Why Doesn't Microfinance Work?: The Destructive Rise of Local Neoliberalism

It's too socialistic and repetative, although his ideas are currently fanishable

It is refreshing to see that there are still writers and publishing companies out there that are willing to challenge fashionable trends. Microfinance as a model for economic development has become very fashionable, particularly among Western developed nations. This is, in part, because it was held to be a kind of "pull yourself up by your bootstraps" model of economic development in poor countries. This means reducing government subsidies and letting the market take care of things--a key economic principle in free-market, neoliberal ideology. Milford Bateman does an excellent job of demonstrating how the core mission of microfinance institutions (MFIs) shifted from poverty reduction to profit maximization as part of the neoliberal movement in the banking industry starting in the 1990s. As we have seen from the Mexican peso crisis, the East Asian crisis, and the Russian Ruble crisis in the late 1990s and the banking crisis of 2008, the results of neoliberal financial market deregulation have been disastrous. Microfinance is no exception. Bateman's book is accessible, informative and an crucial resource for anyone interested in microfinance or economic development. Highly recommended.

This book has a weak empirical basis for its attack on microfinance. A more recent text by Lamia Karim does a much better job of demonstrating the reasons microfinance, particularly in Bangladesh, has not lived up to expectations.

This is less a thoughtful analysis of the microfinance industry and more an all out assault on it. While many of the view expressed by Bateman are based on valid insight, he pushes the argument past what can be reasonably concluded from the evidence presented. Bateman nitpicks his cases to illustrate his points and thus does not adequately review a representative sample of microfinance outcomes. The deepest fallacy of the book is the assumption of a zero-sum game in aid funding. In essence, he argues that funds directed toward microfinance draw money away from more productive development activities. The evidence supporting this claim is dubious. It should not be assumed that taking money away from microfinance projects would make it available for other types of development work. That said, the book is worth reading if you work in the field or have only heard the positive spin on the subject in the past.

This is a very important book and needs to be read by all who are intersted in foreign aid, development and microfinance. The way it's written may, unfortunately, prove a little hard for many people, and that's a pity because it answers the question of why some nations have remained poor and some have prospered in the late 20th and early 21st century. The author did a lot of research and possesses the necessary practical experience to understand these issues. All the statistical data supporting his analysis are provided, the sources are clearly cited, and the bibliography is vast - probably enough to write a PhD thesis. Once I started reading it and understood the message, I just couldn't cancel my Kiva account fast enough. The author has been swimming against a very powerful tide with significant vested interests, and I admire his courage.

Great book. I love the controversy it will spark on the micro-finance debate.