The myth of microfinance: who is freaking out? II

Oh oh. Are the practitioners now worried? I had earlier thought they wouldn’t bother much as long as times are good and profits are booked. But today, I came across (via IFMR’s India Development Blog and Microfinance Focus) an official reaction from the big guns – ACCION International, FINCA, Grameen Foundation, Opportunity International, Unitus and Women’s World Banking

I am almost dumb-struck by this 4-page statement. I would be among the first to agree that practitioners could have insights beyond what researchers can capture (whether armed with RCTs or not). But I would also insist that practitioners championing their programmes have a high degree of self-awareness and show a positive intent to critically discuss their work. Academics have done rather creditably in this regard. JPAL and IPA researchers have themselves come out to explain what their studies really meant and put their findings in context, acknowledging the tremendous innovation that micro-finance represents.

But this statement by the group of apex microfinance agencies is a shame. This is why –

  1. While talking of loans and savings and insurance – I wish the quantum of funds that go into savings and insurance was represented by the amount of print space these services get on Page 1 of the document –  the article is just a blind cheerleader. There are no negatives, no risks, no defects in their perfect big (and fast-growing) world. This is really disturbing.
  2. The article criticises the research for using small sample sizes and short time-frames. While the researchers themselves acknowledge the point about the time-frame, I don’t think they will take too kindly to being lectured about sample sizes in RCTs.
  3. This one is classic – in this article, the authors completely play into the hands of their critics by arbitrarily citing six random cases (Delia, Roqia, Zeinab, Lucas, Kanti and Vesna) to illustrate success – revealing exactly why we need to be skeptical of their tall claims in the first place. Wasted – Page 2
  4. They describe seven ways in which financial inclusion matters to households across the developing world – note, financial inclusion – this now takes the debate beyond micro-finance and its methods to campaigning for financial inclusion, which no one disputes. And in themselves, the points made in that section do nothing to explain why micro-finance is the best way to achieve financial inclusion. So that is Page 3 wasted.

Thankfully, the article doesn’t go down the road of hailing empowerment and freedom as the ultimate goals of micro-finance. But on every other count, this is a rather sorry defence.


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