Microfinance Movie Night

Last week I caught up with David Roodman who was on his way to an NYU screening of The Micro Debt, a documentary on microfinance by Tom Heinemann. Heinemann sent me the DVD a while ago, but I hadn't watched it yet so I tagged along. 

Heinemann is a muckraker, a trouble-maker, a Danish Michael Moore -- especially in the scenes where his camera crew tries to corner Muhammad Yunus (unsuccessfully) at an industrial fair in Spain. 

The film is an unrelenting indictment of the microfinance sector, the Nobel Committee, and Yunus. Heinemann distorts and sensationalizes, and he does a grave disservice to Grameen Bank and Yunus. In a now-resolved matter, Heinemann accuses Yunus of massive financial improprieties involving a $100 million tax dodge. Worse, the film pins a series of borrower suicides on alleged strong-arm tactics of Grameen Bank. (If your preference for unbalanced documentaries instead tilts toward hagiography, try this or this.)

Heinemann is unsparing: Alex Counts, head of the Grameen Foundation and a thoughtful microfinance advocate, is set up as an apologist for indefensibly high interest rates in Nigeria. And Yunus is simply pilloried. A recurring image, slotted between stories of borrower suicides, shows a beaming Yunus on a Dhaka billboard, with arms outstretched like a manic Christ.

That said, criticism can be helpful. Even one-sided "not the whole truth" criticism. You don't have to agree with everything the Occupy Wall Street folks advocate (or even really understand what it is they advocate - I don't) to be glad that someone's jumping up and down about greater accountability in the financial sector. 

One of the strengths of Heinemann's film is the amount of airtime given to Thomas Dichter, a Paris-based consultant filmed while sitting in a huge room in Paris that looks like a study at Versailles. He's especially articulate in puncturing microfinance hype. Dichter makes the entirely reasonable point that not every poor person wants to be an entrepreneur or has what it takes to succeed as one. Most people (myself included and probably you) want decent, stable jobs more than anything. Yunus's proposition, to be fair, is that you can talk about decent, stable jobs all you want, but those jobs are not materializing in big numbers for the world's poorest citizens. Microfinance provides a set of opportunities that are real, today, now. But microfinance is sold as much more than that, which opens the door to the world’s Heinemanns.

During the post-screening discussion, commentators worried about growing problems of indebtedness of microfinance borrowers. They hammered that lenders need to do a better job of making sure that loans are actually used for production, not diverted to consumption. It's a view that's often heard, but I’m not on board.

A lesson from the financial diaries is that microfinance loan officers know that borrowers won't use 100% of loans for production. Still they lend – and for good reason. The loan officer’s job is to make sure that households have sufficient cash flows to service loans, no matter how borrowers invest the money - or if they invest it at all. They know there will be diversion, but, after having completed due diligence, they need to have faith that households will make the smartest choices they can. Sometimes that means dealing with a health problem or putting food on the table, rather than putting every last penny into a micro-enterprise. If there’s a real problem, it’s usually with due diligence (the loan officer’s assessment of total household cash flows), not with how loans get used.

I had a bit part in the film, shot from my definitely unpalatial NYU office. I describe the power of Yunus's vision and the volume of subsidy needed to turn it into a reality. After the film, Brian Gately, a credit union expert, asked me whether I felt duped by Heinemann. In truth, I had thought about not participating based on Heinemann’s past work (a co-author declined), but sometimes it makes sense to be part of a conversation even if you don’t agree with where it ends up. This one ended up as an unfair, destructive film with some fair, constructive moments. Due diligence required.