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Hugh Sinclair Replies

This is a reply from Hugh Sinclair to my review of his book. If you haven't read the book, I think you will get a good sense of his views and style from this post. ---David Roodman

Fury and delight: I thank David for performing “due diligence” on my book, and am pleased to see genuinely new issues appear to be attracting attention, long over-due perhaps. Identifying where yet more scrutiny is required in the embattled microfinance sector can only be a constructive development. The mysteriously over-looked principal-agent problem is indeed the central theme of my whistleblowing book, and to refer to my suggestions as laughably conservative may be premature. I am suggesting a new degree of scrutiny and regulation be applied to those entrusted to manage a significant proportion of capital flows to MFIs. Start asking too many questions about their activities and impact, or, God forbid, regulate the likes of Kiva - and such suggestions may not generate laughter amongst our trusted intermediaries.

The book is an insider’s memoir, and not a text-book. It is aimed at the non-academic audience; the (wo)man on the street, who is largely spared the subtleties of these blogs and quasi-academic debates, and yet maintains a limited, at times uninformed impression of the wonders of microfinance. Insiders know this idealism, optimism or hype, is fantasy, but the (wo)man on the street usually does not. I attempt to plug this gap. We are not all experts in everything, sometimes we have to trust the experts, but in microfinance extreme caution is required.

Hugh Sinclair: A Microfinance Heretic Confesses

Note: Hugh Sinclair has replied to this review.

I can't recall feeling such an acute combination of fury and delight at a book before. Hugh Sinclair's Confessions of a Microfinance Heretic is a tell-all from an industry insider. It recounts his experience working in microfinance institutions (MFIs) in Mexico, Mozambique, Nigeria, and Mongolia, and then inside the microfinance investment firm Triple Jump. Near on half the book is about a single MFI, LAPO in Nigeria, which you might recognize from the New York Times article that Hugh engineered behind the scenes or from the masked blog commentator StreetCred, whose identity Hugh may know something about.

The extended scorchings of particular MFIs sometimes obscure what is, or is meant to be, the book's main message. It is not "these MFIs are bad so all microfinance is bad," for the text states more than once that the MFIs exposed may not be representative. It is rather that there is something wrong with the readiness of intermediaries to invest in the asserted bad guys---and here the list of institutions does represent a large swath of the industry: Triple Jump, BlueOrchard, Grameen Foundation, Calvert, Kiva, and more. To document his battles with them, Hugh has posted primary materials such as internal reports and phone call recordings. I assume he says less than he knows, his lawyers providing one filter for what can be public.

What delights in this book are the stories. I felt my heart beat as I read Hugh's account of the confrontation with his superiors at Triple Jump that would turn him into a whistleblower. Earlier, he tells how a man named Sam Grottis came to lead an MFI in Mozambique called FCC that Hugh would later be brought in to try to turn around:

He was apparently a former businessman and freedom fighter in Rhodesia who had experienced a Road to Damascus moment of enlightenment and had become a fundamentalist Christian---a prerequisite for senior managerial positions at World Relief. Eventually Grottis met a suitable westerner who displayed mutual agreement regarding the imminent end of the world and promptly made him CEO of FCC.

But you sense the sardonism: we can't quite trust the book to tell the full, fair story.

Then there's the water-selling lady in the hotel Hugh stayed at while working with LAPO in Nigeria:

Every morning I would buy a bottle of water for the day ahead, clearly labeled as N25.