Boston Globe on Microfinance Impact Studies

September 20, 2009

The Boston Globe has an article today on what the latest impact studies tell us about microfinance. I really do think this article is well-done—clear-eyed and clearly written. But maybe I’m biased by being quoted in it.

Coverage like this raises an old question for those who promote charities: How far is it wise to go in, well, accentuating the positive in order to raise funds for good works? At what point does going beyond the evidence risk too much backlash and disappointment? Ponder such sites as ACCION’s lendtoendpoverty.org and the Grameen Foundation’s stoppovertynow.org. I do not mean to insinuate through my indirectness that I have the whole answer.

Update: The Globe published a letter from Elisabeth Rhyne, head of ACCION’s Center for Financial Inclusion.

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1. Jim Battle Says:
   October 16th, 2009 at 8:44 am

   One criticism of the MIT study, as described in the article (page 3).

   They judge the consequence of loans by randomly accepting or rejecting a set of cases that fall on the very edge of what the loaning organization would consider worthwhile loans.

   Is it any wonder that the effect of the loans for this set of marginal cases would be less than if the study had instead compared the results from randomly accepted/rejected cases which they deemed strong candidates for a microloan?

   Another criticism is that they limited their analysis to a single lender in a single market. Generalizing their conclusions of this small sample to the entirety of the microloan market seems unwarranted, although still food for thought and justifying follow-on studies.

2. David Roodman Says:
   October 16th, 2009 at 8:51 am

   Jim, I think your first criticism actually applies to the other study, by Dean Karlan at Yale and Jonathan Zinman at Dartmouth. Your second applies to both. Both of these caveats are examples of what the experts call “external validity” problems, i.e., issues of how much you can generalize from one study. You can be sure the authors recognize these issues, but you’re right that that tend not to come out in press coverage.