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

by Sinclair, Hugh

• ISBN13: 9781609945183
• ISBN10: 1609945182
• Format: Hardcover
• Copyright: 2012-07-09
• Publisher: Berrett-Koehler Publishers

Summary

- A deeply personal story written by a microfinance insider who was once tapped as an anonymous source for a New York Times exposé - 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 exists that microloans make a dent in long-term poverty. Evidence does exist for negligence, corruption, and methods that border on extortion. Part exposé, 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.

Author Biography

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. Sinclair holds a master’s degree in international and corporate finance from the University of Durham and a master of business administration from IESE Business School.

Among his accomplishments are being the first to deliver a Harvard Business School 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.

Table of Contents

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	p. 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
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