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:

negative
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.” (??)
positive
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.”
in between
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.

The most balanced review comes from former BASIX-chairman Malcolm Harper, who writes that “it is not difficult to find fault with many of Bateman’s assertions, or to point to his omissions”, but advises that “all of us, however, should think carefully about what Bateman writes”.  Harper sees the chapter unpacking the politics of microfinance as “the weakest part of the book” – I disagree -, and his opinion is echoed by Hans-Dieter Seibel, who supports Bateman’s critique but rejects the political story.

Most importantly, Harper lauds Bateman for concluding with a solid discussion of alternatives to microfinance. Perhaps Harper is the only reviewer to have actually read the entire book before making up his mind (and pouring words onto webpages). To polemicise (as some true believers do) that ‘it is easier to destroy than to create’ both misses Bateman’s point and fails to appreciate the essential role of the critic in correcting aberrations.

Belief over evidence? When critics become heretics

Some reviewers apparently chose to Bateman’s work short shrift – after all, why challenge your preconcieved opinions? In one review on MicrofinanceHub.com, the authors not only got the book’s title wrong, they also admit never having read it! While they do offer some vague and promissive replies to Bateman’s arguments, most of their counter-arguments are actually dealt with in the book.

But what is particularly revealing about the MicrofinanceHub review is the wording chosen by the reviewers, who entitle their replies “we believe” (not “we know”, or “we posit”, etc). This is perhaps more of an admission than was intended. Is microfinance more about belief than evidence? When those who criticise the orthodoxy are treated as heretics, open-minded discussion on how best to help the poor is inevitably stifled.

The most biting review of Bateman’s book came from David Roodman, which in my opinion was a departure from his habitual sharp analysis and reasoned argument. He claims to be annoyed by Bateman’s “sloppy thinking” and levies three main critiques agains the book: first, it makes “dramatic conspiracy claims”; second it is “careless in [its] use of evidence”; and third, it has bad style. He also accuses Bateman of “extremism”.

As a reviewer, Roodman makes no further mention of his ‘conspiracy theory’ charge, nor does he really explain his stylistic criticism; instead, he seeks to correct Bateman on minor hand-picked technical points of evidence. For instance, he questions whether Jonathan Morduch may be called a microfinance “advocate” or not (does being the Managing Director of the Financial Access Initiative count?). Also, there seems to me little wrong with the statement that Muhammad Yunus “cancelled” (Bateman’s words) 42 Bangladeshi farmers’ debt to a moneylender in the 1970s, even if Roodman points out that he “substituted his lenient, no-interest loans for the moneylenders’ ” – either way, Yunus saw an injustice and paid their way out.

What Roodman regrettably fails to do is engage with Bateman’s overall argument that microfinance has few and questionable economic impacts, but is nevertheless promoted because of its political usefulness. The selective and nit-picking engagement with Bateman’s line of reasoning is unworthy of the book, and the attacks on the author’s personal integrity probably serve to distract. It would have been more satisfying to see an intellectual of Roodman’s caliber engage in more reasoned discussion of the argument instead of shooting polemical broadsides. (A long and unrelentingly technical debate later erupted in the comments section of Roodman’s review, but personal potshots were hard to expunge after an aggressive start.)

Yet why do both Harper and Roodman accuse Bateman of seeing microfinance as being promoted by a conspiracy? I believe they are wholly mistaken; not least because I can’t remember reading anything about a conspiracy.

An epistemic community is not a conspiracy

Say that I claim that a set of organisations and/or individuals is promoting an idea, a policy, a product – all of which microfinance is, to an extent – does that make me a conspiracy nut? Social scientists have countless conceptual tools with which to grasp such phenomena: advocacy networks, social movements, collective action, interest groups, etc. What Bateman’s book claims (or, I would argue, shows) is that (A) microfinance is a politically viable tool for the restructuring of poor countries to better conform with contemporary economic doctrine; and (B) microfinance is promoted by a network of influential organisations and individuals. This is by no means a conspiracy claim, and Bateman’s critics have yet to refute the claim. Conspiracy is secret concerted action with sinister motives. Microfinance was promoted both intellectually and financially over recent decades by publicly-known institutions and individuals through well-documented activities and for known reasons.

