Sinclair confessions of a microfinance heretic; how microlending lost its way and betrayed the poor (2012)

CONFESSIONS OF A MICROFINANCE HERETIC CONFESSIONS OF A MICROFINANCE HERETIC How Microlending Lost Its Way And Betrayed the Poor HUGH SINCLAIR Confessions of a Microfinance Heretic Copyright © 2012 by Hugh Sinclair All rights reserved No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law For permission requests, write to the publisher, addressed “Attention: Permissions Coordinator,” at the address below Berrett-Koehler Publishers, Inc 235 Montgomery Street, Suite 650 San Francisco, California 94104-2916 Tel: (415) 288-0260, Fax: (415) 362-2512 www.bkconnection.com Ordering information for print editions Quantity sales Special discounts are available on quantity purchases by 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by Steven Hiatt / Hiatt & Dragon, San Francisco Copyediting: Steven Hiatt Proofreading: Tom Hassett Cover Design: Kirk DouPonce, Dog Eared Design This book is dedicated to the poor entrepreneurs struggling to create a better world for themselves and their families, but in particular to those paying interest rates of over 100 percent a year to line the pockets of a few microfinance banks and their investors On a more personal note, I also dedicate this work of financial critique to the man who first taught me finance: my grandfather, William Clark Contents Foreword by David Korten Preface Thou Shalt Not Criticize Microfinance Baptism in Mexico Bob Dylan and I in Mozambique Another Mozambican Civil War The “Developed” World Something Not Quite Right in Nigeria Something Not Quite Right in Holland In Front of the Judge Rustling Dutch Feathers 10 Blowing the Whistle from Mongolia 11 Enter the New York Times 12 Collapse, Suicide, and Muhammad Yunus 13 The Good, the Bad, and the Poor Appendix: Microfinance Economics 101 Notes Acknowledgments Index About the Author Foreword By David Korten Confessions of a Microfinance Heretic provides an insightful, well-documented, and devastating look into the tragic reality of how a good idea was derailed by the same mindless pursuit of financial gain that caused the global financial crash of 2008 It is essential reading for anyone involved in microcredit and for all who are committed to ending global poverty and injustice For some twenty years we have heard the story that microcredit is the cure for global poverty: An amazing visionary economist in Bangladesh named Mohammed Yunus founded the Grameen Bank and demonstrated a simple, effective way to end world poverty Small, low-cost loans to the poor unleash their entrepreneurial potential and allow them to start profitable businesses that bring prosperity to themselves, their children, and their communities It is a win–win solution that doesn’t require charity, redistribution, rethinking economic policy, or restructuring existing economic institutions and relationships Global investments of a few billion dollars can earn an attractive financial return for socially responsible investors and simultaneously banish the scourge of poverty That’s the widely received story The reality that Hugh Sinclair documents in this book presents a very different picture Too Good to Be True Microfinance is now a $70 billion industry and some investors and microfinance institutions enjoy eye-popping returns The industry falls far short, however, of fulfilling its promise to end poverty Indeed, as Hugh Sinclair spells out in detail, many microcredit programs are nothing more than predatory lending schemes rebranded as socially responsible investment opportunities There are effective microcredit programs Sinclair describes one in Mongolia that truly serves the poor with low-cost loans used to fund successful microbusinesses Tragically, these may be more the exception than the norm I lived and worked in Asia from 1978 to 1992 as part of the foreign aid establishment During this time I regularly served as a consultant to several Bangladeshi nongovernmental organizations (NGOs) that were pioneering microfinance along with other innovative programs serving the poor Two that I particularly admired at the time as world-class models of positive NGO leadership are now major players in the international