In contemporary times microfinance is promoted by powerful organisations such as the United Nations (UN) and the World Bank as a cutting-edge financial innovation that has the potential to meet certain development ends and goals, including poverty alleviation and women's empowerment. Indeed, the UN officially declared 2005 the International Year of Microfinance. However, research on the impact of microfinance is often conf licting, with certain studies providing evidence of the empowering effects of microfinance, and other studies analysing its disempowering potentials. Such conflicting perspectives challenge the 'magic bullet' notion of microfinance and illustrate the richness of research in this field. In light of these conflicting viewpoints, the purpose of this special issue is to set out a platform for these debates, and to introduce papers appearing in this special issue on microfinance. This is a discussion paper exploring key issues theoretically. The paper finds that there are many aspects of microfinance that should be explored in greater depth in future studies.