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This guest post is provided by Milford Bateman who is a Visiting Professor of Economics at Juraj Dobrila University of Pula in Croatia and a development consultant. He recently accepted a two-month position as Distinguished Visiting Professor of Development Studies at St Mary’s University in Nova Scotia, Canada, to be taken up in late 2013.
Four of the most high-profile research teams have in recent months released papers summarising the results of multi-year projects that aimed to assess the impact of microcredit. All of these projects claim to have found some small residual value in the increasingly de-bunked concept of microcredit which, the authors quickly go on to say, suggests to them that it is too early to agree with the growing number of nay-sayers and abandon the microcredit model in favour of other local development models. The four papers I refer to are:
- (most recently) ‘Win Some Lose Some? Evidence from a Randomized Microcredit Program Placement Experiment by Compartamos Banco’ by Manuela Angelucci, Dean Karlan, and Jonathan Zinman (hereafter AKZ
- ‘Microfinance at the Margin: Experimental Evidence from Bosnia and Herzegovina’ by Britta Augsburg, Ralph De Haas, Heike Harmgart and Costas Meghir (hereafter AHHM)
- ‘The Miracle of Microfinance? Evidence from a Randomized Evaluation’ by Esther Duflo, Abhijit Banerjee, Rachel Glennerster and Cynthia G. Kinnan (hereafter DBGK)
- ‘Are microcredit participants in Bangladesh trapped in poverty and debt?’ by Shahidur R. Khandker and Hussain A. Samad (hereafter KS).
Dazzling econometrics and pioneering impact methodologies aside, the most important thing these four papers all have in common is actually something else: they all go to great lengths to avoid exploring the most awkward downside issues that lie at the heart of microcredit and, to do so, they choose to deploy some faulty logic along the way. Read the rest of this entry »
Next week sees a high-profile head-to-head between two of the leading voices on microfinance. In a debate hosted by the United States Agency for International Development (USAID) in Washinton D.C. on Monday, 30 January at 9:00 a.m./14:00 GMT/15:00 CET, David Roodman (Center for Global Development, USA) and Milford Bateman (University of Pula, Croatia) will have alot to discuss.
(P.S. See also below for information about a debate at Harvard University on 2nd February with Guy Stuart.)
The past few years have been particularly turbulent, with a succession of microfinance crises, growing overindebtedness, borrower suicides, disappointing impact findings, and a prize-winning Norwegian documentary contributing to Muhammad Yunus being removed from office as head of Grameen Bank.
The two debaters have met in the past. Bateman first brought a critique of microfinance into the mainstream with his 2010 book, which Roodman heavily criticised. Roodman has made a name for himself as a prolific and insightful blogger with the open book blog he kept while writing the book he recently published.
Whether Roodman’s book (endorsed by Muhammad Yunus) is anything as “impertinent” as it claims to be; what to think of Bateman’s musings about the “end of microfinance?”; and why the best evidence of microfinance’s impact on poverty still is “zero”, will be questions likely affecting the debate as much as the official debate question (which USAID succeeded in making so overwhelmingly dull I fear it may even scare off Washington development brass):
As India celebrates Diwali this week, the debate about how to deal with microfinance has calmed a bit. But since I wrote up my analysis of the root causes Andhra Pradesh showdown (part 1, part 2), the news has taken few further twists. Here’s an update:
- Vijay Mahajan, Chairman of BASIX and speaker for the MFIN industry organisation, stated on TV: “Alot of the reasons for invoking the ordinance were the creation of the microfinance sector itself. There has been a certain degree of wrongdoing by our sector. And as the president [of MFIN] I am the first one to accept it, I want to do it on record.”
- The interest rate disclosure requirement under the new microfinance ordinance in AP has uncovered interest rates far higher than previously reported – up to 60.5 percent. I wish I was surprised; but MFIs usually neglect to factor compulsory savings, fees, etc., into their publicly quoted rates.
- The AP government has published the complete list of complaints of malpractice and suicide launched against the MFIs – see it here.
- A massive borrower database in AP will go on-line in January, in an effort to clear up the mess.
Meanwhile, India’s vibrant media and civil society have been grappling with the issue, as are some American media. The rest of this post is a digest of the most provocative, insightful and intelligent commentary I’ve seen on the subject.
Milford Bateman’s book Why Doesn’t Microfinance Work? has generated heated discussion, with blows not always struck very far above the belt. Recently, I got involved by recapping and analysing several book reviews published on the web. I was critical of the tone and substance of David Roodman’s review (published on his blog, of which I remain a fan, notwithstanding), because I felt it attacked the person more than the argument, and it didn’t engage with Bateman’s overall point that microfinance is politically useful while economically questionnable.
David Roodman has responded to this challenge in a more elegant and eloquent piece than his original review. Some allegations against Bateman’s writing have been clarified, new ones have appeared. I think Roodman is still off with his accusations of “sloppy thinking” and “extremism”. I would still like to see Roodman engage with Bateman’s overall argument.
Most of the criticisms launched against the book (by diverse authors) have validity; however, I would urge those who dislike the work to beware the trap of accusing Bateman of what they see him as accusing others of, namely malignance. In plainer English: try to measure the book and your reaction by the same standard.
Here are my (less brief than intended) responses to what I see as David Roodman’s main points:
Prior to a seminar I hosted at the MPIfG in July with Milford Bateman, I published a review of his book Why Doesn’t Microfinance Work? (reproduced by several other sites). When the book was released this summer, it sold out its first print run within four weeks. It was the basis for an article (with a great cartoon) in the Dutch daily De Pers. It introduced a wider audience to the fundamental doubts surrounding microfinance. It also seems to have made Milford Bateman a fair share of enemies.
My review was resoundingly positive, since I felt that the book expressed growing concerns about microfinance’s impacts and legitimacy with great clarity and poignancy. What astonishes me is the type of criticism and hostility which has greeted the book. While the book sparked some general neutral publicity, the in-depth reviews ranged from cautious praise for raising important questions to heavy-handed attacks on Bateman’s academic integrity.
Some recent reviews:
David Roodman @ cgdev: “I am allergic to (as I perceive it) sloppy thinking …Bateman’s passion seems to lead him to select and distort evidence. I find it hard to fully engage with a piece of analysis in which the conclusions so seem to drive the evidence … I don’t think you need to read this book.”
Liz Blase @ wokai: “We urge that readers not fall prey to Bateman’s infatuation with short-term profits.” (??)
Duncan Green @ oxfam: “A passionate polemic that takes on a development shibboleth – sometimes it feels as though doubting microfinance is as heretical as criticising Nelson Mandela. But Bateman does so.”
Phil @ this blog: “The first book critical book capable of crossing the border between academia and the lay world … The proverbial ‘book’ on why (this) microfinance is not an adequate response to poverty.”
Malcolm Harper @ microfinance focus: “Few readers will agree with everything in it, and most will be irritated by some of it. All of us, however, should think carefully about what Bateman writes.
H-D Seibel: “There is nothing subtle about Bateman’s arguments… The one thing that concerned me was him framing his argument as a war of ideologies… Despite my reservations, Bateman’s book is a must read.” (published on devfinance)
Fehmeen @ microfinance hub: “While some welcome this opportunity to re-think the basic microfinance model, others deem some of his claims exaggerated… We think this book is a worthy effort.”
To me, the intensity of the reactions to Bateman’s book is a gauge for measuring just how worried many in the development industry have become about their poster child. I get the impression that a systematic critique of microfinance touches highly sensitive nerves with many researchers and industry insiders, whose reaction is to challenge the person rather than the argument. Read the rest of this entry »