It’s been great to see business school faculty take an interest in microfinance. Gabriel Natividad of the strategy group at the Stern School of Business at NYU just published an interesting new paper that links asymmetric information, third-party credit ratings, the price of credit and the operations of microfinance institutions (MFIs). Empirical evidence on information problems lags behind theory and practice, so the paper’s especially welcome...
Read MoreKiva Lenders Have Needs, Too
Meet Jacques. He’s the Kiva Coordinator at WAGES, a microfinance institution (MFI) based in Togo, West Africa. Every day, a loan officer hand-delivers a stack of borrower information forms and a USB chip full of photos. Jacques has trained the officers how to fill out the forms, use digital cameras, and get borrowers to smile and display their merchandise proudly for pictures.
Jacques formats the pictures, writes the information into paragraphs, and uploads everything to Kiva’s website...
A recipe for expanding financial access through regulatory reform
With the global financial crisis still rippling across front pages of newspapers around the world, it may not seem like the moment to further open the doors to the financial system. But this gets it backward. As experts focus on shoring up financial regulation, this is precisely the moment to simultaneously craft a new financial framework that expands access to the billions of people who are currently unserved...
Read MoreSocial finance: moving beyond microfinance
Last year's financial crisis caused many people to lose their already tenuous faith in financial institutions and the role they play in supporting the various functions of an economy.
This view of finance in the life of an economy is paradoxical to the one we hold about finance in the lives of low income households. The microfinance industry, and our work here at FAI, rests on the belief that access to well-designed financial services is critical for the economic and social development of poor families...
Read MoreA new look at temptation
Everywhere in the world, people both rich and poor struggle to save and invest for tomorrow rather than splurging on the things they want today. From text messaging reminders, to providing piggy banks, to giving away little motivational presents, IPA investigates ways to help people meet their financial goals and avoid temptation. However, Research Affiliates Abhijit Banerjee and Sendhil Mullainathan have a new paper that suggests we may need to rethink the economics and psychology of temptation.
Read MoreWhen low-tech is highly successful
It is a difficult and not particularly fruitful debate when different sectors important to economic development are pitted against one another in the quest for donor attention. Lasting development progress usually encompasses many areas, and debates that fail to recognize this are often just distracting. Some of the more interesting (and no less heated) debates are waged once a specific sector of focus or growth constraint has been identified.
For example, once we have decided that education is crucial, how do we act upon this decision?
Read MoreDebunking the microfinance bubble
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...
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