What do you think?
Rate this book
Due Diligence: An Impertinent Inquiry into Microfinance
The idea that small loans can help poor families build businesses and exit poverty has blossomed into a global movement. The concept has captured the public imagination, drawn in billions of dollars, reached millions of customers, and garnered a Nobel Prize. Radical in its suggestion that the poor are creditworthy and conservative in its insistence on individual accountability, the idea has expanded beyond credit into savings, insurance, and money transfers, earning the name microfinance. But is it the boon so many think it is?
Readers of David Roodman's openbook blog will immediately recognize his thorough, straightforward, and trenchant analysis. Due Diligence, written entirely in public with input from readers, probes the truth about microfinance to guide governments, foundations, investors, and private citizens who support financial services for poor people. In particular, it explains the need to deemphasize microcredit in favor of other financial services for the poor.
Readers of David Roodman's openbook blog will immediately recognize his thorough, straightforward, and trenchant analysis. Due Diligence, written entirely in public with input from readers, probes the truth about microfinance to guide governments, foundations, investors, and private citizens who support financial services for poor people. In particular, it explains the need to deemphasize microcredit in favor of other financial services for the poor.
- GenresEconomicsNonfiction
275 pages, Paperback
First published December 19, 2011
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 7 of 7 reviews
September 17, 2012
This is the book to read about microfinance, specifically microcredit.
Roodman is a fantastic journalist and a delightful writer. The book is exactly what I want in that 'one,' definitive book about a subject: thoroughly documented, broad but focused within each topic, well-organized and indexed for reference, and nuanced. Really, complexly, and carefully nuanced. He makes no claim in the book that is not stated exactly as he means, no broader nor more narrow. And that is what you need in what is in effect a gutting of a bloated, predatory industry, which nevertheless encompasses many well-crafted projects that directly and materially benefit people who need and expressly want the services. The author believes in capitalism, so don't expect much of a critique on the structural nature of credit, debt, and linking people's livelihoods to foreign capital markets here. In fact, the main positive conclusion Roodman makes, after eviscerating microcredit's claims to reduce poverty and empower clients, is that at least the microfinance industry is successful at expanding the microfinance industry, replete with finance-related job growth and capital investment. Umm...? But because what Roodman is doing is reporting on the impact of free market capitalism as applied to profit off the poorest people in the world, a structural critique can be made based on his findings even if the author himself is much too conservative with his conclusions to do so. Respect.
Above and beyond all this, Roodman throws in so many ridiculously beautiful turns of phrase that I put the book down in disbelief several times to read the artful wording to whoever was sitting next to me. Uncommon in a book about finance and maybe an author having just a bit too much fun for this kind of work. Roodman wrote a readable book that is masterfully constructed and organized, and on top of that he put the entire text online free, and crowd-sourced edits on his blog as he wrote drafts. Edward Abbey is the first source in the extensive bibliography. He quotes Herman Daly to critique unlimited growth. Every analogy in the book is drawn from ecology. Hell yes.
Roodman is a fantastic journalist and a delightful writer. The book is exactly what I want in that 'one,' definitive book about a subject: thoroughly documented, broad but focused within each topic, well-organized and indexed for reference, and nuanced. Really, complexly, and carefully nuanced. He makes no claim in the book that is not stated exactly as he means, no broader nor more narrow. And that is what you need in what is in effect a gutting of a bloated, predatory industry, which nevertheless encompasses many well-crafted projects that directly and materially benefit people who need and expressly want the services. The author believes in capitalism, so don't expect much of a critique on the structural nature of credit, debt, and linking people's livelihoods to foreign capital markets here. In fact, the main positive conclusion Roodman makes, after eviscerating microcredit's claims to reduce poverty and empower clients, is that at least the microfinance industry is successful at expanding the microfinance industry, replete with finance-related job growth and capital investment. Umm...? But because what Roodman is doing is reporting on the impact of free market capitalism as applied to profit off the poorest people in the world, a structural critique can be made based on his findings even if the author himself is much too conservative with his conclusions to do so. Respect.
Above and beyond all this, Roodman throws in so many ridiculously beautiful turns of phrase that I put the book down in disbelief several times to read the artful wording to whoever was sitting next to me. Uncommon in a book about finance and maybe an author having just a bit too much fun for this kind of work. Roodman wrote a readable book that is masterfully constructed and organized, and on top of that he put the entire text online free, and crowd-sourced edits on his blog as he wrote drafts. Edward Abbey is the first source in the extensive bibliography. He quotes Herman Daly to critique unlimited growth. Every analogy in the book is drawn from ecology. Hell yes.
September 23, 2018
The main question the author attempts to answer is: What is microfinance's social bottom line, its contribution to development?
