In Bangalore's Avalahalli neighborhood, a bank account and microloans have transformed the life of 32-year-old Sabira Khanam. Her first loan, of 10,000 rupees (about $200), allowed her to experiment with a small-scale kerosene distributorship. A second, smaller infusion financed her sister's wedding. A third, of 20,000 rupees, launched a business sewing sequined saris for sale to local women. Khanam, who lives alone and has disabilities stemming from childhood polio, is now able to rent a large masonry house. And she got the cash to do this without resorting to local loan sharks, who charge 2 to 10 percent monthly interest for long-term loans--and much more for small, short-term loans.

But more than half of India's 1.1 billion people lack access to the kinds of financial services that made such a difference for Khanam. "In most of the developing world--and that means most of the world--the people that are 'unbanked,' or very badly banked, represent 70 percent of the population," says Michael Chu, a Harvard Business School lecturer and an expert on microfinance, which extends basic banking services to poor people who have not been served by the traditional financial system. "Literally, you are talking about 4 billion of the 6.5 billion people in the world. We are just beginning to penetrate that." And despite the well-­understood potential of microlending to help lift people out of poverty, it currently reaches fewer than 200 million people worldwide. ­(A 2007 estimate put the figure as low as 133 million.) Micro­finance "has been progressing at a very fast rate," Chu says. "But if you look at it in terms of how many people [enjoy the benefits], we are just beginning."