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Microfinance is mostly a scam

mathbabe

I might be well behind others on this subject, but I’m trying to catch up. I just finished a book entitled Confessions of a Microfinance Heretic: how microfinance lost its way and betrayed the poor, written by Hugh Sinclair. Published in 2012, it reviews the previous decade or so of microfinance institutions and how there are essentially very few that haven’t become loan sharks for poor people.

The promise of microfinance was this: that poor people are budding entrepreneurs, who simply don’t have access to the capital required to make their dreams come true. Turns out that’s pretty rare in practice, and that 90% of the loans taken out are “consumption loans,” meaning they are used to buy something like a TV or a service, and then some part of the remaining 10% are loans taken out to repay other loans, and so the “investment loans” are down to…

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