The answer I got from the book was: it's unclear. David argues that microfinance can be viewed as development in 3 different ways; as escape from poverty, as freedom, or as industry building.
He goes on to show (in a reasonably verbose fashion) that the evidence for microcredit improving 1 and/or 3 (poverty and industrialisation) is lacking. And he speculates that microfinance does increase freedom through some lousy reasoning.
So the original question remains unanswered in my mind. I certainly don't expect microfinance to be a sufficient cause of economic/social prosperity, but I imagine it is a necessary cause. More data is needed to compare credit/savings/insurance/?. How many people become bonded by their dept? How many people use the credit to successfully lift themselves out of poverty?
I would define the purpose of financial tools such as credit, savings and insurance to help people manage uncertain futures and plan long term. Distasters or opportunities may come along and capital is often needed to take mitigate or exploit them, (re)payment to banks ensure long term commitments can be paid for, insurance provides support to the unlucky.
Overall, I enjoyed the book, but ended up skimming a few chapters near the end. It was nice food for though about how financial tools can be used to help others.
The answer I got from the book was: it's unclear. David argues that microfinance can be viewed as development in 3 different ways; as escape from poverty, as freedom, or as industry building.
He goes on to show (in a reasonably verbose fashion) that the evidence for microcredit improving 1 and/or 3 (poverty and industrialisation) is lacking. And he speculates that microfinance does increase freedom through some lousy reasoning.
So the original question remains unanswered in my mind. I certainly don't expect microfinance to be a sufficient cause of economic/social prosperity, but I imagine it is a necessary cause. More data is needed to compare credit/savings/insurance/?. How many people become bonded by their dept? How many people use the credit to successfully lift themselves out of poverty?
I would define the purpose of financial tools such as credit, savings and insurance to help people manage uncertain futures and plan long term. Distasters or opportunities may come along and capital is often needed to take mitigate or exploit them, (re)payment to banks ensure long term commitments can be paid for, insurance provides support to the unlucky.
Overall, I enjoyed the book, but ended up skimming a few chapters near the end. It was nice food for though about how financial tools can be used to help others.
February 3, 2020
I learned 3 things
It is a very solid book. I learned these:
1) microfinance should be run like a business.
2) promotion of savings is more important than insurance which in turn is more important than credit. Trouble is, inflation is a disincentive.
3) I have been sceptical of quantitative models in social sciences. David Roodman has hammered that home elegantly.
Some thoughts:
My own microcredit firms collapsed one after another in China in the past nine years. I moved into bad-debt recovery and collection three years ago. I see tremendous social value here. Plumbing is not glamorous, but someone has to do it. All my work entails restructuring: hair cut, repayments in instalments or deferred repayments. Not only good for the sustainability of microcredit firms but also good for indebted borrowers. They should not suffer quietly and alone. Restructuring helps them get out of the trouble. They can avoid bullies and justice in the jungle.
My debt-collection company’s full description is here:
It is a very solid book. I learned these:
1) microfinance should be run like a business.
2) promotion of savings is more important than insurance which in turn is more important than credit. Trouble is, inflation is a disincentive.
3) I have been sceptical of quantitative models in social sciences. David Roodman has hammered that home elegantly.
Some thoughts:
My own microcredit firms collapsed one after another in China in the past nine years. I moved into bad-debt recovery and collection three years ago. I see tremendous social value here. Plumbing is not glamorous, but someone has to do it. All my work entails restructuring: hair cut, repayments in instalments or deferred repayments. Not only good for the sustainability of microcredit firms but also good for indebted borrowers. They should not suffer quietly and alone. Restructuring helps them get out of the trouble. They can avoid bullies and justice in the jungle.
My debt-collection company’s full description is here:
September 11, 2019
An important companion to the vast literature promoting microfinance, including Yunus's "Banker to the Poor" and other well-known works. As Roodman points out in logical detail, it turns out it is very hard to effectively help the global poor make economic progress. Capitalism (even with its rough edges), trade, commerce, and entrepreneurship are, I'm increasingly believing, the only way.
August 21, 2012
Very good and honest effort to scrutinize one of the hot topics in development. Conclusions are reasonable, and based on the view that the glass is half full. The book provides an interesting historical perspective of financial services to the lower income classes.
November 28, 2022
Book was fine, solid overview, but if I was the editor, I would recommend cutting it by 100 pages. Lots of pages of stories that might be a nice analogy in a class or presentation but not necessary for this.
September 2, 2022
Well-researched investigation of the impact microfinance has had on the world's poor. In short, Roodman concludes that funneling more foreign capital into microcredit endeavors at present is apt to fuel entrapment in debt rather than reduce poverty. The book's analysis is nuanced, though, and it is worth reading in full as Roodman deeply explores many dimensions of the topic.
Displaying 1 - 7 of 7 reviews