In July, a book was published that has caused something of a stir amongst people interested in microfinance. This was not the first time an author had published a work critical of the sector, but the majority of previous attempts have been written by academics who criticise the concept from either an ideological or a technical perspective. Confessions of a Microfinance Heretic, however, is different. This is because the author, Hugh Sinclair, is not a Marxist university professor or an anarchist political activist, but rather a graduate of one of the world’s top business schools with a track record of more than a decade working in microfinance around the globe. In the book, Sinclair describes his first-hand experience of the corruption and profiteering that he believes characterises some organisations and individuals in the sector, and the evidence he presents has left many people in microfinance wondering what can be done to ensure that their work benefits the poor people who need it.
With his latest book David Roodman, a senior fellow at the Washington-based Centre for Global Development, adds a new contribution to the debate on the effectiveness of microfinance in empowering the poor. Written through Roodman’s Microfinance Open Book Blog, where drafts of chapters, questions and findings were posted online and available to be read and commented by the public, “Due Diligence: An Impertinent Inquiry into Microfinance” is an investigation on the microfinance sector, its most relevant practices, and its structural weaknesses.
Roodman argues that “Sustainably extending the financial system to poor people is development,” he explaines. “Poor people deserve access to financial infrastructure just as they deserve access to clean water, sanitation, and electricity.” However, he also finds that there are serious problems, particularly the speed of growth of the microfinance market, given by the high amount of resources invested in it. A more moderate growth in the sector would help to avoid credit bubbles and encourage microfinance institutions to take savings deposits.
These findings will be discussed by Roodman in an upcoming modified parliamentary-style debate with Milford Bateman from the University of Juraj Dobrila, Pula, author of the provocative “Why Doesn’t Microfinance Work? The Destructive Rise of Local Neoliberalism“. Both participants will answer one question among the ones submitted from the audience on the Microlinks website, after which a Q&A session will be held. The debate is being held in Washington DC on January 30th from 9-11am EST, and will be broadcast as a live webinar which you can register for here.
The discussion between two of the most conflicting voices from the microfinance debate may not lead to final conclusion on the effectiveness of microfinance for the poor, but it will definitely raise important issues and valuable questions that will help to better understand the mistakes of the sector and find appropriate ways to tackle them.
On Tuesday night the APPG on Microfinance hosted a debate on the motion: ‘Is Microfinance an Effective Tool for Helping Eradicate Poverty?’
The panel of speakers was composed of two teams with Martin Greely (Institute of Development Studies) and Tom Sanderson (Five Talents) debating in support of microfinance and Milford Bateman (Overseas Development Institute) and Malcolm Harper (Cranfield School of Management) arguing against the motion. Almost 100 members of the public, including members of the Houses of Parliament, academics, private investors, representatives of international organisations and microfinance institutions, attended the event. Continue reading
The All-Party Parliamentary Group (APPG) on Microfinance will be hosting a debate to discuss the effectiveness of microfinance in eradicating poverty on 19th October 2010 at the House of Commons, London.
Microfinance has been hailed as an effective and sustainable tool to combat poverty. However, recent studies have challenged the extent to which microfinance can really lift people out of poverty and whether it is really having the impact that its supporters propose. Continue reading
With Milford Bateman’s new book ‘Why doesn’t Microfinance work?’ being in the spotlight, there are new questions being posed and rising concerns that the commercialisation of microfinance can in fact exacerbate poverty.
The Swayam Krishi Sangam (SKS) Society started with the help of international grants and soon became the fastest growing and largest microfinance institution in India. However, the initial funding of the SKS and the initial public offering (IPO) process underlined the faults with the traditional microcredit model and the pitfalls of commercialised microfinance. For more on this see our previous post. Continue reading
Microfinance has come under a lot of scrutiny in recent years and increasingly challenging questions are being asked about the impact that microfinance actually has on ending poverty.
Whilst there are many inspiring stories out there about how the lives of entrepreneurs have been transformed through access to savings, loans and other financial services, as well as the impact that microfinance has had on the health, education and empowerment of clients and their families, robust evidence of a wider impact on poverty alleviation is in short supply leading some to ask whether the benefits of microfinance have been oversold.
One very vocal opponent of microfinance is Milford Bateman who has recently joined the Overseas Development Institute (ODI) in London as a Senior Research Fellow.
Earlier this month, Milford Bateman presented his new book ‘Why doesn’t microfinance work?’ which suggests that microfinance is actually a major poverty trap and that almost all of the main claims made on behalf of microfinance are myths. Continue reading