Is there a “microfinance bubble”? The question recently hit the front page of the Wall Street Journal. A storm of responses followed, including one from CGD’s David Roodman and another from SKS’ Vikram Akula. Both Roodman and Akula question the evidence for this so-called bubble. This week, the Economist jumped in, adding a big dose of (much needed) perspective...
Read MoreWhy academic involvement in RCTs is important
There’s been more activity on the question of the importance of RCTs. Last week, Bill Easterly wrote his thoughts about randomized controlled trials (RCTs) on his blog, and Chris Blattman posted a response. Both of them seem to take the perspective that academic research should produce new theory and/or create major policy recommendations. The fact that each RCT often only answers a “small” question – and sometimes only in a certain context – seems to them to be a huge drawback. I disagree.
Read MoreWhat to Protect?
FAI Director Sendhil Mullainathan appeared as a witness in the recent U.S. Senate Banking Committee meeting “Creating a Consumer Financial Protection Agency: A Cornerstone of America’s New Economic Foundation.” You can watch the hearing here...
Read MoreThe Data Question
In early June, I joined several hundred researchers at the First European Research Conference on Microfinance hosted by CERMi. The three-day conference included presentations on a wide array of subjects including social responsibility, institutional governance and performance, and rural and informal microfinance.
One striking aspect of the conference was the prolific use of data from the Mix Market. The Mix Market database contains data on financial performance and outreach indicators for over 1,400 institutions...
Read MoreThe Price of Zero
Chris Anderson’s new book, Free: The Future of a Radical Price, was just reviewed twice in the New York Times (here and here) and got a Gladwellian treatment in the New Yorker.
Anderson argues that the price of zero is essentially different from all other prices. Anderson describes an experiment conducted by Duke psychologist Dan Ariely, the author of Predictably Irrational. Ariely offered a group of people two types of chocolates – Hershey’s Kisses for one cent, and Lindt Truffles for fifteen cents...
Read MoreNon-Profit on the Side
Together with a group of friends and colleagues from Botswana, Canada and the US, I started to brainstorm about ways of boosting core funding for these organizations. Together we developed the concept for Setso Project, an online tool to leverage individual donations to small, community-led organizations in Botswana...
Read MoreThe Value of Replication
As a rule, replicating studies is boring and insufficiently rewarded. At least boring and insufficiently rewarded relative to striking out into new terrain. Not surprisingly, it doesn't happen much. On the other hand, it's fundamentally important for building knowledge.
There are two types of replication, both of which lose out to other kinds of studies...
Of instrumental variables and sample definition
Welcome back to the world of econometrics debates! I hope you enjoyed the first installment. Round 2 pits Heckman and Urzúa against Imbens, and is about instrumental variables and estimates the local average treatment effect (LATE).
First, a little bit of background about instrumental variables...
Read MoreAccess to finance vs. access to healthcare
A new video on global health features BRAC USA CEO Susan Davis and Partners in Health founder Paul Farmer. BRAC has been a pioneer in taking a holistic approach to reducing poverty, and their healthcare programs reach more than 92 million people in Asia and Africa. Farmer recently spoke as part of NYU’s “Social Entrepreneurship in the 21st Century” speaker series about his success with Partners In Health in providing healthcare services for the poor in Latin America, Africa and Russia...
Read MoreEconometric debate on randomized controlled trials (RCTs)
So far, 2009 has been a fertile time for methodological debates in econometrics. One hot debate touches directly on randomized control trials (RCTs), a methodology often used in impact evaluations of development interventions. On one side, renowned Princeton development economist Angus Deaton argues that randomized experiments are overhyped and that other methods of learning about impacts provide guidance which is often more closely related to theory. On the other side, Guido Imbens reminds readers of the reasons why randomized experiments have gained a wide following. Other methods rely on assumptions that often make them not quite fully convincing.
Read MoreBasic Needs Financing
It’s time again for the Financial Times Sustainable Banking Awards. The awards recognize financial institutions that show leadership and innovation in incorporating environmental and social sustainability objectives in their operations.
The organizers included a new category this year - Achievement in Basic Needs Financing. The category highlights institutions with solutions to address basic needs such as energy, food and water...
Read MoreMicrofinance Debates
A recent Times (UK) Online article resurrects two debates about microfinance. The first is whether it really works as a poverty-fighting tool, and the second is whether the increasing commercialization of microfinance should be seen as a challenge or an opportunity.
Aneel Karnani of the University of Michigan weighs in on the first debate as the leading naysayer..
Read MorePayment mechanisms and healthcare
The Microinsurance Network and ILO's Microinsurance Innovation Facility and STEPprogramme are conducting a survey on Third-Party Payment Mechanisms in Health Microinsurance in Developing Countries.
Payment mechanisms form an integral component of insurance schemes because they not only affect the financial flexibility available to customers, but also afect the quality of care delivered by the health provider...
Read MoreUncovering the Secret to Successful Aid?
This seems to be our week to blog about Bill Easterly's blog. Although in this one, we aren't going to agree as much. I was really excited to see his report about Women's Trust until I got to the final paragraph...
Read MoreMicrolending Taking Off in the US?
As banks tighten their lending criteria in response to the financial crisis, would-be entrepreneurs are finding that they can’t get start-up capital from the usual sources, and some small business owners are turning to microlenders like ACCION USA, Grameen America, and home-grown institutions like the Wisconsin Women’s Business Initiative...
Read MoreMeasuring Use of Loans
A recent post from Alex in the Philippines addressed the common uses of microfinance loans, which leads logically to two follow-up questions. How do we actually know with any certainty what microfinance clients do with their loans given that money is fungible? And, secondly, should we care as long as the loans are paid back?
Read MoreHow are micro-loans used?
A frequent question that I get from friends and family members about the microfinance projects I work on for IPA is, “What do people actually do with the loans?”
Perhaps these questions come from confusion over the large differences between the economies of the developed versus developing world. About 13% of the labor force in the developed world is self-employed versus about 49% in the developing world...
Read MoreGetting cash out from under the mattress and into the bank
Cash under your mattress? These days it’s easy to feel like keeping our money at home—literally– may be the safest place for it. The Bill & Melinda Gates Foundation, though, is making a global push to get money into savings accounts, and Pascaline Dupas and Jonathan Robinson have just finished a paper that makes the cleanest case yet for getting money out from under the mattress...
Read MoreHow behavioral economics can help change the fight against poverty
Seed Magazine is perched at the overlap between science and culture. It aims to be the bi-monthly rag of a new breed of science-savvy global citizens ...
Read MoreDid Congress worsen the banking crisis?
Researchers and financial analysts are still sorting through causes of the financial crisis. One target is the Community Reinvestment Act (CRA), which requires that banks to lend to low and moderate income people in the communities where they take deposits. Among the naysayers are Ron Paul, who charged the CRA with "forcing banks to lend to people who normally would be rejected as bad credit risks," and Jeffrey A. Miron, an economics professor at Harvard, who called for “getting rid” of policies like the CRA that “pressure banks into subprime lending.” But Paul and Miron may now have to eat their words...
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