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Confessions of  a Microfinance Heretic

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Confessions of a Microfinance Heretic

How Microlending Lost Its Way and Betrayed the Poor


15 min read
10 take-aways
Audio & text

What's inside?

Interest rates of 100% and heavy-handed repayment methods? Welcome to the world of microfinance.

Editorial Rating



  • Innovative


In this well-sourced and highly readable memoir, investment banker Hugh Sinclair – who worked in the microfinance sector from 2002 to 2012 – offers a scathing indictment of how microfinance institutions (MFIs) really operate. His exposé arises from his experiences working deep inside the $70 billion microfinance industry and from his exploits traveling around the world for various MFIs and the funds that invest in them. In short, Sinclair knows what he’s talking about, and he has learned that the microlending world does not take warmly to criticism. He’s received numerous complaints from insiders that his relentless criticism borders on blasphemy and risks undermining any good the industry is doing for the poor. Sinclair even received a death threat for bringing this information to light. Though acknowledging that not all MFIs are guilty of injurious activities, getAbstract recommends this insightful but damning report to policy makers, regulators, activists, industry insiders, investors, and readers with an economic interest in microfinance and a social interest in addressing global poverty.


Inside the Microfinance Industry

The goals of microfinance are clear, but the ways in which microfinance institutions (MFIs) operate isn’t so transparent. Their glossy brochures and glitzy websites would have you believe that you can help eliminate poverty. In theory, with even a $25 donation, you can lend money to the needy to fuel their entrepreneurial spirit, fund their small-business acquisitions and, in the process, help them out of hardship. In practice, however, MFIs’ usurious interest rates keep the poor engulfed in penury.

Microfinance is the practice of lending small sums at low cost to impoverished people so they can improve their lot by, say, purchasing a “productive asset,” such as a child’s school tuition, a farm animal or a piece of equipment. The idea is that being able to buy a “goat or a sewing machine” could enable a family to produce more goods to sell, thus helping them help themselves so that with diligent effort, they can build a “small business that receives successively larger loans” and eventually conquer poverty.

The sad truth is that only a small fraction of the 200 million people worldwide using microcredit actually achieves results...

About the Author

Hugh Sinclair is an economist and investment banker. He worked in the microfinance industry for more than 10 years and now provides consulting services on microfinance strategy and portfolio management.

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    E. B. 8 years ago
    Does the WBG/IFC report or track how we are positively impacting the microfinance sector to reduce such practices?
    • Avatar
      8 years ago
      Hello Eva,
      I am responding to you via email.
      Thank you,