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Why Doesn't Microfinance Work?: The Destructive Rise of Local Neoliberalism
Since its emergence in the 1970s, microfinance has risen to become one of the most high-profile policies to address poverty in developing and transition countries. It is beloved of rock stars, movie stars, royalty, high-profile politicians and ‘troubleshooting’ economists.
In this provocative and controversial analysis, Milford Bateman reveals that microfinance doesn’t actually work. In fact, the case for it has been largely built on hype, on egregious half-truths and – latterly – on the Wall Street-style greed of those promoting and working in microfinance. Using a multitude of case studies, from India to Cambodia, Bolivia to Uganda, Serbia to Mexico, Bateman demonstrates that microfi nance actually constitutes a major barrier to sustainable economic and social development, and thus also to sustainable poverty reduction. As developing and transition countries attempt to repair the devastation wrought by the global financial crisis, Why Doesn’t Microfinance Work? argues forcefully that the role of microfinance in development policy urgently needs to be reconsidered.
In this provocative and controversial analysis, Milford Bateman reveals that microfinance doesn’t actually work. In fact, the case for it has been largely built on hype, on egregious half-truths and – latterly – on the Wall Street-style greed of those promoting and working in microfinance. Using a multitude of case studies, from India to Cambodia, Bolivia to Uganda, Serbia to Mexico, Bateman demonstrates that microfi nance actually constitutes a major barrier to sustainable economic and social development, and thus also to sustainable poverty reduction. As developing and transition countries attempt to repair the devastation wrought by the global financial crisis, Why Doesn’t Microfinance Work? argues forcefully that the role of microfinance in development policy urgently needs to be reconsidered.
274 pages, Kindle Edition
First published June 10, 2010
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Displaying 1 - 9 of 9 reviews
April 24, 2017
I was reading "Listen, Liberal" by Thomas Frank when I came across a reference to this book and the fallacy of the great tool to reduce poverty called "microfinance". I was stunned. I had seen Muhammad Yunnus and Grameen Bank receive the Nobel Peace Prize for reduction of poverty in Bangladesh with microfinance. I got the book. Turns out it's all a lie. The original model as proposed byMuhammad Yunnus no longer exists. It has been replaced by for-profit micro fincance institutions who have interest rates at 24-28%, plus various fees, and that are basically a poverty trap.
The microfincance narrative is false. It does not help people out of poverty because the interest rates are so high, it just can't be done. It's not first and foremost an income generating lone, that is, a loan to set up small business. Mainly it is a consumption loan. It does not empower women, because even when women receive money, they have to pass it on to the head of the family. There is an enormous amount of data showin the utter failure of microfinance to reduce poverty. All it has done is put money in the pocket of the ones heading the financial institutions. Since the loans are so small, they can't fund any mid-sized companies - the ones needed for economies of scale.
Microfinane is a damaging neoliberalistic institution set up to put money in the pocket of elite at the expense of the poor. There are better ways of doing this locally and without huge interest rates, but we're not supposed to know about this. Remember that the father of neoliberalism, a man I put along side Hitler and Stalin in his massive destructive impact of the world, had the following view:
"It was Friedman who in 1962, with the publication of 'Captialism and Freedom', first proposed the abolition of Social Security, not because it was going bankrupt, but because he considered it immoral."
Holy Smokes.
No, let me reiterate with a quote from "Listen, Liberal", which works as well in this context.
"Economies aren't ecosystems. They aren't naturally occuring phenomena to which we must learn to acclimate. Their rules are made by humans. They are, in a word, political. In a democracy we can set the economic table however we choose."
We should not impose microfinance on the poor. It isn't right. There are better ways to combat poverty than indebting people and not lifting them. Microfinance has failed utterly and completely every place that has tried it, it is time to lift our sights above prestigious prices. They should not dictate how we think about something, at least not when the facts all point in another direction.
Read the book, it's not necessarily easy, but it is definitely an eye opener.
The microfincance narrative is false. It does not help people out of poverty because the interest rates are so high, it just can't be done. It's not first and foremost an income generating lone, that is, a loan to set up small business. Mainly it is a consumption loan. It does not empower women, because even when women receive money, they have to pass it on to the head of the family. There is an enormous amount of data showin the utter failure of microfinance to reduce poverty. All it has done is put money in the pocket of the ones heading the financial institutions. Since the loans are so small, they can't fund any mid-sized companies - the ones needed for economies of scale.
