Abstract
When Muhammad Yunus started his out-of-pocket microfinance experiment nearly 40 years ago, he realized the great potential of innovative financial services to alleviate poverty. The Grameen Bank has since become legendary within the development community for its successes in helping Bangladeshi women work their way out of poverty. But at the global level, microfinance has not always lived up to expectations, and some recent studies even have shown little or no impact of microfinance for alleviating poverty. Given these disappointments, it is not surprising to now see literature that tries to ascertain what is wrong with microfinance and offer solutions for better outcomes.
The editors of this anthology take up that task by turning one of Yunus’ most basic premises on its head. Whereas Yunus argues that poor persons who become entrepreneurs out of necessity do not need business training because they already have shown themselves able to survive under the harshest of circumstances, Jeremi Brewer and Stephen Gibson argue the opposite: Training is necessary. This is a plausible argument that others have made, but Brewer and Gibson take it even further, implying that training is only the tip of the iceberg and that what is truly needed is some sort of cultural inculcation. Brewer asks, Is it possible that necessity entrepreneurs continue to fail because their core value system or culture discourages competition, ambition, growth, integrity, honesty, the future orientation of time, goal setting, contractual agreements, or record-keeping, all of which are necessary practices to succeed in business? (p. 20)
Nowhere in the book is there any rigorous evidence to answer this question, but based on “second-hand observations around the world,” Gibson faults the borrowers for being too generous and too trusting. While this seems to contradict Brewer, it still operates on the same logic of poverty as cultural flaw, but neither Brewer nor Gibson makes any attempt to understand how trust, a short-term orientation, or any of these traits might actually be part of a moral economy that is integral to the poor’s survival strategies.
More generally, Brewer and Gibson work on an implicit assumption that culture is independent of external factors, which ignores an enormous body of literature showing that culture is itself shaped by and adapted to external factors. According to that literature, what at first glance appears to be an illogical and inhibitive tradition may in fact be a reasonable response to circumstances beyond one’s control. But to ascertain that phenomenon, researchers would have to listen deeply to their subjects and observe them carefully in their daily lives. Unfortunately, that kind of research is completely absent from this book. Indeed, most of the contributing authors do not even have experience in the developing world. So instead of empirical evidence, we get words of wisdom from Gibson’s religious leaders, an SC Johnson advertisement, and Andrew Carnegie, who challenged the successful individual to live moderately—a curious bit of advice to give to people living on less than $2 a day.
Some of the contributing authors share Brewer and Gibson’s mindset. For example, Dyer offers one of the most egregious examples of blaming the victim that I have seen in academia, asserting that out of wedlock births in the United States is a cause of poverty. He goes on to praise Asian Americans for having the strongest families and adds, “I believe it accounts for a significant part of the variance [and entrepreneurship] that we see between racial and ethnic groups” (p. 153). No evidence is provided to support that assertion, and no discussion is made of the context in which these people live and how their circumstances—that is, segregation in the housing market and discrimination in the job market—might affect the stability of families.
John Hatch’s contribution is a glowing contradiction to such ethnocentrism. One of the founding fathers of the microfinance movement, Hatch’s core philosophy is that we must learn from the clients before we can help them. He expresses concern that so few of his colleagues have been interested in doing so. Indeed, Hatch again finds himself in that kind of company in this book. His reflections on his experiences in the field are an invaluable contribution to our knowledge of microfinance. It is unfortunate they got included among some far less worthy works.
The book does have a few other merits. For example, Denker et al. give some interesting suggestions for promoting microfinance in Germany, including a searchable database of unemployed individuals that allows funders to identify employees. They also discuss the legal barriers and problems faced by international investors, but it is unclear how these topics are applicable to poor nations, which ostensibly are the primary focus of the book.
In the conclusion, Brewer expresses his dismay that more than a dozen professors refused to sit on his advisory committee “because speaking of a correlation between culture and poverty was a horrendous offense” (p. 183). Brewer sincerely seems to think the problem is simply a matter of political correctness; but, in fact, this is a question of intellectual integrity. Legitimate social research is based on empirical evidence, not opinion. And it considers the multitude of factors at play and weighs those factors against each other to determine what are the most important factors rather than simply focusing on the factors that happen to be the author’s favorites.
Furthermore, it is ironic that the entrepreneurs themselves are so conspicuously absent from a book about entrepreneurs. Nowhere in this book is there original research that directly quotes or even summarizes the words of even one borrower. Perhaps then it is no surprise that borrowers are so stereotyped when they have no voice.
Although this book may not be good research, at least academics can use it as a classic example of the discourse of poverty as individual deficiency, in which the solution is to apply self-help ideologies and “behavior modification.” (Gibson even likens his own organization’s model to that of Weight Watchers and Alcoholics Anonymous). In this sense, the book does not represent advancement in our academic understanding of how microfinance works, but a flagrant example of what has gone wrong with the microfinance industry.