A recent Forbes publication, "Microfinance Fights Growing Pains," examined the rapid growth and associated challenges of the microfinance field.

As noted in the article (and thanks to Vital Wave Consulting for highlighting this), the explosion of new entrants and the overall rapid growth of microfinance may be creating an environment ripe for inefficiency or fraud. For example, with little communication between lending agencies, some loan recipients have borrowed multiple times against the same collateral. The Forbes article called for credit bureaus to be established so that lenders can communicate (formally and informally) with each other in order to avoid double or triple lending to dishonest borrowers.

Credit evaluating mechanisms exist throughout the developed world - credit bureaus for loans, better business bureaus for businesses, and even seller ratings for those trading on eBay. These institutions create trust, critical to a well functioning economy, and where the rules and behaviors of doing business are either not codified or not enforced, the economic impact can be severe. In fact, the worst case scenario - which was in full force during a recent work-related trip to Aceh, Indonesia - can bring business to a crawl.

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