June 29, 2009
Newsweek Blogs Roodman & Morduch 2009
By David Roodman Tags: media
Newsweek blogger Mac Margolis just wrote about my new paper with Jonathan Morduch. I think Margolis got the story 95% right, though Jonathan and I never suggested that microfinance is a bubble. And while we did write that “30 years into the microfinance movement we have little solid evidence that it improves the lives of clients in measurable ways,” that assertion was carefully worded to allow for the perspective in Jonathan’s Portfolios of the Poor, which is that given what we know about how the poor manage money, it is easy to see how reliable financial services could help them survive life on $2/day, even if not escape it.
Still, it is nice to have the story picked up.
June 30, 2009 at 11:31 am
If I was asked to write a Twit (less than 140 characters) on your forthcoming book it would be \Microfinance is a hype and Grameen Bank had no role in discovering and scaling it up.\ What is the difference between a bubble and a hype?
June 30, 2009 at 1:18 pm
I understood the Newsweek blogger Margolis to be using “bubble” to refer to the idea that new loans are being used to hide defaults on old ones, making everything look great until it implodes. Jonathan and I suggest no such thing is happening. (And Margolis makes it clear this is his idea, not ours.)
Hype can feed bubbles, but that’s not so much what I worry about. We all face incentives to exaggerate the value of our work and the “marketplace” often favors those who are best at hyping. In time, that can foster a skeptical counter-reaction. I think Yunus and the Grameen Bank were and are innovative in the ways that the best entrepreneurs are, mixing old ideas with new, aggressively scaling up (defying doubters), constantly experimenting. They are heroes in the Schumpeterian “creative destruction” mold.
But I am finding that the question of whether microfinance is a particularly good way to help the poor compared to other interventions is a complex one, and am still sorting through it.