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Independent research & practical ideas for global prosperity
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Independent research & practical ideas for global prosperity
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Posts in: UncategorizedWhich Studies Should Someone Be Paid to Reexamine?May 23rd, 2012Posted by David RoodmanProbably you agree that actions meant to help poor people should be guided by the best science about what works. (Or perhaps you also have a problem with motherhood and apple pie.) And probably you’d concede that part of what makes science science is replicability. Cold fusion is a scientific joke, not a scientific advance, because the experiments seeming to generate evidence of fusion at room temperature could not be independently reproduced. In this way, replicability is at the heart of the grand project to give everyone a shot at a decent life. But in economics, and the social sciences generally, replication doesn’t happen much. Why? No one ever won a Nobel Prize by copying others. And as I think John Kenneth Galbraith once observed about competition, people like replication until it happens to them. But times are changing. The World Wide Web was invented in 1990 to help researchers share data, and it is slowly shifting norms about openness and collaboration. Communities converge faster to agreement, dare I say the “truth,” when analysis is public, collective, and iterative. Back when data were stored in punchcards and scientific discourse took place via ungainly bound volumes, statisticians could easily bar outside observers from their private digital laboratories. Now expectations of transparency are much higher. So here’s a cool thing. The International Initiative for Impact Evaluation (3ie) is seeking nominations by May 31 for impact studies that it should pay to have replicated. 3ie was born out of a recommendation in a CGD report led by Ruth Levine, Nancy Birdsall, and Bill Savedoff; its mission is to support new, high-quality research on what works in development, and at what cost. The just-launched replication program, on whose advisory board I serve, embodies an astute recognition that 3ie can also contribute by rigorously reexamining research done by others. Are there studies in your field that you think are influential enough to deserve reexamination—and confirmation, contradiction, or something in between? How strong is the evidence base for the idea that girl education is an investment with particularly high returns? How sure should we be that, roughly speaking, men spend all their money on beer while women invest in the children? Or that financial sector expansion increases economic growth? Comment »Nonsense about RandomnessMay 21st, 2012Posted by David RoodmanOMG:
Comment »Weekly Tweets for 2012-05-18May 18th, 2012Posted by David Roodman Tags: tweets
Comment »Eminence & EvidenceMay 16th, 2012Posted by David RoodmanA couple more reviews of my book appeared in the digital ether this week. One is on the blog of MYC4, which is a European peer-to-peer lending site that typically does loans larger than Kiva. I think it’s thoughtful and fair. The other is on the site of the Whole Planet Foundation (you have to dig a bit on this page or go here). The Whole Planet Foundation’s mission is “poverty alleviation through microcredit in communities worldwide that supply Whole Foods Market stores with products.” I gather that when you check out at Whole Foods you can donate your change and then some to the foundation. Reading the latter one, by Executive Program Director Steve Wanta, led me to reflect on what can make a review persuasive. I thought of two things. One is eminence. The reviewer’s achievements and experience and position—who he is—can make him credible when he describes a book as insipid or brilliant. I think of Amartya Sen’s review of Bill Easterly’s second book and Bill Clinton’s take on Robert Caro’s latest opus on LBJ. But that avenue is not open to Wanta, not so much because he lacks the stature of Sen or Clinton, but because he has a professional, vested interest in what I critique. Who he is should make him compelling only to the converted. The other avenue is evidence. I.e., backing up statements like “Roodman does not demonstrate the same statistical rigor for the potential adverse effects as he does for the positive effects of community building reported by the industry” with specifics. I tried to do something like what I have in mind in my biting review of Dambisa Moyo’s Dead Aid, which the Whole Planet Foundation deems “Compelling reading and a must read for anyone interested in African development.” Or see Alex Counts’s thorough examination of my book, which I still think is the best so far. At any rate, I think the Whole Planet review of my book does not persuade through either eminence or evidence. 