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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper presents an in-depth analysis of developments in the microfinance sector before and after the Lehman Brothers collapse in 2008 by comparing them with developments in traditional banking sectors of emerging market economies and developing countries. The findings indicate that microfinance has been part of the same credit boom observed in the traditional banking sector. Moreover, as in the traditional banking sector, the boom was fostered by substantial inflows of foreign capital. This raises the question whether the crisis resilience the microfinance sector has shown in the past remains a characterizing feature of microfinance or whether the same risk factors associated with excessive credit growth lead -as in the traditional banking sector -to greater vulnerability.The findings indicate that microfinance markets with strong capital inflows, high credit growth rates and rapidly increasing competition experienced a substantial decrease in credit growth and deterioration of portfolio quality in the post-Lehman period. This is in line with the evidence found for the traditional banking sector in emerging markets and developing countries. The paper concludes that by becoming part of the global financial system, microfinance has lost one of the characteristics which distinguish it from traditional banking, namely its higher resilience towards crises in domestic and global financial markets.

The global financial crisis has led to a reassessment of the role of finance in modern economies. Does the long-standing view still hold that finance has only a positive impact on growth and development or can financial deepening also raise the likelihood of financial turmoil? The debate has reached the microfinance industry after it has experienced its first credit cycle in history: a credit boom in the precrisis period was followed in 2008-2009 by a severe drop in credit. In this paper we show that conceptually microfinance is the exact opposite of subprime lending as the former employs credit technologies that focus on clients' cash-flows whereas subprime lending is based on an expected rise of the underlying asset that is financed, i.e. the house. At the same time, microfinance has become more similar to traditional finance by closely following the boom-bust pattern of credit growth. This new development reflects changes in the market environment microfinance operates in, most prominently a rising degree of competition and integration.

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