In the 1990s, microfinance captured the imagination of opinion leaders, governments and donor agencies. Supporters have argued that microfinance institutions (MFIs) can not only have a major impact in the fight against poverty, but can do so on a sustainable basis. At the same time, a number of critics have emerged. This paper considers the achievements of microfinance to date. It finds that most, but not all, of the evidence suggests that microfinance can play a role in reducing poverty. On the other hand, while it has become generally accepted that MFIs can and should become financially self-sufficient, few have actually done so. There is a continuing role for donors in the development of microfinance, but it is important that donors focus on quality rather than quantity.