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Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor

by: Anonymous

ISBN: 9781609945183 | 1609945182

Format: Hardcover
Publisher: Ingram Pub Services
Pub. Date: 7/9/2012

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Summary Table of Contents

- A deeply personal story written by a microfinance insider who was once tapped as an anonymous source for a New York Times expos� - Reveals the shocking truth of the industry once hailed as the miraculous solution to world poverty- Profiles the few shining exceptions to industry-wide corruption and offers solutions to clean up the rest Offering inspiring success stories, the microfinance industry depends on the faith of investors that small loans can transform the lives of the poor. But as Hugh Sinclair points out, very little solid evidence e... MORExists that microloans make a dent in long-term poverty. Evidence does exist for negligence, corruption, and methods that border on extortion. Part expos�, part memoir, and part financial detective story, this is the account of a one-time true believer whose decade in the industry turned him into a heretic. Sinclair worked with several microfinance institutions and funds as he traveled from Mexico to Mongolia, with Nigeria, Holland, and Mozambique in between. He couldn't help but notice that even with a booming $70 billion industry on their side, the poor didn't seem any better off in practice. Exorbitant interest rates led borrowers into never-ending debt spirals, and aggressive collection practices resulted in cases of forced prostitution, child labor, suicide, and nationwide revolts against the microfinance community. With characteristic intelligence and biting wit, Sinclair weaves a shocking tale of a system increasingly focused on maximizing profits. The situation worsened when large banks, attracted by the high repayment rates of overpriced loans, hijacked the sector and created a microfinance bubble. Sinclair details his discovery of several scandals, one of the most disturbing involving a large African microfinance institution of questionable legality that charged interest rates in excess of 100 percent per year, and whose investors and supporters included some of the most celebrated leaders of the microfinance sector. Sinclair's objections were first met with silence, then threats, attempted bribery, and a court case, and eventually led him to become a principle whistleblower in a sector that had lost its soul.Microfinance can work - Sinclair describes moving experiences with several ethical and effective organizations and analyzes what made them different. But without the fundamental reforms that Sinclair recommends here, microfinance will remain an "investment opportunity' that will leave the poor with hollow promises and empty pockets.

Part memoir, part financial detective story, and part expos�, this is the account of a microfinance insider who joined the industry in 2000s with a newly minted MBA and the intention to do good in the world. But over the course of eight years, he became increasingly disillusioned and alarmed. Eventually he decided to do something about it: he became an anonymous source for The New York Times, providing information for a series of stories that covered an increasing number of microfinance scandals. The author traveled the world, from Mexico to Mongolia, with Nigeria and Mozambique in between, working for several banks, agencies and institutions. He saw microfinance at all levels, from the first-world banks who called him in the night to hush up negative publicity, to the street vendors whose lives were sometimes transformed by microloans-but all too often were not. Because microcredit is largely unregulated and poorly understood by individual investors the potential for abuse is rampant. And seduced by the high pay-back rate of the loans, banks like DB and Citibank helped push the microfinance sector to bubble-like highs. The author describes his firsthand experiences of the result: rampant corruption, exorbitant interest rates, and microloans leading to fraud, child labor, and even suicide. Much of the book centers on the scandal he uncovered involving the corrupt Nigerian nonprofit LAPO and its dealings with industry darlings Kiva and Triple Jump. Microfinance can work-the author had direct experience of this too, and lays out the conditions necessary for success. But he authoritatively debunks the myth that putting the poor of the world into debt is always a good idea.

Offering inspiring success stories, the microfinance industrydepends on the faith of investors that small loans can transformthe lives of the poor. But as Hugh Sinclair points out, verylittle solid evidence exists that microloans make a dent in long-term poverty. Evidence does exist for negligence, corruption, andmethods that border on extortion. Part expos?, part memoir, andpart financial detective story, this is the account of a one-timetrue believer whose decade in the industry turned him into aheretic.Sinclair worked with several microfinance institutions and fundsas he traveled from Mexico to Mongolia, with Nigeria, Holland,and Mozambique in between. He couldn't help but notice that evenwith a booming $70 billion industry on their side, the poordidn't seem any better off in practice. Exorbitant interest ratesled borrowers into never-ending debt spirals, and aggressivecollection practices resulted in cases of forced prostitution,child labor, suicide, and nationwide revolts against themicrofinance community.With characteristic intelligence and biting wit, Sinclair weavesa shocking tale of a system increasingly focused on maximizingprofits. The situation worsened when large banks, attracted bythe high repayment rates of overpriced loans, hijacked the sectorand created a microfinance bubble. Sinclair details his discoveryof several scandals, one of the most disturbing involving a largeAfrican Microfinance institution of questionable legality whichcharged interest rates in excess of 100% per year, and whoseinvestors and supporters included some of the most celebratedleaders of the microfinance sector. Sinclair's objections werefirst met with silence, then threats and attempted bribery, acourt case, and eventually led him to become a principlewhistleblower in a sector that had lost its soul.Microfinance can work-Sinclair describes moving experiences withseveral ethical and effective organizations and analyzes whatmade them different. But without the fundamental reforms thatSinclair recommends here, microfinance will remain an "investmentopportunity" that will leave the poor with hollow promises andempty pockets.A deeply personal story written by a microfinance insider who wasonce tapped as an anonymous source for a New York Times expos?Reveals the shocking truth of the industry once hailed as themiraculous solution to world povertyProfiles the few shining exceptions to industry-wide corruptionand offers solutions to clean up the rest

Foreword	p. ix
Preface	p. xv
Thou Shalt Not Criticize Microfinance	p. 1
Baptism in Mexico	p. 15
Bob Dylan and I in Mozambique	p. 29
Another Mozambican Civil War	p. 55
The "Developed" World	p. 69
Something Not Quite Right in Nigeria	p. 83
Something Not Quite Right in Holland	p. 107
In Front of the Judge	... MOREp. 125
Rustling Dutch Feathers	p. 135
Blowing the Whistle from Mongolia	p. 149
Enter the New York Times	p. 167
Collapse, Suicide, and Muhammad Yunus	p. 193
The Good, the Bad, and the Poor	p. 215
Appendix: Microfinance Economics 101	p. 239
Notes	p. 251
Acknowledgements	p. 261
Index	p. 262
About the Author	p. 268
Table of Contents provided by Ingram. All Rights Reserved.

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