microfinance industry Even back in the 1980s, I was concerned that microlending programs could draw energy away from efforts by these same NGOs to address the deeper structural causes of poverty I also worried that such programs might leave the poor even more dependent on financial institutions over which they had no control The microfinance industry Sinclair documents has been corrupted far beyond my worst fears Our Human Capacity for Self-Deception Sinclair predicts that microfinance insiders will seek to discredit him and use vicious attacks to dismiss his conclusions I urge those who may feel persuaded by these attacks to bear in mind what Nobel Prize winner Muhammad Yunus said in a 2011 New York Times op-ed He noted that when he founded Grameen Bank in Bangladesh in 1983, “I never imagined that one day microcredit would give rise to its own breed of loan sharks But it has.” Some of those responsible for the corruption of a noble idea may be true scoundrels Several of the organizations Sinclair implicates in this volume, however, are led by individuals I have known personally as people of admirable ability, ethics, and intention Sinclair’s insightful assessment of how even the industry’s most honest and respected leaders become trapped by the imperatives and self-justifying stories of the institutions they head is an important contribution of Confessions I can relate to their experience I worked in various capacities with and within the foreign aid system for some thirty years—rarely questioning its basic premise It was little more than two months after leaving my post with USAID as Asia Regional Advisor on Development Management that a fresh insight hit me Foreign aid, as practiced, is almost inherently destructive, because it increases the dependence of poor countries on the goods, technologies, markets, finance, and expertise of rich countries and leaves them exposed to classical colonial exploitation in a new guise It is hard to see the truth of a system on which your pay and prestige depend Follow the Money To my surprise and shock, I once heard a microlending advocate make the amazing claim that high interest rates are a rich people’s concern They don’t matter to the poor To benefit the poor, microcredit need only offer lower interest rates than local money lenders Those who work in microfinance commonly view the system from the perspective of the investor rather than that of the community and thereby lose sight of the bigger picture Tara Thiagarajan, chairperson of Madura Micro Finance, a for-profit microcredit program in India, is an all-too-rare exception—as revealed in her insightful May 2, 2010, blog: The local moneylender … may charge a higher interest rate, but being local will probably spend most of that income in the village supporting the overall village economy So potentially, local lending at higher rates could be more beneficial to the village if the money is in turn spent in the village, compared to lower rates where the money leaves the village Suppose that a microloan extended by an outside agency actually supports an increase in village production To cover the net outflow of rupees required to make loan payments, the village must sell to outsiders more of what it produces just to get rupees that immediately flow back out as loan payments At the usurious interest rates often involved, this can result in a substantial net loss When the loan does not contribute to an increase in productive output, which Sinclair notes is the most common case, the net rate of outflow of both real wealth and rupees is even greater The same dynamic plays out at national and global levels Suppose that an investor in the United States invests in one of the microcredit programs in India described by Sinclair The investor provides loan or equity financing in U.S dollars and expects payment of interest and dividends in U.S dollars The transaction between microlender and borrower in India, however, is in Indian rupees The invested dollars are exchanged for rupees in the foreign exchange market and become part of India’s foreign exchange pool The rich who need foreign exchange to buy things abroad get the dollars The poor microloan borrowers get the rupees Interest on the rupee microloan