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Dean Karlan and Timothy Ogden discuss microfinance

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"What do you do with the households that are so poor that there is no real sustainable livelihood going on?" Professor Dean Karlan and FAI's Managing Director Timothy Ogden discuss some of the recent research into poverty alleviation programs targeting the ultra-poor; questions of internal validity versus external validity; and evaluating economic well-being as well as psychological well-being.

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Substitution Bias & External Validity: Why an innovative anti-poverty program showed no net impact

The net impact of development interventions can depend on the availability of close substitutes to the intervention. We analyze a randomized trial of an innovative anti-poverty program in South India which provides “ultra-poor” households with inputs to create a new, sustainable livelihood. We find no statistically significant evidence of lasting net impact on consumption, income or asset accumulation. Instead, income from the new livelihood substituted for earnings from wage labor. A very similar intervention made a large difference elsewhere in South Asia, however, where wage labor alternatives were less compelling. The analysis highlights the roles of substitution bias and dropout bias in shaping evaluation results and delimiting external validity. 

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From Credit to Savings

When the Gates Foundation started a programme to expand global ‘financial services for the poor’ (FSP), many in the field, myself included, saw this as an important complement to the foundation’s work in health and education.1 The evidence is piling up that the world’s poor face the twin problems of low incomes and difficulty managing their incomes without bank accounts or insurance. Finance, in this view, allows people to invest in the future and – importantly – to marshal resources to meet needs today. Access to finance, then, is a key tool for improving the lives of the poor. The Gates Foundation’s impact on finance for the poor has been most strongly felt in re-balancing attention between credit and savings. 

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Credit is Not a Right

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The notion of “credit as a human right” flows from the argument that if we are concerned with universal access to food, shelter, and health, then we must be committed to providing access to the tools that are most likely to deliver those basic elements of life. For the sake of argument (and there is, of course, argument), we will follow Article 25(1) of the Universal Declara- tion of Human Rights, adopted by the United Nations in December 1948, and begin with the idea that access to food, shelter, and health constitute basic human rights. Yunus can then be interpreted as saying: access to credit is so powerful in reducing poverty, that access to credit should be a right itself. 

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Evaluation Fundamentals

Impact evaluations try to measure the change in a participant’s life that occurred because of an intervention. The “intervention” could be a policy, a project, an insurance product, or a specific feature of a product. For instance, the intervention could relate to a particular product feature, such as the extent of coverage, a change of pricing structure, or variations in the distribution channel. . .

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Emergency (Hand) Loan

Emergencies can derail families and prevent them from getting ahead. This study describes the design, implementation, and results of a pilot emergency (“hand”) loan product in India. The product achieved its original intent, but the pilot encountered considerable institutional and execution challenges. The experience generated lessons for future product innovation. 

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From Microfinance to m-Finance

In some countries it can take years to get a new telephone line installed. In 1990, there were just 10 telephone lines installed for every 1000 people in the Philippines. In Kenya, the ratio was 7 per thousand. In India, 6 per thousand. Compare that with the United Kingdom with 441 lines per thousand in 1990, or the United States with 545. For decades, public sector telephone companies in developing economies seldom had incentives or budgets to rapidly expand land line networks, and the private sector has had even less motivation to serve the costly-to-reach.