UPDATE: Check out the microlinks post-event resource page for a recording of the debate, a transcript and more!

On Monday January 30th USAID and the Financial Inclusion Forum of D.C. hosted a much anticipated parliamentary style debate between David Roodman, Author of Due Dilligence: An Impertinent Inquiry into Microfinance, and Milford Bateman, author of Why Doesn’t microfinance Work: The Destructive Rise of Local Neoliberalism. The debate was entitled “Moving Financial Inclusion Beyond Microfinance” and the central question was:

“If microfinance has not achieved its objective in substantially reducing poverty, what are the pathways to financial inclusion that will contribute to this objective?”

The debate was moderated by Chuck Waterfield of MFTransparency. To find out more about the context for the debate see this exchange between Roodman and Bateman in the comments section of David Roodman’s Microfinance Open Book Blog.

David Roodman won the coin toss and started out the parliamentary-style debate by laying out his top ten reasons for why it is incorrect to characterize microfinance as a completely useless tool in poverty alleviation work. Amongst his reasons, he noted the tendency in microfinance literature to exaggerate both positive and negative impacts, and argued instead for deemphasizing the most extreme viewpoints for the sake of developing a more evidence-based discourse. He preempted the question of opportunity costs and the accusation by some (including Bateman) that microfinance is diverting resources away from other interventions to the detriment of economic development in some regions. Roodman noted that the data on this question is weak, and that it is both difficult and speculative to prove that microfinance is diverting resources away from more effective or impactful economic development interventions to the detriment of local economies. He cited the randomized control trials on the impact of microfinance that have shown the overall average impact of microfinance to be zero, and in some cases to be slightly positive. Even so, Roodman contends that microfinance comprises a market which needs to be regulated like any other. He emphasized that the term microfinance does not exclusively apply to microcredit, but that it also includes savings, insurance and mobile money transfer solutions which deserve their own evaluation criteria. He refuted Bateman’s suggestion that microfinance does not have a place in the broader vision of industrialization and asserted that there are many innovations in microfinance which deserve critical inquiry and consideration.

Bateman countered by clarifying that he does not argue that there are no benefits to microfinance, but that the evidence indicates that the costs do clearly outweigh the benefits. He also makes the distinction that his critique is limited to microcredit, and that he too feels there is potential in micro savings, insurance and other microfinance tools. He characterizes microcredit as having become corrupted by commercialism, such that the poor are expected to finance their own way out of poverty. He went on to accuse the microfinance community of resisting evidence that demonstrates the negative impacts of microfinance. He interprets this resistance as self-serving, and he suggests that the move by many MFIs towards a financial inclusion paradigm is a way of justifying their own existence in the face of this negative evidence. Milford rebuked Roodman’s assertion that there is no place for extremes in this dialogue, and claimed that in fact it is possible that there is truth in the extremes. Bateman accused Roodman of interpreting the success of the microfinance industry itself as evidence of its own positive impact, and argues instead that we should be seeking evidence for impact in poverty indicators. He advocates for moving resources and inquiry into more locally based solutions to economic development like credit unions, local banks, enterprise development efforts and cash grants and away from microcredit.

The debate was followed by a lively question and answer session.