Due Diligence: An Impertinent Inquiry into Microfinance
Il n'y a pour l'instant aucun commentaire client. Partagez votre opinion avec les autres clients. Commentaires client les plus utiles sur Amazon. Well worth reading in order to understand microfinance as it existed through a year before publication! However, I wish it had a given a better explanation of the high interest rates being charged to borrowers; b explained why the industry seems preoccupied with this "neoliberal" view of capitalism that steers it away from subsidies; c covered the many lending and collection practice abuses that seem to exist between the theory and the practice of microfinance.
As I understand it, there is no reason why MFI's can't reform to be social businesses. You don't want to be a charitable NGO? Just don't be a blood-sucking for-profit business that oppresses the poor. It is impertinent to question the effectiveness of charitable efforts, and this makes it difficult for anyone to raise doubts about the practice of microcredit, which involves lending small sums of money to the poor at high interest rates.
But if the purpose of the charitable efforts is to help the poor, rather than to gratify the donors, then someone really does need to investigate whether the practice actually works.
That person is David Roodman in this book. The quick - and for most donors very disappointing - answer is that there is no convincing evidence that microcredit is an effective tool for bringing people out of poverty.
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There are many stories of people who have indeed worked their way out of poverty after accessing microcredit loans, but there are also many stories of people who have worked their way further into debt. According to the author, the most reliable research into the effectiveness of microcredit does not indicate any net positive effect on the incidence of poverty. Microfinance as a whole, however, particularly microsavings accounts, does provide a very useful means for the poor to manage their money.
Intuitively these findings make sense.
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In Western countries, poor people who save money tend to improve their lot, whereas poor people who max out their credit cards tend to stay poor. Poor people tend to borrow money more often to meet today's needs than to invest in high-return business enterprises. Finding food for today is a more pressing concern than repaying a loan tomorrow. The surprising thing about the findings is that they tend to contradict the virtually unanimous voice of microcredit proponents over many years.
Presumably the microcredit myth has lasted so long because it appeals to our paternalistic instincts as donors, romantically portraying the poorest of the poor as skilled entrepreneurs just needing access to capital when what they really need is opportunities for decent employment , portraying women as better managers of money than men when in reality they are perhaps more susceptible to coercive demands for repayment , and suggesting that poverty can be solved through a simple commercial transaction when much more complex structural change is required.
The author does not confine himself to investigating the effect of microfinance on financial poverty. He also considers the impact on freedom and industry building. He presents his observations in a measured and impartial but very engaging and readable manner. I highly recommend the book to anyone who is concerned about serving the poor effectively.
David Roodman writes extremely well and that makes it an engaging read to start with. He is a very well trained academician who has taken more tie and effort than any other I know to understand what microfinance actually does with the possible exception of Esther Duflo. Imagine your life without financial services: Clearly they are a necessary part of a modern, relatively affluent life.
Due diligence: An impertinent inquiry into microfinance.
But in fact, the global poor need financial services more than the rich precisely because they are poor. As the seminal book Portfolios of the Poor has shown, the incomes of the poor are more volatile and unpredictable than for the world's salaried minority. Meanwhile, the livelihoods of the poor depend more on their physical health, which tends to be more fragile and is rarely insured.
The intense uncertainty of poverty leaves an intense need for ways to set aside money in good times for use in bad times and to discipline oneself into doing so. Loans, savings accounts, insurance, even money transfers can all meet that need, however imperfectly, so poor people devise and use such services as they can. The services available are often far from ideal—for lack of insurance, people may borrow or deplete savings to pay a hospital bill—but that is part of being poor. In the financial lives of the poor, microfinance is one more option, typically characterized by high reliability, if also rigidity, and useful in the spirit of diversification.
Organized efforts to meet the financial needs of the poor began centuries ago. In 15th-century Italy, some towns instituted pawn shops, monti di pieta, to undermine Jewish bankers seen as usurious. The monti were themselves accused of usury, but the pope ruled in their favor in Around the same time, bequests for charitable loan funds began appearing of well-to-do Englishman.
Rather like microcredit clients today who must take loans through groups, shouldering responsibility for each other's loans, each of Swift's borrowers needed to two cosigners, who would be liable in the event of default.
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By the midth century loan funds on Swift's model reached a fifth of Irish households. Today's microfinance traces to Germany's credit cooperative movement, which began in response to famine in the s. In , for instance, the British introduced cooperative credit groups into colonial India, including what is today Bangladesh.
History demonstrates the abiding demand among poor people for additional financial tools; yet it provides no evidence that meeting the demand systematically lifts people out of poverty. And today's microfinance echoes the past in many ways. As in previous eras, the movement has developed as do-gooders and profit-seekers discovered, invented, borrowed, and tinkered with ideas.
Due Diligence: An Impertinent Inquiry Into Microfinance
The rarest of these figures are those who found ways to scale up, reaching thousands or millions. Muhammad Yunus and his students did not invent microcredit, but they were the first in the modern wave to go to scale in founding what is now the Grameen Bank.
Microfinance is supplied by macro-organizations. The big institutions got that way by solving a tough business problem: That creates intense pressure to control costs. It pays to observe microfinance institutions the way Darwin did finches, looking for links between how they operate and whether they survive and thrive. The most famous traits of microfinance—the emphases on loans, groups, and women—do admit Darwinian explanations. Out of self-interest, the jointly liable peers must judge who is a prudent risk; and after loans are made they must pressure their peers to repay.
This reduces the quality of the financial product—who wants to be on the hook for the debts of others? The good news is that competition and innovation have steadily lowered interest rates while raising the diversity and flexibility of microfinance services. Though it began life with lending, the Grameen Bank now holds more deposits than loans. New technologies may throw back the frontier of the possible, vitiating old trade-offs between affordability and quality and creating radical new possibilities.
And each tends to lead to different kinds of evidence, all of which the book reviews. Most of the evidence on whether microfinance gives people, especially women, more control over their lives is qualitative: It is quite mixed. Some women have found liberation by doing financial business in public spaces. Others have been made to sit in meetings until all dues are paid.
Due diligence :an impertinent inquiry into microfinance /David Roodman. – National Library
But here too, critique is warranted. The development of the microfinance industry has often been unhealthy. Microcredit, like all credit, is susceptible to bubbles. Overindebtedness is a real possibility. First is the absence of negative feedback mechanisms such as credit bureaus, which can check the growth of credit. Second is the lack of diversity of linkages to other economic actors.