1 Predatory microfinance Kristiano Raccanello 1 “In the 1970s, when I began working here on what would eventually be called “microcredit,” one of my goals was to eliminate the presence of loan sharks who grow rich by preying on the poor. At that time, I never imagined that one day microcredit would give rise to its own breed of loan sharks.” Muhammad Yunus (2011, p.A23) Background. In most developing countries, the low penetration of the banking system and a limited financial inclusion are the main reasons that motivate vulnerable individuals to resort to high cost informal and semi-formal financial market (Leslie and Hood, 2009). During the last two decades, the performance of the Grameen Bank (Yunus, 2003) has promoted microfinance as one of the most important tools to combat poverty through financing microenterprises’ start-up capital. This strategy, coupled with greater economic development at community level and through women empowerment, has been endorsed by the World Bank and other international organizations that directly or indirectly support microfinance institutions (MFIs). The merit of the microfinance schemes is to provide an avenue to credit and savings services to those people whose have no access to the formal financial sector. Some recent studies (Dichter and Harper, 2007) critique MFIs commercial lending and point out the limitations of these schemes because of their large-scale implementation that seems to respond to an inertial phenomenon rather than being based on rigorous evidence. Also, MFIs when seeking their financial sustainability through services’ commercialization can end up harming clients, because of the spillover effects and 1 Associate professor and researcher, Fundación Universidad de las Américas Puebla (Mexico), Department of Economics; email: kristiano.raccanello@udlap.mx.