiction Can…Why Insurance Matters: Announcing the European Microfinance…