A crisis of overindebtedness among some clients in Andhra Pradesh, India, political attacks on Mohammad Yunus of Grameen Bank, and academic studies that question the magnitude of microloan impact have all conspired to shake the global microfinance community at its roots.
Overindebtedness is a symptom, not a cause, of Third World poverty.
"But Germany has a history, a memory about inflation and overindebtedness," he said.
A combination of rich-world overindebtedness and insufficient consumption in developing countries could also dampen returns, Mr Gross argues.
Mr. Rajoy's warning also has raised questions about whether, and how soon, the European Union should punish Spain for breaking new rules aimed at preventing a rerun of the chronic overindebtedness in Europe that nearly wiped out the euro.
An inability to pay debts on time, on the other hand, is described by a different Thai word that translates roughly into "overindebtedness" and is not provided for under the law.
"These crises happen when the microfinance sector gets saturated, when it grows too fast, and the mechanisms for controlling overindebtedness is not very well developed," said Elisabeth Rhyne, a senior official at Accion International, a organization in Boston that invests in microlenders.
Such excessive indebtedness depletes future options for development and, as a consequence, the access to credit determines the risk of overindebtedness that comes with certain credit conditions and affects resilience.
The overindebtedness of this low-income population," she said, "would be a terrible tragedy".
In India, government regulators in the state of Andhra Pradesh cracked down on the industry after a spate of suicides that they claimed had been caused by strong-arm collection tactics and overindebtedness by microfinance customers.