flows quickly back out of the village in rupees to the national microfinance institution A portion of that outflow is then converted to dollars that go to the U.S investor abroad This creates a negative drain on India’s foreign exchange reserves that, given the rates of interest and profit Sinclair documents, may add up to several times the original investment dollar inflow To pay this dollar obligation, India must produce goods and services for sale abroad Or it may sell or mortgage assets to foreigners, creating additional future claims against its production and real assets In return for a short-term inflow of credit, the village and India as a country bind themselves to a long-term outflow of claims on their wealth—supporting a classic pattern of colonization and wealth concentration beneficial only to foreign interests and their local accomplices Grameen Is a Bank The key to fixing microfinance is to recognize the critical differences between the Grameen Bank and the vast majority of microcredit institutions that claim to be its replicas • Grameen is similar to what Sinclair calls a “regular” bank Its lending is mostly self-funded by local deposits in Bangladesh’s national currency, the taka • Grameen offers depository services with generous interest rates designed to help its members build a financial asset base • Grameen extends loans to its members at a maximum interest rate of just over 20 percent, a fraction of what many other microlenders charge • Owned by its member savers and borrowers, Grameen is rooted in and accountable to the community it serves Profits and interest continuously recycle locally to support productive local exchange and build real community wealth Grameen has its flaws, as does every institution, but it is designed to be locally accountable and to build rather than expropriate community wealth Most of the microcredit programs that claim to replicate the Grameen model resemble it only in the fact that they make loans to poor people They are not “real” banks with regular depository services They are not owned by their borrowers Some charge interest rates of more than 100 percent Interest and profits are siphoned off by distant managers and foreign investors rather than recycling within the community Whether on Wall Street or in the villages of India, control of money by distant financiers rewarded for seeking maximum personal financial gain is a path to outsized wealth and power for the few and debt slavery for the many Even member/owner accountable banks that lend at reasonable rates are not a magic-bullet solution to poverty Grameen Bank, however, demonstrates that they can be one useful tool It is time to rethink and restructure the microfinance industry in ways that take the best of the Grameen model seriously Instead of restructuring microfinance institutions into publicly traded forprofits that sell shares to foreign investors, the goal should be to restructure them as cooperative banks owned by their local borrowers and funded in their national currency This model will not generate profits for foreign investors That, however, was never a proper purpose of microfinance Preface The microfinance community often resembles a religious cult Criticism is considered heresy and is not tolerated Impact on poverty is dogmatically claimed but demonstrated in only exceptional cases Above all, the sector is highly profitable, and the origin of this profit is simple: the poor Criticizing microfinance thus antagonizes those who have power and money at stake—the owners of the microfinance institutions (MFIs) and those who control their funding The goal of my heretical act in writing this book is to shed light on the actual practices of the microfinance sector and to prompt changes that will skew the odds slightly in favor of the poor I tried to influence microfinance from within, during a decade of work in the sector across three continents and in a number of institutions I tried logic and reason first, but that strategy failed I pointed out the immorality of exploiting the poor, but this argument was ignored Good, honest, hardworking microfinance practitioners were gradually replaced with unscrupulous players with a simple motivation: profit This was disguised as a