In catching up on my blog reading after the holidays, I lingered over Rich Rosenberg’s post on whether microcredit is squeezing out moneylenders. In it, he refers to a Wall Street Journal article on the rapid expansion of moneylending in India, and returns to the nagging question of whether this new availability of credit is leading to overindebtedness...
Read MoreWhen does insurance make sense?
In his useful assessment of microinsurance schemes, Paul Mosley proposes the idea of “quasi-insurance” – the provision of risk-protection through non-insurance routes such as loans and savings in markets where microinsurance is lacking or insufficient. Mosley purports that “in every case where a choice has to be made concerning choice of risk management strategies it is desirable to assess whether such non-insurance options may offer a lower-cost or more effective method of protective the poor than microinsurance.”
Read MoreSetting new benchmarks for the impact of microfinance
What do we do now that two impact studies from the Philippines and India say that microfinance isn’t such a big deal after all? The Microfinance Working Group at Columbia took on this question in a panel on “Taking stock of microfinance: Does it really help the poor.” An ambitious topic to cover in one hour, but the panelists did a commendable job...
Read MoreIPA Researchers in Superfreakonomics
Research on charitable giving by IPA President Dean Karlan and Research Affiliate John List is mentioned in Ian Ayres' review of the new Superfreakonomics...
Read MoreMicrofinance "Graduation" pilots are graduating
It’s no secret few MFIs have had much success mobilizing the “poorest of the poor” into their programs. This failure has remained a persistent irritant in an otherwise phenomenally successful industry.
Microfinance advocates have generally taken one of two approaches to the problem...
Read MoreThe continuing saga of the microfinance bubble
A recent article by Daniel Rozas pondered the existence of a microfinance bubble in South India. Rozas crunched the numbers and concluded that, in some areas, microfinance borrowing has overreached capacity. Rozas’s doesn’t have data on household finances, so he’s extrapolated from regional aggregates. The story is worrying, but he doesn’t nail it.
Read MorePaying to improve health
The organizers of this year’s 5th International Microinsurance Conference, held last week in Dakar, wisely included “Providing health insurance to the poor” as one of the main themes. Health events - whether they are unanticipated emergencies, or even foreseeable events like giving birth - are among the main financing challenges for poor households. When you’re living on $1 or $2 a day, better health financing mechanisms have the potential to make a huge difference. Too often, they’re literally life and death issues.
Read MoreNew global estimate reveals that half the world is unbanked
FAI just published a new paper that reveals that 2.5 billion adults worldwide do not have a savings or credit account with either a traditional (regulated bank) or alternative financial institution (such as a microfinance institution). And nearly 90% of the financially unserved (2.2 billion) live in Asia, Africa, the Middle East and Latin America.
Read MoreThe impact of microfinance credit ratings
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...
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