David Roodman's Microfinance Open Book Blog

 

Posts in: 5. Microfinance as Business

 

Chapter 5 Refined

March 20th, 2011

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The long march is coming to an end. As you can see, I’m making a big push to get the darn book done. I just posted a re-edited chapter 5 (.docx, .pdf). I hope to have 6 and 7 ready for the editor by the end of the month.

The original post for this chapter summarizes it.

Along with editing the whole text, I inserted a table, salvaged from chapter 4, on the prevalence of microcredit in various countries and regions; updated the tables; added some block quotes from Vikram Akula’s book on his pursuit of efficiency at SKS; fixed dated references to India and Nicaragua; stripped out some loaded, negative, passing descriptions of MFIs such of how they “impose on the time of the customers”; and responded to some appropriately challenging comments from reviewers on fine points.

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Chapter 5: Microfinance as Business

November 3rd, 2009

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I’ve just posted the long-threatened draft of chapter 5 (.doc .pdf). To write it, I started with the text of Microfinance as Business which I wrote with Uzma Qureshi three years ago in response to a request (and grant) from the ABN AMRO bank in the person of Suellen Lazarus. My last act before posting the chapter just now was to go over annoyingly astute comments on the text form Suellen’s son Eben, who served me this summer as a superlative intern.

The chapter argues that much of what characterizes modern microfinance, notably the emphases on credit, groups, and women, can be explained with recourse to rather crass commercial considerations. In other words, doing microfinance in the ways it is usually done helps microfinance institutions (MFIs) solve this problem: how do you mass-produce financial services without losing your shirt? By fully covering their costs, MFIs scale up and serve millions of people. Group lending to women, for example, turns out to be cheaper than group lending to men because women in many societies repay more reliably in the group setting. They may be more sensitive to the peer pressure, and may value access to opportunities to do business in public forums of the sort where men usually dominate.

This thesis comes at the question of the impacts of microfinance through a back door. “If the common emphasis on credit over savings, for example, can be explained as a matter of business practicality, that should seed judicious doubt that credit is what the poor most need.”

My chief influences in writing this chapter were Jared Diamond, famous for bringing an evolutionary perspective to human history in Guns, Germs, and Steel, and Pankaj Jain and Mick Moore, who wrote What makes microcredit programmes effective? Fashionable fallacies and workable realities.

I welcome your comments. Here’s the intro:
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