In her article Easy Money, Claire Cain Miller says most microcredit recipients use the money (average loan $75 at 30 to 45% interest) for immediate expenses. Only 1/3 to 1/5 (estimates) actually start businesses, and many of those fail to make a profit. An Indian government mandate forces commercial banks to make the loans, which total $1.3 billion this year.
Microcredit advocates claim that 95% of the loans are repaid, but the article notes that an unknown number are repaid using money borrowed in turn from local loan sharks. This forces the borrowers deeper into debt than they originally were.
It's a disturbing story about a process that has seemed to offer such good results at lifting the poorest up toward the middle class.