The $32-billion microfinance sector has been pounded by the worst economic slowdown since the Great Depression. Default rates at MFIs are rising, with many borrowers facing a harsh deterioration in economic health because of weak conditions in the developed countries. And growth has pulled back significantly, with MFIs hampered by the capital constraints endemic to the financial market meltdown.

"Far from being insulated from the economic mainstream as traditionally thought, microfinance could face a fall in growth and funding because of the global recession and declining investor confidence," according to Microfinance Banana Skins 2009, a report from British think tank CFSI that measures the risks facing the business.

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