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The microfinance industry (MFI) has crossed the threshold into a period of tremendous growth. This growth was significantly accelerated by media attention to the industry during the United Nations Year of Microcredit in 2005 and the awarding of the 2006 Nobel Peace Prize to Grameen Bank founder Mohammed Yunus, as well as the interest of high-profile donors and investors, including eBay founder Pierre Omidyar and Microsoft founder Bill Gates. Despite the promise for international development, despite the proven track record of exceptional loan repayment rates, and despite the development of competitive markets in countries like Bolivia, Peru and Bangladesh or the global expansion of microfinance access to tens of millions of new clients, little research has explored the impact this expansion has had on global poverty and economic and social development, in general.

Julie Abrams, President, Microfinance Analytics, has been a consultant to the microfinance industry for 15 years. She has authored or co-authored 16 publications on microfinance topics including international financial institution funding, foreign investment, MFI debt default, foreign exchange risk, an e-course on financial risk management, capital structure, profitability, financial performance, and MFI appraisals. Julie has been on the review panel and jury for CGAP's Financial Transparency Awards. She currently serves as an advisor for Research and Analysis to the International Association of Microfinance Investors (IAMFI) and is a member of the Calvert Foundation's External International Investment Committee, including reviews of MicroPlace and all syndicated lending. She began working in microfinance in 1985 with Women's World Banking. Julie was a fellow at the Lauder Institute of Management and International Studies, where she earned an MBA from the Wharton School and an MA in International Studies from the University of Pennsylvania and holds a BA in Economics from Oberlin College.

Within the past few years, a new phenomenon has taken place among the world's leading microfinance institutions (MFIs) – entry into new capital markets through initial public offerings (IPOs). “Going public” launches MFIs into a new frontier, not only presenting challenges but also providing new opportunities for the institutions and the clients they serve.

Woller, Dunford, and Woodworth (1999) and Morduch (2000) were among the first to discuss the existence of a “schism” in the study of microfinance. Although the exact dimensions of this divide are stated differently by various authors, the existence of alternative schools of thought is widely accepted (Brett, 2006; Bhatt & Tang, 2001; Mitlin, 2002; Robinson, 2001; Rhyne, 1998).

Despite the remarkable expansion of microfinance over the past several decades, the industry remains in a developmental period of experimentation and rapid growth, exploring which approaches work best under different circumstances. Widespread diffusion and local adaptation of techniques and innovations from pioneering organizations such as ACCION International, Grameen Bank, FINCA, Bank Rakyat Indonesia, BancoSol, and many others fostered the emergence of a global industry that by most counts now serves more than 100 million clients. Yet along many dimensions of the industry – for example, client methodologies, information technologies and infrastructures, transparency and performance monitoring, product and service portfolios, funding structures, human resource management, health and environmental amelioration, and regulations – significant barriers remain to achieving the broad vision of microfinance as a major contributor in fighting global poverty.

The Government of Iraq (GoI) and the U.S.-led coalition in Iraq have used microfinance institutions (MFIs) as part of their counterinsurgency campaign. This raises several questions. What role can MFIs play in counterinsurgency? Are the economic or civilian and military motivations for supporting microfinance convergent or divergent? What constraints does conflict impose on microfinance borrowers, lenders, and institutions and how can an MFI ameliorate these constraints? Analyzing these issues is the core of this chapter.