I, for one, have read the entire book, and Bateman claims nothing else. What he does claim, however, is that there is a disjunct between the private (in-community) knowledge about microfinance, which includes knowledge about limitations and failures, and the public account. I observe that around the topic of microfinance a transnational epistemic community has grown, whose aim is to organise and promote microfinance (as a business and as a policy). This community consists of people from a variety of different backgrounds, from music and film stars to academics, politicians, business leaders, activists and philanthro-billionnaires, and a number of organisations in which these groups are active. What unites them, among other things, is that (with very few exceptions) they belong to a global socio-economic elite and that they share an unwavering belief in the power of microfinance to do good. Epistemic communities are infamous for the groupthink they produce, as psychologist Irving Janis termed the

“mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members’ strivings for unanimity override their motivation to realistically appraise alternative courses of action”.

The microfinance industry (and its groupies) might be taken as a case study of such a transnational in-group. It is held together through specialised media, purpose-built information exchanges, supervisory agencies, IFI-funded promotional bodies, expensive conferences and supportive NGOs networks; each of which resultingly has a substantial financial and (more importantly) reputational investment in the future of microfinance. Because these investments are threatened, shaking the consensus is unwelcome. So Bateman’s challenge to think outside the cramped box of microfinance is seen as a threat.

Let he who is without ideology cast the first stone

Furthermore, ideologies do exist, whether we admit to them or not. Microfinance is an ideological product just like most (or all) policies. But seeing one’s  own position as non-ideological while branding any challenger as per se ideologically motivated is a luxury afforded only to those thinking within the narrow consensus. It also bears the totalitarian risk of stifling dissent.

When Bateman argues (as I do, too) that microfinancialists are ideologically motivated, he accuses nobody of “conspiring” to keep poor countries poor, or of aiming to keep people in low-productivity work. The opposite is the case: that the microfinance industry and its groupies may perpetuate poverty despite and because of their good intentions. “Ideology has very little to do with ‘consciousness’ – it is profoundly unconscious”, as Althusser says.

When neoliberal (and by the way, there is nothing obscurantist about the term) economists and policy makers in the 1980s and 90s went about dismantling Bolivia’s social safety-net and undoing Bosnia’s worker-run enterprises, replacing them with the risks and opportunities of microenterprise, I assume that they did so with the best of intentions. I am sure their models told them the poor were most likely to thrive under a meritocratic economic polity of freely contracting agents, and the only thing missing was small finance. For certain, I give them the benefit of that doubt. The trouble is, as rigorous evaluations of microfinance are increasingly showing, the models are wrong. But because microfinance fits the economic orthodoxy of the recent decades so well – that free markets, minimal states and greatest financialisation will lead to the highest welfare – it is so difficult to challenge.

That is why Slavoj Zizek recently writes (about economic crisis and the responses to it):

“This brave new world of global commodification considers itself post-ideological. … Insofar as, in its self-perception, ideology is located in subjects, in contrast to pre-ideological individuals, this hegemony of the economic sphere cannot but appear as the absence of ideology. What this means is not that ideology simply ‘reflects’ the economy, as superstructure to its base. Rather, the economy functions here as an ideological model itself … in contrast to ‘real’ economic life, which definitely does not follow the idealized liberal-market model.”

There we have it. As I read him, Bateman’s core argument is that microfinance fits the orthodox economic model, which itself is an ideology held by powerful people and institutions, but the real effects of microfinance don’t fit the predictions of the model. Why? Because the assumptions of the model are false.

Definitely, there is no conspiracy claim in this, or even a claim that pure financial self-interest is the prime motivator for the microfinancialists. Rather, it is a challenge to examine their positions in the light of evidence and self-reflection. If those who are so strongly opposed to Bateman’s arguments are actually committed to helping the poor, they should step up to a fair debate, and if possible, reflect upon their basic assumptions. Otherwise, in my book, they lose their credibility. Rather than protect the assumptions of an increasingly defunct model, they should take the challenge as an invitation start thinking outside the box.

(phil)

Update: David Roodman has published a thoughtful reply on his blog @ CGDEV. (14 Sep, 22:00 GMT)