Due Diligence: An Impertinent Inquiry into Microfinance
Format: PDF / Kindle (mobi) / ePub
The idea that small loans can help poor families build businesses and exit poverty has blossomed into a global movement. The concept has captured the public imagination, drawn in billions of dollars, reached millions of customers, and garnered a Nobel Prize. Radical in its suggestion that the poor are creditworthy and conservative in its insistence on individual accountability, the idea has expanded beyond credit into savings, insurance, and money transfers, earning the name microfinance. But is it the boon so many think it is?
Readers of David Roodman's openbook blog will immediately recognize his thorough, straightforward, and trenchant analysis. Due Diligence, written entirely in public with input from readers, probes the truth about microfinance to guide governments, foundations, investors, and private citizens who support financial services for poor people. In particular, it explains the need to deemphasize microcredit in favor of other financial services for the poor.
(1997), 315–21. 97. On Latin America, see Westley and Palomas (2010). 98. Adams (2009), 9–10. 99. Adams (2002), 5; Shaw (1973). See also Christen and Mas (2009), 282. 100. Adams (2002), 5. 101. Dennis Whittle, February 4, 2010, comment on David Roodman, “Charting Growth,” Microfinance Open Book Blog, February 3, 2010 (j.mp/cUAobc). 102. Maisch, Soria, and Westley (2006). 103. Johnston and Morduch (2007), 29. 104. Twenty-one percent of (21.2–3.5) million versus 9 percent of 3.5 million.
smoothing, making sure there is enough to eat every day. One bought materials to improve her house, which we could call asset building. In fact a majority did use the credit for what could be called business activities, though not ones usually thought of as microenterprise: moneylending and the leasing or buying of rice land. Bank policy proscribed land leasing in particular, viewing the rents as usury extracted by landlords, a perspective that reflects the historical intertwining in South Asia
government has, from its point of view, cleared Grameen of all charges.] The episode does shed light on the parting of ways between the Grameen Bank and donors. Yunus has long taken pride in the Bank's independence since the mid-1990s. Whether he is making a virtue of out of an unhappy divorce, or whether the deep cause of the newly exposed dispute was Yunus's growing restiveness under the yoke of the donors, it seems clear that the Bank had developed the confidence to do things its way, on its
microfinance, 59–60 Capital adequacy ratio, 283 Capital allocation function, financial services, 250 Capitalism, Socialism and Democracy (Schumpeter), 225 Carcano, Michele, 43, 62 CARE charity, 87, 211–12 Cash credit origins, Scotland, 43–45 Cash lender study, South Africa, 165–67 Catholic Relief Services (CRS), 159–60 Caulfield, Catherine, 70–71 Causation vs. correlation problem, microfinance impact studies, 146–48, 158–65 Centre for Microfinance study, 169–70 Chakravarti, J. S., 96
the British Prudential system for direct retail. It made up for its slower start by importing hundreds of British Prudential agents. Soon it became the market leader.79 Early in the twentieth century, serious efforts were made to introduce two more models, one based on the European credit cooperatives, the other on the more individual approaches of the British Isles. The former grew steadily, and the institutions it spawned thrive to this day; the latter soared spectacularly and then disappeared