> Posted by Elizabeth Davidson
Last Monday, January 30, Milford Bateman, author of Why Doesn’t Microfinance Work? The Destructive Rise of Local Neoliberalism, and David Roodman, author of Due Diligence: An Impertinent Inquiry into Microfinance, faced off in a debate about microfinance and the future of financial inclusion. The event, held at the QED Group and co-hosted by USAID and the Financial Inclusion Forum, was moderated by Chuck Waterfield, founder of MFTransparency.
To say the debate was contentious would be an understatement. Provocative, lively, and fast-paced also describe the two-hour event. Those of us from the Center for Financial Inclusion who attended the debate have been all a-buzz ever since.
The obvious differences in Bateman’s and Roodman’s debating styles were central to how we interpreted the arguments both men offered. As Holly Padgett articulated:
Bateman focused his arguments on extremism and was very eager to simplify the matter at hand. His style of debating clearly and attractively conveyed his principal arguments while avoiding supporting evidence. On the other hand, Roodman analyzed both negative and positive evidence of microfinance before developing a more nuanced, less decisive argument.
Based on their debating methodologies, Josh Goldstein concluded that Roodman did a poor job of defending microfinance against Bateman’s emphatic statements about the harmful nature of the industry:
The debate had an unhappy outcome for those who believe in the efficacy of microfinance. Roodman struggled to counter Bateman’s insistence that microfinance is an abject failure— and that development dollars could be better spent elsewhere. The most he offered is that randomized trials of microfinance have not found either a clear negative or positive effect, a half-hearted endorsement. So when Bateman says that Roodman’s support of microfinance depends on an act of faith not evidence—it is hard to argue the point.
However, others concluded that while Bateman’s arguments were seductive, they lacked substance. Sergio Guzman offered:
Bateman’s arguments, while alluring on the surface, lacked any factual content, like specific examples and figures. Where Roodman analyzed a full set of data—both qualitative and quantitative, Bateman relied (as he frequently does) on anecdotes and analogies aimed at playing on the audience’s emotions rather than arising from evidence. Bateman seemed to be under-acquainted with the hard realities that managers on the ground face as they strive to achieve financial sustainability and face growing demand for their products.
While watching the Roodman-Bateman feud playing out in real time, we couldn’t help thinking about what was missing—the microfinance industry’s side of the debate. Bateman is decidedly against microfinance, and Roodman seems to sit somewhere in the middle, taking a cautious, nuanced view of the industry as a whole. So, why wasn’t the microfinance industry allowed to stand up for itself? This omission, we thought, seemed unfair to the industry.
But maybe the most telling moment of the debate was when each man gave a response to the compelling question posed by Chuck Waterfield: “If we (investors, networks, providers) disappeared, what would happen to microfinance?” Sonja Kelly summarized:
On the surface, their responses were quite similar. The normative implications of their answers, however, were strikingly different. Bateman answered that although the microfinance industry would persist, there was nothing inherently good about such endurance. He insisted that the existence of and demand for an industry does not make it an industry worth keeping (the subtitle of his book, “The Destructive Rise of Local Neoliberalism,” conveys this sentiment even more strongly than his debate rhetoric). Roodman, on the other hand, indicated that the presence of the microfinance industry even in the absence of its creators would be a good start toward financial inclusion. He maintained that, while microfinance itself has not been proven to be the “silver bullet” that it was initially purported to be, the widening of the product line and the applicability of the economic and human capital that are already contained in the industry might be a great benefit for low and middle income countries.
Ultimately, as Roodman acknowledges in his response to the debate, it never truly reached a conclusion. They agreed to disagree and offered little in the way of innovative ideas to move the field of financial inclusion forward. As Holly Padgett concluded:
Ultimately, I have to wonder if perhaps their energy would be better spent researching alternative solutions for development.
Did you listen in to the debate? What was your reaction?