beneficial development, with coordinated publicity and attendant hype Naïve celebrities were employed for PR purposes, and large commercial banks soon realized that there was a whole new client group to profit from Unfortunately, only negative publicity seemed to actually shake people into corrective action, albeit begrudgingly Slowly the popular press became aware of some of the atrocities and touted them as typifying the sector, which was not necessarily accurate; but such is the tendency of journalists seeking a scoop Specialized academic texts questioning the validity of the claims of the microfinance sector exist, but they are mostly technical, dry, and inaccessible to the average reader The book you hold in your hands attempts to bridge this gap I have attempted to go beyond the dinner table description of microfinance and explain how the various players in the sector operate in practice, without venturing into excessive technicality I use the decade in which I worked in microfinance as a backdrop This decade coincided with the adolescence of microfinance, which before 2002 was a somewhat obscure niche of the financial sector It is now a $70 billion business and is featured on The Simpsons I beg the reader to not throw out the baby with the bathwater Some microfinance is extremely beneficial to the poor, but it is not the miracle cure that its publicists would have you believe Microfinance has been hijacked by profiteers, and we need to reclaim it for the poor The problem is not with a few rogue operators, alas, but with systemic flaws that permeate the sector I offer no easy solutions to fix this problem, but the first step is to acknowledge it and identify its causes In the concluding chapter I offer the reader some tangible suggestions as to how best maneuver within the microfinance sector We need to develop microfinance 2.0—a model that takes the lessons of the last decades and applies them cautiously and prudently to the benefit of the poor Making modest profit from a wellrun, competitive MFI is not unethical Making millions of dollars for a few individuals by charging eye-watering interest rates to vulnerable poor women who cannot read the loan contracts they sign with a fingerprint is unethical Expecting a client to repay a loan is reasonable Hounding a delinquent client unable to repay her loan to the point of suicide is not Claiming miraculous results with scant evidence is optimistic at best, and more likely deceptive Rigorous research by independent, qualified academics and practitioners on the actual impact of microfinance on the poor is the only Index A Accion, investment in Compartamos, 75, 158, 192 ACODEP, 197–98 Africa Microfinance Trasparency (AMT), 219 Africa Works, 65 Akula, Vikram, 203–4, 206 A Fistful of Rice, 206 Annibale, Roger, 147, 165 Argentina, 16, 104–5 Armendáriz, Beatriz, 17 Armendáriz, Ruben, 17, 23–25 Ashoka, 175 ASN Bank, 70, 84, 109, 110, 126, 133, 142–43, 143 investment in LAPO, 138 reaction to criticism of LAPO, 143–44 withdrawal from LAPO, 145, 188 ASN-Novib, 160 investment in LAPO, 109, 113, 115–19, 121, 139 pulls out of LAPO, 145 B Banana Skins, surveys of microfinance sector, 80–81 Banerjee, Abhijit, 78 Bangladesh Grameen Bank and, 209–11 microfinance impact on poverty, 201 banks, banking, 18, 34–35, 144, 182 Bateman, Milford, 201, 208 Why Doesn’t Microfinance Work?, 208 Berenbach, Shari, 159, 161 BlueOrchard, 141, 199 investment in LAPO, 169, 182, 216 investment in Nicaragua, 193, 199 mission statement, 73 public relations attack on critics, 184–85, 200 Bolivia, microfinance in, 8, 249 Bosnia, microfinance in, 249 BRAC, 174, 179 Burson-Marsteller, 218 C Calvert Foundation, 11, 70, 200 complaint against, 159, 160 criticized in New York Times, 167, 168 discussion of evidence against LAPO, 155, 159, 161–64 due diligence on investments, 161 investment in LAPO, 115–16, 127, 131–32, 139, 146, 161 investment in Nicaragua, 199 stonewalling on LAPO criticisms, 145–46, 153, 164, 168 withdraws from LAPO, 164, 168 Caught in MicroDebt (Heinemann), 183, 208–10, 238 Center for Global Development, 184, 216 Central Bank of Mozambique, 64 Central Bank of Nigeria, 144, 145, 158, 182 Chang, Ha-Joon, 201 child labor, 6–7, 78, 205, 219 Chirac, Jacques, 209 Citi