Daily Archives: August 29, 2012

Theory vs. Practice: Confessions of a Microfinance Heretic

“Journalism,” George Orwell is supposed to have said, “is printing what someone else does not want printed: everything else is public relations.”

I don’t know if Hugh Sinclair realizes this, but despite lacking any formal journalism training, he has indeed committed an act of journalism in his recently published book, “Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor.”

The book’s title is indicative of what’s inside and Mr. Sinclair does a nice job backing up his claims with well researched and annotated sources where the source is not his own decade of experience in the field. Among the basic findings:

  • Microborrowers at some of the industry’s poster child institutions pay interest rates considered usurious, extortionate and predatory in any other context, but somehow the microfinance canon has convinced a critical mass of people that this is the road to solving poverty;
  • Due diligence by American and European microfinance investment funds into microfinance lenders is all too often a joke, and not a very funny one;
  • In certain cases, financiers, some of whom represent the largest banks in the world, are aware of what are arguably unsustainable and unethical practices at microfinance institutions but turn a blind eye to them in the pursuit of greater yield.

And much, much more. Here’s a short list of what else this book is: jarring, jaw-dropping, infuriating, inflammatory, and yes, heretical. At the same time: enlightening, engaging, inspiring, illuminating.

And now here’s an even shorter list of what this book is not: bullshit.
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Emerging & Frontier Markets Headlines 2012.08.29

“Former World Bank Vice-President for Africa, Dr. Oby Ezekwesili, Tuesday said an estimated $400 billion of Nigeria’s oil revenue has been stolen or misspent since the country’s independence in 1960.” — This Day

“KKR follows Carlyle Group LP in turning to Africa as global buyout firms seek to diversify away from western economies to achieve higher returns. A so-called frontier market because it is perceived as riskier than more mature emerging economies such as China or Brazil, Africa is appealing to investors partly because of its steady economic growth over the past five years, its 1 billion inhabitants and growing middle class.” — BusinessWeek

Microfinance in Latin America – The myths and the reality — Milford Bateman
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