Microfinane is a damaging neoliberalistic institution set up to put money in the pocket of elite at the expense of the poor. There are better ways of doing this locally and without huge interest rates, but we're not supposed to know about this. Remember that the father of neoliberalism, a man I put along side Hitler and Stalin in his massive destructive impact of the world, had the following view:
"It was Friedman who in 1962, with the publication of 'Captialism and Freedom', first proposed the abolition of Social Security, not because it was going bankrupt, but because he considered it immoral."
Holy Smokes.
No, let me reiterate with a quote from "Listen, Liberal", which works as well in this context.
"Economies aren't ecosystems. They aren't naturally occuring phenomena to which we must learn to acclimate. Their rules are made by humans. They are, in a word, political. In a democracy we can set the economic table however we choose."
We should not impose microfinance on the poor. It isn't right. There are better ways to combat poverty than indebting people and not lifting them. Microfinance has failed utterly and completely every place that has tried it, it is time to lift our sights above prestigious prices. They should not dictate how we think about something, at least not when the facts all point in another direction.
Read the book, it's not necessarily easy, but it is definitely an eye opener.
November 12, 2024
Eradicating poverty sounds like a very noble pursuit, especially after the example of Grameen Bank which was founded by Yunus, this company claims that it can alleviate poverty just by providing the poor access to low-interest loans, commonly known as microfinance.
However, this book vilifies most of the promises Yunus envisioned, basically by saying that most poor people when they get an access to money, they won't necessarily invest the money in income-generating projects. Instead, they often use it for consumption and buying their basic needs which can lead to an additional loan that they couldn't pay back or suffer to pay back!
Lacking finance isn't the only way to escape poverty; lacking knowledge, training, and connections is the smoke gun for poverty! Microfinance most of the time does more harm than good!
However, this book vilifies most of the promises Yunus envisioned, basically by saying that most poor people when they get an access to money, they won't necessarily invest the money in income-generating projects. Instead, they often use it for consumption and buying their basic needs which can lead to an additional loan that they couldn't pay back or suffer to pay back!
Lacking finance isn't the only way to escape poverty; lacking knowledge, training, and connections is the smoke gun for poverty! Microfinance most of the time does more harm than good!
February 18, 2017
Interesting read however I feel that his argument lacks a lot of substance. His arguments and work appears to be rather repetitive and does not provide the depth. The book could either have greater insight or alternatively be shorter and more to the point. There are with no doubts issues within the MF sector and ways which it can be implemented more effectively. He promotes CCT in his writing as an alternative but these too have issues within itself which he does not identify in his writing...
June 24, 2015
The thesis is interesting... I just wish it was possible to actually read this book. It never uses one word when six will do, never uses a period if there's an opportunity for a semicolon.
August 13, 2020
A little redundant, but that what happens when your insider who has a lot of specific info who reflects the larger point. An extremely compelling takedown of a favorite cause of the liberal class. The evidence is overwhelming that microfinance not only does not solve poverty but in many cases has exacerbated it to the exclusion of the more effective collective economic alternatives. Frankly surprised the book doesn't have more positive reviews. My guess is the content challenges a lot of folks who have a tacit or direct desire to believe the hype on this issue.
July 23, 2017
The reading of this book has turned on its head what I have been made to believe about the virtues of microfinance, with real evidence being heard and seen on the ground here in Cambodia. The case against microfinance was made so convincingly with recounts of the key myths and their debunking and comparative study with alternative models adopted in post-war Japan, South Korea, Taiwan and more recently in China and Vietnam.
August 25, 2019
The points brought forward about the development and current state of microfinance are backed by thorough research. It changed my view on the industry.
However, the author sometimes cuts corners, puts too much emotion in his writing for a book like this and does not give equal weight to the other side’s points. Furthermore, the book could be halved, as passages are repeated and easily fewer words could have been used.
However, the author sometimes cuts corners, puts too much emotion in his writing for a book like this and does not give equal weight to the other side’s points. Furthermore, the book could be halved, as passages are repeated and easily fewer words could have been used.
January 7, 2022
As was mentioned by others, the book is a bit repetitive and lacks depth. I'd say MF as everything else has drawbacks and "black sides", but it's a too quick to say that MF doesn't work at all.
October 9, 2013
Slightly repetitive but interesting
Displaying 1 - 9 of 9 reviews