The Uncomfortable Truths about Microfinance
The blog Diverging Markets has published an interesting book review of Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor by Hugh Sinclair. I haven’t yet read it myself, but I am bracing myself for the long-overdue hit job.
It’s never fair to extrapolate one quote or passage as being representative of a book as important as this one, but since I happened to have my laptop open as I was finishing it, I couldn’t help pulling a couple quotes. Here’s one regarding the proposition that credit may be a “human right”:
But what did Muhammad Yunus actually say about this human right? “[Credit is] also a human right, so that people can create their self-employment with that money. If they can create income for themselves, they can take care of right to food, right to shelter much more easily than government can ever do it.” If, as some have speculated, 90 percent of microfinance is directed to consumption, or loans cost 144 percent, how does this create employment or income? This is the difference between the theory and the practice of microfinance.
And here’s another a few pages later:
…the debate is not whether microfinance works, but how the inherent conflicts of interest can be managed.
I would actually consider Chapter 13 alone to be a mission statement for the entire industry.
What else is in this book…obviously a lot of uncomfortable truths, but I think the most appropriate way to continue discussing them here would be to break it down by audience types.