Generalising from Milrford Bateman's Iron law of micro-fiance
This is Prof. Milford Bateman's Iron Law of micro-finance-' to the extent that local savings are intermediated through microfinance institutions, the more that country or region or locality will be left behind in a state of poverty and under-development.'
The Law will hold so long as there are returns to scale or scope, downward sloping demand curves for whatever borrowers produce, as well as differences in the quality of labor and other inputs- i.e. different borrowers will gain different revenue from whatever it is they use the loan to produce.
Other factors militating towards the same conclusion have to do with
1) how credit to unviable businesses or households delays rational resource allocation while also driving down acceptable living standards and social expectations,
2) the manner in which the informal economy and black money take over- reducing the tax base for the Govt. and thus preventing infrastructure spending and Social Capital formation.
3) capture of M.F. networks by criminal/political gangs or parties for their own purposes of creating a mass support base.
Why is M.F so bad? What's wrong with lending small sums of money to people? The answer is that it isn't M.F which is bad it is M.F-as-pro-market-gender-equitable-environmentally-sustainable-Development.
There's nothing wrong with either Development or Micro Finance or Organic Farming or Cottage industries or whatever. It's just that when you try to kill two birds with one stone and have Development-as-something else, or Micro Finance-as-something else, and so on, that everything quickly turns to shit.
I think some Prof. somewhere should come up with a lapidary formulation of an Iron Law of Development viz. 'the more charitable fuckwits, of the highest character and altruism, sit around concocting schemes for Development-as-something real noble sounding- the more Development fucks up the already poor.'