Microfinance, 165 investment in LAPO, 139, 146–47, 169 reaction to criticism of LAPO, 147 clients, microfinance advice to, 231–32 cheated of savings, 91–92, 157 default rates, 20, 62, 157, 171, 175 forced prostitution of, 205–6, 207 forced savings, 35–36, 92, 144, 157 group guarantees, 17, 19–20, 36, 205 harassment by MFIs, 205–6 interest charged, 2, 5–6, 10, 60, 92–93, 99, 100–2, 138, 157, 171–72, 175, 177–78, 180–81, 182, 183, 249 interest paid, 92, 99, 101–2, 247 kidnapping of, 205 overindebtedness, 80, 81, 140, 194, 205 resistance to MFIs, 195, 197 suicides of, 20, 80, 206 use of loans, 5–6, 18–19, 77–78, 150–52, 171, 193, 247–49 Compartamos, 3, 252n9 interest rates charged by, 3, 74–75 public offering, 3, 74, 182, 192, 204 Conserva, 25–26 Cordaid, investment in LAPO, 138 Counts, Alex, 183 Craigslist, 175 CrediComun, 174 credit unions, Creditiuyo, 174 D Daley-Harris, Sam, 128 de Klumpp, Jean-Pierre, 141, 184, 186 debt, indebtedness, 5, 80, 81, 101, 140, 194, 205 Department of International Development (DFID, UK), Desjardins Group, Deutsche Bank, 10, 11, 133, 143 criticized in New York Times, 167 investment in LAPO, 139, 146 investment in Nicaragua, 199 reaction to criticisms of LAPO, 154–55 Diouf, Wagane, 166, 177 Duflo, Esther, 78 Dutch Postcode Lottery DOEN Foundation, 69, 70, 177 E eBay, 116, 159, 167 Ehigiamusoe, Godwin, 83–84, 142, 143 Ejoh Moju & Co., 156 Engelsman, Ab, 127 Enron, 16 entrepreneurs, entrepreneurialism, 18, 73, 235, 239–49 Erikson, Eliza, 145–46, 159, 164 Evers, Steven, 71, 72, 108, 110, 143 F FINCA International, 78 First Bank Nigeria, 211 Flannery, Matthew, 177 Fondo de Credito Comunitario (FCC) compared with other MFIs, 62 cost structure of, 60–61 forced savings, use of, 37, 60, 61 interest rates charged by, 60, 61 IT system projects, 39–53, 60 problems at, 33–34, 38, 55–56, 60–61 Ford Foundation, 157 Friends of Grameen, 209–11, 218 Fundenuse, 197 G Givewell, 184 Global Microcredit Summit, 128–29 Gokhale, Ketaki, 203 Google Inc., 175 Graber, Ken, 63, 64 Grameen Bank, 2, 8, 17, 84 criticism of, 208–10 interest rates charged by, 2, 210 Norwegian government investment in, 80 Grameen Foundation USA, 2, 143, 147, 157, 184 Grameen Trust Chiapas and, 17 investment in LAPO, 84, 133, 139, 168, 180, 182, 221 knowledge of LAPO problems, 104 LAPO accounting practices and, 91–92, 99 public relations attack on critics, 183–84, 208 Grameen Trust Chiapas, 17 accounting problems at, 23 business model, 24–25 group lending by, 19–20 nonprofit status, 19, 25 structure of, 19–20 Grottis, Sam, 38–39, 56, 57, 58–59, 64, 65 H Hatch, John, 78 Heinemann, Tom Caught in MicroDebt, 183, 208–10, 238 Human Development Index, 201 I Incofin investment in LAPO, 138, 169, 199 withdrawal from Nicaragua, 199 India development of microfinance in, 202–3 suicide of MFI clients in, 20, 80, 206 Indian Express, 205 Intel Corp., 175 Inter-American Development Bank, 12 visit to Grameen Trust Chiapas, 22–25 International Association of Microfinance Investors (IAMFI), 200 International Finance Corporation, 18 J Jackson, Jessica, 177 JP Morgan Chase, 175 K Keen, 175 Khosla, Vinoid, 204 Kiva, 11, 70, 102, 135 business model, 170–74 criticized in New York Times, 167, 168–69 default rates, 175 interest rates charged clients, 171–72, 174, 177–78 investment in LAPO, 139, 148, 153, 169, 175, 177–78 investment in Nicaragua, 199 partners, 173 profitability, 173–74 public relations, 175–76 response to criticism of LAPO, 177–80 withdrawal from LAPO, 179, 184 Klachteninstituut Financiële Dienstverlening (KIFID), 144 Kristof, Nicholas, 13 L Lift Above Poverty Organization (LAPO), 83 accounting problems, 91–92 business model, 101–2, 114–15 client desertion rates, 110, 138, 185 creditor taskforce, 161 deception of rating agencies, 152–53 forced savings, 101–2, 139, 144, 157 interest rate calculations, 91–93, 157 interest rates charged, 99, 100–2, 138, 142–43, 157, 180, 183, 185, 210 IT system, 90–92, 97, 99–100, 103, 107 microfinance fund investments in, 109, 113, 115–19, 121, 139, 167, 182, 216 profitability, 115, 158, 182–83, 185, 187, 190, 192 rating agency evaluations of, 137–38, 153, 156–58, 185, 219 transformation into a bank, 144–45, 158, 182 loans, microfinance consumption, 5–6, 78 default on, 20, 62, 157, 171, 175, 