Microfinance has been one of the boom sectors in development cooperation over the past years. At times, it was almost seen as a panacea for development. After a number of large-scale projects had failed over the 1960s and 1970s, microfinance was seen to have a number of advantages over traditional approaches of official development aid: First, as funds were disbursed at a decentralized level, political economy problems of planning and implementing projects centrally should be avoided. Second, as a microcredit is to be seen different from a grant, but has to be repaid, it was assumed to motivate people who had remained mostly passive to take the initiative themselves. Third, as a market-based instrument, it was hoped to create entrepreneurial spirit in the population which might trigger a sustained increase in economic activity.