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Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor Hardcover – July 9, 2012
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—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
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.
Top Customer Reviews
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.Read more ›
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.Read more ›
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.Read more ›
Most Recent Customer Reviews
I started the first best practice micro finance agency in Sri Lanka named SEEDS and has also consulted and assisted setting up many others in over 10 countries. Read morePublished 6 months ago by Amazon Customer
The author has shown us the dark side of microfinance. It is a front for a few chosen Microfinance institutes (MFIs) and Microfinance Fund executives to leverage the desperation... Read morePublished 9 months ago by Vaishali Naroola
A clear, open view of the microfinance Industry, given by an insider. It calls to reflection, but mostly action... Things can be done better.Published on June 1, 2014 by J. Bonilla
An eye-opening glimpse into the world of micro-finance from the inside. Essential reading for anyone who claims to be interested in making a difference to world poverty,... Read morePublished on January 21, 2014 by thebookworm
As an active Micro-finance Lender through Kiva, I found "Confessions of a Microfinance Heretic", to be highly informative. Read morePublished on January 4, 2014 by James E. Dowd
I was expecting a viewpoint on the utility [or otherwise] of microfinance from this book. Instead this book is 90% about a scam by a Nigerian microfinance institution which the... Read morePublished on October 10, 2013 by Mian Parvaiz Hameed
This is a very helpful analysis of micro finance, how and why it has messed with the poor, some positive statements about a handful of good things, and suggestions on how to fix... Read morePublished on June 25, 2013 by Denise Owen
I've been coordinating microfinance courses at Bangladesh and done a bit of field work in Honduras and read about almost all the microfinance books out there, but this is about the... Read morePublished on April 19, 2013 by akkynym
I rarely can read a book cover to cover in a day -- this book was one of the few exceptions. I had to hold my thirst, hunger and urine just to keep reading non-stop. Read morePublished on April 11, 2013 by Humble