205 group guarantees of, 7, 19–20, 36 interest rates, 2, 5–6, 10, 60, 92–93, 99, 100–2, 157, 171–72, 174–75, 177–78, 180–81, 182, 183, 194, 220–21 purposes of, 5–6, 18–19, 77–78, 150–52, 171 LuxFLAG, 220 M M-Cril, 136, 203 M2 software, 84–86, 140 MacDougal, David, 199 MacFarquhar, Neil “Banks Making Big Profits from Tiny Loans,” 167 Mahmood, Asad, 154–55 Manuel, José, 26, 40–48, 84–86, 88, 99–100, 103, 105 Maputo, Mozambique, 32–33, 39 crime in, 56–57 Mecene Investments, 166 men, as microfinance clients 145, 234 Mexico, microfinance in, 19–26, 208, 210 microDINERO, 211 microfinance economics, 239–49 microfinance funds, 67, 227–28 Banana Skins surveys of sector, 80–81 business model, 72–79, 170–74 cooperation among, 78–79, 115–16 cost structure, 77–78, 238 due diligence on investments, 76, 98, 111–14, 118, 121–22, 137, 139, 158, 161, 169, 187, 192, 199–200 investors in, 12, 70, 175, 176, 177, 179, 189–91, 192, 196 lack of transparency, 166, 176, 179, 181, 191–92, 219–21 overinvestment in Nicaragua, 193, 194, 196, 198–200 principal-agent problem, 81–82 profitability, 102, 173–74, 190, 192, 194, 199, 216–17 public relations, 72–73, 76–77, 170, 175–76, 199, 202, 210 regulation of, 82, 116, 176, 188, 189, 192, 196, 197, 221, 231 microfinance rating agencies, 136–40, 156–58, 185, 237 methodologies, 137 warnings of financial problems, 139–40, 203 MicroFinance Transparency, 181, 184, 220–21 microfinance, microfinance institutions (MFIs), as nonprofits, 19, 114–15, 182 business model of, 18, 20–21, 34–35 Christian, 65–66 clients, 5, 10, 11, 18, 19–20, 36–37, 77–78, 110, 138–40, 145, 150–52, 193–98, 205–7, 212 comparison to favelas, 215–16 competition among, 73–74, 104, 197 defense of, 2, 4–5 effective models, 222–24 financing of, 18, 36–38, 65–66, 73–76, 100, 111–14, 138–39, 191 gender-based lending by, 142, 145–46 harassment of clients, 20, 195, 203–8 history of, 8–10 impact on poverty, 3–4, 13, 78, 92, 100, 142–43, 179, 201, 212–12, 217, 247–49 interest rates charged by, 2, 5–6, 10, 60, 92–93, 99, 100–2, 138, 157, 171–72, 175, 177–78, 180– 81, 182, 183, 249 IT systems in, 26, 39–40, 83, 84, 99–100, 105, 237 lack of transparency, 166, 170, 191–92 loan and other products, 20–22, 225–26 principles for fixing the sector, 225–38 profitability of, 18, 115, 172–73, 190, 191, 212–13 public relations, 4–5, 10, 12, 65–67, 73, 128–29, 142, 143–44, 147, 148, 153, 160, 171–72, 175– 76, 182–83, 195, 218–21 regulation of, 37, 64, 65, 82, 189, 196, 197–98, 207, 221, 231 summary of critique of, 5–7 transformation into banks, 34, 100, 114–15, 144–45, 182, 192 use of client savings, 33–36 Microfinanza Rating, 136 MicroPlace, 116 deception on website, 160 raising money for LAPO, 167 MicroRate, 136, 165, 184 2006 rating of LAPO, 138–39 confirmation of LAPO rating, 158, 159 withdrawal of LAPO rating, 152–54, 203 Microsoft Corp., 175 MIX Market reports, 197–98 Africa Works, 65 Fondo de Credito Comunitario, 61 India, 203 SKS, 204 Mkandawire, Bentry, 99 Mol, Eelco, 70, 71 Molijn, Bruno, 108–10, 133, 144–45 moneylenders, 18, 203 Mongolia, microfinance sector in, 149–56, 152, 179 Morgan Stanley, 200 Mozambique, 41–52, 56–57, 84 poverty in, 32–33 Mujeres de Zinacantan, Las, 26 MyC4, 70, 135 N Nestor, Camilla, 181 Netherlands, 160 employment law, 127 government investments in microfinance, 84, 111, 148 New York Times, 13, 108, 167 critical articles on microfinance, 11, 167–69, 178, 180, 183, 184, 200 Nicaragua, collapse of microfinance sector, 80, 140, 193–97 microfinance bubble, 193–98, 201 microfinance impact on poverty, 201 no paga movement, 195–97 regulation of microfinance, 197–98 Nigeria, 83, 87, 89, 94–96, 179 corruption in, 84, 86–87, 94, 103 microfinance in, 99–103, 138–39, 142–43, 211 working conditions in, 87–89 Norway, investigation of Grameen Bank, 209–10, 259n32, 259n36 Not One The Same (NOTS), 70, 160 O Omidyar, 175 Otero, Maria, 75, 158 Overseas Development Institute, 208 Oxfam Novib, 67, 70, 71, 84, 105 conflict with Triple Jump, 112–13 investment in LAPO, 110, 111–13, 116, 133, 138, 190 learns about LAPO problems, 108–10, 144, 145 P PayPal, 116 Park, David, 33, 61, 62, 64 peer-to-peer organizations (P2Ps), 79 business model, 170–77 lack of transparency, 166 PlaNet Finance group, 136 Planet Rating, 136, 