Leading bankers fear another potential sub-prime scandal in poverty hotspots across the world with the advent of Microfinance, where lenders make tiny loans to impoverished borrowers.

Microfinance is supposed to offer a "double bottom line": the financiers make profits while helping some of the world's poorest people, from Mexico's villages to the townships of South Africa, improve their lives.

As new lenders flood the sector, however, concerns are mounting that a new breed of "microloan sharks" are helping only themselves. Leading bankers fear another sub-prime-type scandal – where poor American homebuyers were sold loans they couldn't pay - is brewing.

In the 32 years since Grameen Bank, the first microlender, opened for business in Bangladesh, poor borrowers have proven astonishingly creditworthy. Microloan repayments typically top 97 per cent, far higher than conventional lending.

Hopes are high: Muhammad Yunus, the Nobel Peace Prize-winning "godfather of microcredit" who founded Grameen, talks of a future in which people visit "poverty museums". Asad Mahmood, who heads Deutsche Bank's microfinance arm, envisages a time when "a Dar Es Salaam becomes a Frankfurt". Such is the potential power, they argue, of loans of as little as £5 advanced to help, say, Venezuelan villagers buy dairy cows or Ugandan co-operatives purchase sewing machines.

Some of the world's savviest investors are buying in: Sequioa, the venture capital group that backed Google, recently took a stake in SKS, India's largest microfinancier. With estimates suggesting that demand for microcredit stands at about $250 billion, ten times the amount lent so far, Citigroup and HSBC plan to make it a mainstream business. As Time magazine put it: "the pinstripes are chasing the poor".

Not all is well, however. When Compartamos Banco, Mexico's largest microlender with more than 840,000 customers, went public last year, it raised $450 million for a group of backers that had originally invested just $6 million. It emerged that the bank routinely charges annual percentage rates (APR) of interest of more than 100 per cent – about treble the global microfinance average. Its return on equity is more than three times the 15 per cent delivered by Mexico's conventional lenders.

A paper written for a Stanford University review said: "The Compartamos IPO raises a red flag: There is something decidedly unseemly about profit-maximizing investors backing an [microfinancier] that charges 100 per cent interest, compounded annually, to the world's poorest people."

In South Africa experts say loans are being misused to buy television sets and the like. In Bolivia there are fears microfinance will go the way of pawnbroking, a pariah among financial services.

According to Larry Reed, of the Boulder Institute, a specialist thinktank, the sector "faces a moment of reckoning". A recent meeting of bankers, academics and development specialists admitted that "rapid growth ... is now leading to accusations of aggressive collection or excessive profits".

Many hear echoes of another recent financial crisis triggered by overzealous lenders. "We want to make sure [microfinance] doesn't become a subprime case," Mr Mahmood said.

Microfinanciers are now being called to sign the Pocantico Declaration, a self regulation pact that resembles a kind of Hippocratic oath, the ethics code that states doctors should, above all, "do no harm". Elizabeth Littlefield, of the Consultative Group to Assist the Poor, one of the groups behind it, said: "Without commercial foundations microfinance cannot become the profitable business it needs to be to survive. But without firm ethical principles and a commitment to benefit poor people's lives first and foremost, it will no longer be microfinance."

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