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Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor Hardcover – July 9, 2012

4.3 out of 5 stars 37 customer reviews

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Editorial Reviews

Review

“Confessions of a Microfinance Heretic is essential reading for anyone interested in development economics, a disturbing and yet ultimately hopeful exposé.”
—John Perkins, New York Times bestselling author of Confessions of an Economic Hitman

“This is a very important and courageous book. Hugh Sinclair tells a gripping story of idealism, naiveté, callousness, greed, and corruption in the microfinance industry to show how it has been overrun by a new breed of loan sharks who make us believe they are helping the poor when they are actually exploiting them. This sobering tale should be a valuable guide to a reform program that will save what is still good in microfinance and help it make the contribution it can make without the absurd hype that has characterized the industry.”
—Ha-Joon Chang, Reader in the Political Economy of Development, University of Cambridge, and author of Bad Samaritans and 23 Things They Don’t Tell You About Capitalism

“An intriguing book that cuts to the core of microfinance. If you are looking to understand and invest in effective microfinance, this book provides an overview and helps you select the vehicle that suits your needs. Good microfinance is undoubtedly possible…structure, dedication, and full transparency is the way forward.”
—Mads Kjaer and Tim Vang, cofounders, MYC4.com

“In often shocking but sometimes hilarious detail, Sinclair describes how he was sucked into the global feeding frenzy created by the microfinance industry’s determined search for profit, and he angrily exposes how microfinance ended up destroying the lives of the very people it was supposed to be helping. For anyone who still labors under the illusion that microfinance is all about helping the poor, Sinclair’s passionate, lively, and eye-opening exposé of the inner workings of the microfinance industry is an absolute must-read.”
—Milford Bateman, freelance consultant, Visiting Professor of Economics, University of Juraj Dobrila at Pula, Croatia, and author of Why Doesn’t Microfinance Work?

“Provides a devastating, insightful, and well-documented look into the tragic reality of how a good idea was derailed by the Wall Street greed syndrome. It is essential reading not only for anyone involved in microcredit but also for all who seek an end to global poverty and injustice.”
—David Korten, Board Chair, Yes! Magazine, and author of Agenda for a New Economy and When Corporations Rule the World

About the Author

Hugh Sinclair has worked in microfinance with numerous global organizations, banks and funds for over a decade. He currently consults on microfinance strategy and portfolio management. Previously, he worked in traditional finance at ING Barings, CDC Capital Partners, and BZW Securities -- now Barclays Capital. Hugh holds a Master's degree in International and Corporate Finance from the University of Durham and an MBA from IESE Business School.
Among his accomplishments are being the first to deliver a Harvard Business case study in Mongolian and achieving the Guinness World Record for the fastest motorcycle tour from Prudhoe Bay, Alaska to the tip of South America. He speaks frequently at business schools and microfinance conferences.
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Product Details

  • Hardcover: 264 pages
  • Publisher: Berrett-Koehler Publishers; 1 edition (July 9, 2012)
  • Language: English
  • ISBN-10: 1609945182
  • ISBN-13: 978-1609945183
  • Product Dimensions: 6.4 x 1 x 9.5 inches
  • Shipping Weight: 1.2 pounds (View shipping rates and policies)
  • Average Customer Review: 4.3 out of 5 stars  See all reviews (37 customer reviews)
  • Amazon Best Sellers Rank: #566,782 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

Format: Hardcover Verified Purchase
Full disclosure: I knew the author some years ago and was one of the principals in the company that made the M2 software cited in the book.

I was involved in microfinance from 1985 (before it was fashionable) until 2005, when I ended my involvement with the M2 software. Before my involvement with microfinance IT, I was with a fund that supported microfinance and observed many of the weaknesses that Hugh Sinclair cites, including, to my enduring embarrassment, inadequate due diligence of our MFI partners and uncritical marketing of good news stories.

During the time I was involved with information systems for microfinance (there were others before M2), I got a different perspective, but one that still supports Sinclair's conclusions. If we view microfinance IT as the window to the truth about the real portfolio of an MFI, including interest rate structure, fees, delinquency and much more, then the results are sobering indeed. Readers would be shocked to know that many MF executives and board members don't really want that level of transparency. This is partly because it reveals their actual (usually poor) work performance, but also because it often uncovers loans, more often than not delinquent, to relatives, employees and board members.

The company that made M2 (not the same company that owns it now) was often asked for "enhancements" to the software that would permit the requesting MFI to create products that were far from standard banking practice. Opening up the ability to create additional fees, using a variety of formulae was a favourite. We would provide only widely requested improvements, so these unusual requests were not added.
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Format: Hardcover
I can't recall feeling such an acute combination of fury and delight at a book before. Hugh Sinclair's Confessions of a Microfinance Heretic is a tell-all from an industry insider. It recounts his experience working in microfinance institutions (MFIs) in Mexico, Mozambique, Nigeria, and Mongolia, and then inside the microfinance investment firm Triple Jump. Near on half the book is about a single MFI, LAPO in Nigeria, which you might recognize from the New York Times article that Hugh engineered behind the scenes or from the masked blog commentator StreetCred, whose identity Hugh may know something about.

The extended scorchings of particular MFIs sometimes obscure what is, or is meant to be, the book's main message. It is not "these MFIs are bad so all microfinance is bad," for the text states more than once that the MFIs exposed may not be representative. It is rather that there is something wrong with the readiness of intermediaries to invest in the asserted bad guys--and here the list of institutions does represent a large swath of the industry: Triple Jump, BlueOrchard, Grameen Foundation, Calvert, Kiva, and more. To document his battles with them, Hugh has posted primary materials such as internal reports and phone call recordings. I assume he says less than he knows, his lawyers providing one filter for what can be public.

What delights in this book are the stories. I felt my heart beat as I read Hugh's account of the confrontation with his superiors at Triple Jump that would turn him into a whistleblower.
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Format: Kindle Edition Verified Purchase
¡°Some microfinance is extremely beneficial to the poor, but it is not the miracle cure that its publicists would have you believe. Microfinance has been hijacked by profiteers, and we need to reclaim it for the poor. The problem is not with a few rogue operators, alas, but with systemic flaws that permeate the sector.¡±

Thus does Hugh Sinclair lay out the thesis he pursues in Confessions of a Microfinance Heretic. If you skip over this statement in the opening pages of the book, you could easily conclude that Sinclair can see no good at all in the $70 billion industry that has grown up under the impetus of Muhammad Yunus¡¯ 2006 Nobel Peace Prize. After all, Sinclair writes ¡ª at least twice ¡ª that he wouldn¡¯t invest a single dollar in microfinance today. Nonetheless, he insists that the ¡°debate is not whether microfinance works, but how the inherent conflicts of interest can be managed.¡±

The systemic flaws Sinclair perceives are eye-opening:

*** A majority of the money loaned to poor people goes not to help them launch or sustain microbusinesses to supplement family income but rather for current consumption, sometimes to buy food during a time when there's not enough money coming in, sometimes just to buy TV sets. "Estimates for consumption loans range from 50 percent to 90 percent of all microfinance loans, depending on the study. As Sinclair points out, citing numerous sources, the proportion of entrepreneurs among the poor is no bigger than it is among the rich. It's naive of us to expect otherwise.

*** The interest rates charged for microloans are, far too often, prohibitively high. Muhammad Yunus' "benchmarkª -- 10 to 15 percent above the cost of money -- is rarely observed.
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