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The American media is abuzz with stories of doom and gloom as tensions mount over stalled efforts to raise the U.S. debt ceiling. Europe, meanwhile, has its own debt woes, with mounting fears that a default in Greece could spill over into Ireland, Portugal and Spain. So far, however, there has been relatively little discussion about what these twin crises would mean for the 5 billion people living in developing countries. Sadly, those with the least influence over the issue could pay the highest price.

On this week’s Wonkcast, I invite senior CGD fellow and global finance expert Liliana Rojas-Suarez to explain why it’s important to the rest of the world that Europe and the United States put their financial affairs in order. The showdown in the U.S. is especially worrying, Liliana says, because of the U.S. dollar’s role as the international reserve currency.

 

The largest crisis in the history of microfinance is now unfolding in India. After five years of growth so fast it has been described as “indescribable,” and after a lucrative initial public offering (IPO) by the leading firm, the government of the state of Andhra Pradesh has cracked down. Amid reports of microcredit-linked suicides, the state has urged borrowers to stop repaying, and millions have heeded the call. Bankruptcies of some of the world’s largest microcreditors are now a realistic possibility.

What is the reality of microcredit in India? Is the backlash an engineered campaign to protect a government-run (and World Bank–financed) finance program from private-sector competition? Or has the fast growth in credit ensnared the poor in debt? Some of each?

And what lessons does the crisis hold for actors worldwide, including microfinance institutions and investors ranging from the World Bank to Kiva users? When is microcredit—and investment in it—too much of a good thing?