154, 184 LAPO rating, 156–59, 165, 169, 178, 181 second LAPO rating, 182 Pouit, Jean, 99 Pouliot, Robert, 166 poverty reduction, 2, 3–4, 6, 7, 78, 92 ProCredit, 70 Q Quantum Hedge Fund, 204 R Raiffeisen, Wilhelm, responsAbility, 169, 182, 189, 199, 216 risk, management of, 34, 36 Roodman, David, 184, 211, 216 S Schwab Foundation, 180 Securities Exchange Commission, 37, 65, 116, 148, 159 Sequoia Capital, 204 Shah, Premal, 177, 178 Shorebank International, Sinclair, Hugh, 38 arrival in Mozambique, 30–32 background, 4, 7–8, 11–12, 15–17 confronts BlueOrchard, 186–89 confronts Triple Jump with evidence of fraud, 118–23 Conserva and, 26–26 deals with crime in Mozambique, 56–57 deals with crime in Nigeria, 94–96 death threat against, 155 Deutsche Bank and, 10, 143, 154–55, 208 discusses LAPO with AMT, 219 discusses LAPO with Calvert, 146–47, 159 discusses LAPO with Kiva, 177–80 discusses client protection wtih SMART Campaign, 219 files complaints with regulators, 144 Grameen Trust Chiapas and, 18–25 informs Oxfam Novib about LAPO, 108–10 introduction to microfinance, 4, 16–17 LAPO IT project, 90–92, 99–103 lawsuit against Triple Jump, 125–27, 129–33 learns P2P business, 135 lessons from Mozambique, 65–66 move to the Netherlands, 68, 69 organizes LAPO project, 83–86 project in Argentina, 104–5 project in Ecuador, 104 project in Peru, 104 reviews LAPO for Triple Jump, 112–18 Sam Grottis and, 58–59 speaks at ASN Bank annual meeting, 142–43 travel in Nigeria, 86–89 warns World Relief about problems at FCC, 61–64 work at Fondo de Credito Comunitario, 33–34, 38–60, 63–64 work in Mongolia, 149–56 work in Nicaragua, 194–95 Skoll World Forum, 75 SKS collapse in share price, 204–5 floats IPO, 203–4 interest rates charged, 204 profitability, 204 SMART Campaign and, 206 SMART Campaign, 182, 192 client protection principles and, 205, 206, 218–19 Society for the Elimination of Rural Poverty, 206 Soros, George, 204 South Sudan, 174, 179 Standard Chartered Bank investment in LAPO, 146, 169, 182 StreetCred, 16–17 T Times of India, 205, 207 Triodos Bank, 113 Triodos-DOEN fund, 70 Triple Jump, 67, 69, 200 defends lawsuit against Hugh Sinclair, 125–28, 130–31 Dutch court ruling against, 131–33 fires Hugh Sinclair, 122–24 funding of LAPO, 98 investment in LAPO, 139, 147 investment in Nicaragua, 199 knowledge of LAPO problems, 104 management experience, 70–72 misrepresentation of LAPO to investors, 112–13, 145, 147, 159 mission statement, 72 profitability, 174 reaction to criticisms of LAPO, 143–44 Triple Jump Advisory Services, 70, 72 U U.S House of Representatives Subcommittee on International Monetary Policy and Trade, 164–66 United Nations, 10, 157, 235 Unitus, 204 U.S Agency for International Development (USAID), 75, 111, 161 V van Doesburgh, Mark, 70, 108, 110, 141, 143 Visa Inc., 175 von Stauffenberg, Damian, 165, 216 W Walmart, 30, 175 Wall Street Journal, 203, 204 Ward, Terence background, 148 investigates Kiva, 177 SEC complaint against Calvert, 159, 160, 161–64 Waterfield, Chuck, 181 Wellen, Lukas, 71, 108, 110 Weng Liew, 84–86, 99 women, 10 empowerment of, 5, 10, 26, 73 exploitation of, 179 family savings and, 36, 157 forced prostitution of, 205–206 gender-based lending and, 142, 145–46, 155, 234 suicides of, 207 Women’s World Bank, 142, 145 World Economic Forum, 180, 204 World Relief, 29, 32, 33, 37, 56, 63–64, 65 World Relief Mozambique, 52, 60, 63 Y Yunus, Muhammad, 64, 84, 129, 133 criticism of, 208–10 development of microfinance model, 9–10, 19–20 Grameen Bank and, 2, 208–10 Nobel Peace Prize, 2, 10, 19 removal from Grameen Bank, 10, 211 Schwab Foundation and, 180 stance against high interest rates, 168, 192, 211 About the Author Hugh Sinclair is an economist and former investment banker Since 2002 he has worked in the microfinance sector, living in the UK, Mexico, the Netherlands, Mozambique, Argentina, and Mongolia He holds a BA and an MSc from the University of Durham in England; an MBA from IESE Business School in Spain; and the Guinness World Record for the fastest traverse of the Americas by motorbike This is his first book He lives with his wife and daughter in a remote region of South America Berrett-Koehler is an independent publisher 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