For all the scrutiny, academic research and press coverage that the microfinance has attracted over the years, one niche has been exempt: the investment community. This is now changing.

Individuals, NGOs, investors, CSR departments, even governments, have largely had to place their microfinance investments via third parties. Whether this be the $25 loan through Kiva or MicroPlace, or multilaterals placing tens or hundreds of millions of dollars in the microfinance investment funds (MIVs), we have implicitly trusted these intermediaries to invest on our behalf.

These intermediaries have acted as gatekeepers, for both the flow of capital to the microfinance institutions, and for the flow of information back to the investors. Their integrity has been accepted a priori, in direct contrast to the well known problems in all other areas of the financial services sector, defined by economists as the principal-agent problem. How can we ensure that those in whom we entrust our money act in our best interests and those of the final beneficiaries?

In short – we can’t.

At last, scrutiny is now being applied to the MIVs and peer-to-peers (P2Ps).

These players are collectively in lock-down mode. The CEO of BlueOrchard resigned recently. Not a single other institution or individual mentioned in my book has dared issue a single comment. Their traditional method of retaliating aggressively against any critic has failed them this time. The media are having a field-day. The likes of Citi, Deutsche Bank, Standard Chartered etc. are on the back foot after the mess Wall Street has caused in developed countries. Suggestions they have been behaving less than transparently in unregulated, developing countries where the potential to exploit the poor is far greater will come as little surprise to most.

The Norwegian government recently pulled out of microfinance entirely, with the exception of Sudan according to an article in NRK. Will others follow as the sector staggers forwards, religiously clinging to its ever-waning claims of the end of poverty thanks to glorified credit cards?

Much is said of human rights for the poor. Some suggest such rights should extend to access to often over-priced credit and harassment at the hands of profit-motivated MFIs seeking an IPO. Rather than enter this debate, I would like to propose two new rights. First, the rights of the poor to benefit from the same levels of client protection from financial service providers that we enjoy in developed countries. Secondly, the rights of well-meaning investors in developed countries who invest in microfinance via P2Ps or MIVs to benefit from the levels of scrutiny that other areas of the financial services sector are subject to.

I hope the sector wakes up to both these rights. We are all exhausted with the hype surrounding microfinance, and its miraculous impact on poverty despite an absence of much supporting evidence. Perhaps now it is time to focus on some good, old-fashioned regulation? After all, regulating financial service providers should not be such a revolutionary idea in the current climate.

Look at what Damian von Stauffenberg, founder of MicroRate, said in relation to MIV regulation in the House of Representatives hearing on microfinance in 2010:

“this is indeed a concern we have, not that we are seeing microfinance funds, MIVs, are crumbling, but we see the potential. Basically, the microfinance funds on the whole with some exceptions are not terribly transparent. If you go onto their Web sites, you will find beautiful pictures of what is going on in Bangladesh or in a poor country, but you will not get the kind of information that you would take for granted in any funds that you invest in here in the United States. That is worrying. If people invest because it is microfinance and microfinance is good, that is sowing the seeds for trouble. I think yes, a lot more transparency is needed in this field of microfinance funds.”

Since I wrote the book I have been delighted to receive overwhelming support from so many people. Even some whom I would never have expected to support me. Neither in writing the book, nor in the activities unfolding now, have I acted alone. Courageous people are collectively fighting for the rights of the poor, and we are having an impact. I do not know most of these supporters. I read their replies, comments, articles in the media or blogs. They send me notes of support, and we share information. I thank each and every one of them. People are waking up to the fact that increased regulation of the microfinance sector is a critical tool to ensure a fairer outcome for investors and the poor alike. Who will resist this most vehemently? Those with the most to fear: the MIVs.

Welcome to the revolution.