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Over on his blog and on Indian financial news site Moneylife, microfinance expert Ramesh Arunachalam has started an interesting series of posts. They investigate the charges levied by Hugh Sinclair against microfinance investment vehicles (MIVs; or microfinance investment funds) in his recently published book, Confessions of a Microfinance Heretic. Arunachalam is approaching the questions raised by the book with his characteristic meticulous diligence; very data-driven. As usual, he raises poignant questions rather than easy answers, and I strongly suspect his detective work will remain a delight to follow.

Incidentally, some of the points raised by Sinclair’s book are very close to Arunachalam’s fascinating causal reconstruction of the Indian microfinance crisis. The two most obvious ones are: (1) lack of transparency and meaningful regulation in the microfinance industry, in Indian microfinance as well as in the global microfinance investment sphere. (2) The pressures of capital, in that agents bestowed with large amounts of easy money under these circumstances are unlikely to make wise decisions (let alone decisions truly benefitting their stakeholders). These are Indian MFIs who lend as if throwing money from helicopters, or global MIVs investing in low-quality-high-profitability MFIs because they need an easy outlet for their money.

Particularly interesting is that Arunachalam asked investors for statements or rebuttals to Sinclair’s allegations, apparently to no avail or evasive answers. Also, reports promised by the microfinance transpareny/labeling initiative LuxFLAG were not available. So it will be interesting to see if Arunachalam finds out what some investors’ explanations are for having continually invested in the evidently non-law-abiding Nigerian MFI LAPO.

Also, David Roodman at the Centre for Global Development has reviewed the book, his main contribution being to “add nuance”.  He too sees the key message of “Confessions…” in its exposition of the uniquely problematic role played by MIVs in the microfinance money chain, even though he criticises it for its critical tone. No comment on Roodman’s discussion of different people’s character traits (at bottom).

Last-minue addition: Sam Mendelson, co-author of the Microfinance Banana Skins reports, concludes “Ultimately, Confessions is frustrating and fascinating in equal measure” in a similarly even-handed but more personal review on microfinance focus.

(phil)

Today I learnt from the blog of Wikimedia Germany about plans to merge the two wiki-based collaborative travel guide projects Wikitravel and WikiVoyage into a new Wikimedia project such as Wikipedia or Wiktionary, governed by the Wikimedia Foundation. Denis Barthel from Wikimedia Germany describes the history of the two projects as follows (my translation):

Wikitravel.org went live in July 2003 with the goal to collaboratively create a travel guide under an open license. Today, Wikitravel features 19 different language versions with up to 26.000 travel guides. In 2006 the founders decided to sell the trademark “Wikitravel” to the firm Internetbrands to put Wikitravel on more solid grounds. Internetbrands provided for hosting and guaranteed independence of the community with regard to contents. First problems arose when Internetbrands decided to run ads on the site. This decision led to a debate on principles and eventually to a fork: the German community refused to work in a commercial environment. As a result, WikiVoyage emerged, carried by a German-based association. WikiVoyage hosts the bigger stock of German articles (~12.000 compared to ~5.000 at Wikitravel) and a very active and well organized community. Furthermore, there is an Italian version with a shared database for images similar to Wikimedia Commons and “Locations”, some kind of WikiData for locations.

Currently, the Wikimedia Communities are debating whether accepting a merger of these two communities as a new Wikimedia project is both feasible and desirable. And while the majority seems to support the inclusion of the newly merged project into the family of Wikimedia projects, several concerns are raised: Read the rest of this entry »

This is a book review I wrote for the microfinance news site microDINERO about Hugh Sinclair’s controversial new insider/whistleblower account of the microfinance industry.

Hugh Sinclair, 2012: Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor. San Francisco, CA: Berrett-Koehler Publishers.

Outside of the mainstream and microfinance’s promotional campaigns, many academics, NGOs, critical journalists and also former microfinanciers have quietly criticised microfinance for years – only to be ignored or dismissed as lunatics or ideologues. The problems in microfinance, however, are very real, and Hugh Sinclair’s controversial new book “Confessions of a Microfinance Heretic” makes them impossible to ignore.

For the few independent researchers, fortunately able to study microfinance without reporting to microfinance-supporting bodies or the major research groups (which happen to be mostly funded by the same organisations which fund microfinance), the problems of microfinance are not news. They include that microfinance, by its very nature, supports only the simplest, least-productive and lowest growth-potential activities, as Milford Bateman argues. They also include the fact that most loans are simply used for consumption, which even CGAP recognises in its attempts to redefine microfinance in terms of “financial inclusion”, ignoring the problem of these loans’ unsustainability. This is linked to the risk of overindebtedness and debt traps researched bravely by Jessica Schicks, and evidenced most gruesomely in the Indian microfinance crisis. There is also the problem of microfinance building on and employing immense power asymmetries, particularly between men and women, as Lamia Karim has shown, rather than removing these asymmetries through actual processes of empowerment. These are just a few issues.

With Hugh Sinclair along comes someone who has extensive real-life experience, a fascinating story to tell – from his original belief in microfinance to his disillusionment and ultimate heresy against it – and a knack for writing. His book, as devastating as it is entertaining to read, presents a serious challenge to large elements of the microfinance industry. Sinclair adds a new problem to the list of reasons why microfinance cannot keep its promise of poverty reduction, showing that the incentives within the microfinance industry are structured in such a way that positive developmental outcomes can – at best – occur as an accidental by-product; and mostly won’t occur at all. Read the rest of this entry »

Last week the European Parliament rejected the Anti-Counterfeiting Trade Agreement (ACTA, see also “ACTA as a Case of Strategic Ambiguity“) with 478 voting against the treaty, 39 in favour and 165 MEPs abstaining. Commenting on this outcome, Joe McNamee from the ACTA-critical NGO European Digital Rights (EDRi) stated that “ACTA is not the end. ACTA is the beginning.” In his optimistic account, the rejection of ACTA has substantially changed the debate on intellectual property rights regulation in Europe:

Thanks to SOPA, European citizens better understood the dangers of ACTA. Thanks to the anti-ACTA campaign, it would be politically crazy for the Commission to launch the criminal sanctions Directive. Thanks to ACTA, there is broad understanding in the European Parliament of just how bad IPRED really is and any review now, if the Commission has the courage to re-open it, is more likely to improve the Directive rather than increase its repressive measures.

However, a recent op-ed by Canadian copyright scholar Michael Geist, illustrates why ACTA’s contents might not be so dead after all. Referring to leaked documents of negations between Canada and the EU Commission on the “Comprehensive Economic and Trade Agreement” (CETA):

According to the leaked document, dated February 2012, Canada and the EU have already agreed to incorporate many of the ACTA enforcement provisions into CETA, including the rules on general obligations on enforcement, preserving evidence, damages, injunctions, and border measure rules. One of these provisions even specifically references ACTA.

Read the rest of this entry »

The Book

Governance across borders: transnational fields and transversal themes. Leonhard Dobusch, Philip Mader and Sigrid Quack (eds.), 2013, epubli publishers.
July 2012
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