2 Comments »Welcome Coverage, but Not Quite Scrutiny, of KGFSMay 14th, 2012Posted by David Roodman Tags: KGFSBack in 2009, my colleague Liliana Rojas-Suarez convened a meeting at CGD of a task force that would draft Policy Principles for Expanding Financial Access. Attendees included Jonathan Morduch of NYU; and Nachiket Mor of the IFMR Trust, who brought along Bindu Ananth. During a break, Bindu started to tell me about the IFMR Trust’s radical new approach to bringing financial services to poor Indians, called Kshetriya Gramin Financial Services (KGFS), which means “Regional Rural Financial Services.” I was just finding my way as a blogger, so when Jonathan said, “You should blog this,” it was needed advice. I took it. From the outside, KGFS seems like alchemy. No longer is a single, low-quality financial service like group microcredit mass-produced for the poor. Instead, poor people get customized financial services the middle class might envy. A client walks into a branch and meets with a KGFS employee who inventories her income and spending, assets and liability, worries and goals, punches them into a computer, and prints out a recommended portfolio of services that may include loans, insurance, savings, and even retirement savings. KGFS then provides all the recommended services, either on its own account, as with loans, or as an agent, as with insurance. The financial assessment, and presumably the service portfolio preferred, is updated every six months. Somehow, despite all this custom service and the forays into services most others have lost money on, KGFS turns a profit. When Nachiket Mor, who I think is the driving force behind IFMR, described it at a CGAP meeting last December, someone in the audience aptly commented that she would like access to something that good. There is much that is refreshing about KGFS: taking client needs as the starting point; using of high tech to cut the cost of assessing and meeting those needs; partnering with insurance companies and other financial titans, with KGFS the retail agent; and delivering a set of services. The big question in my mind has been whether it can pay for itself and grow. So far it seems to have. CGAP has just put out a report and a video interview with Bindu. From the report, I learned that in the last few years the IFMR Trust has licensed the KGFS system to five independent for-profit entities, which have raised all their capital from private investors. Together they have reached 200,000 people. Even more impressive is that mature branches, ones approaching three years in age, reach nearly 70% of people in the vicinity, or “catchment area.” I commend both the report and the video to you as introductions to the KGFS model. They are clear, accessible, not too long. Having met and talked shop with Bindu, as well as her CGAP coauthors on the report, Greg Chen and Stephen Rasmussen, I have great respect for judgment and intelligence of all those involved. That said, you should recognize that these materials do not represent an independent inquiry into KGFS, which is what I, as someone already familiar with the model, was most hoping to see. Both are clean presentations of the KGFS story as the KGFS people want to tell it. That’s fine as long as it’s seen for what it is. 1 Comment »Yunus-Bashing EscalatesMay 11th, 2012Posted by David Roodman Tags: GrameenHillary Clinton passed through Bangladesh last weekend and publicly expressed her strong support for Muhammad Yunus and the Grameen Bank. “I don’t want anything that would in any way undermine what has been a tremendous model.” She also visited Yunus, whom she has known since 1986. The powers in Bangladesh did not appreciate Hillary’s contribution. Two top officials has gone after Clinton and Yunus, equally publicly. The rather less-famous finance minister who helped Yunus found the Grameen Bank, opined:
Syed Ashraful Islam, general secretary of the ruling political party and Minister for Local Government and Rural Development & Co-operatives, attacked Yunus in the presence of his Prime Minister:
If you think about it, this is a pretty stark spectacle. It is hard for me to imagine two members of Obama’s cabinet attacking a single citizen in public, even ridiculing him in front of the President—much less one so highly celebrated. It’s clear that governance in Bangladesh, not just politics, is war by other means. I hope that as regards the safety of Yunus and the Grameen Bank staff, and the integrity of the institution, the threat from the government is offset by the equally unusual endorsement from a powerful foreign official. Comment »Weekly Tweets for 2012-05-11May 11th, 2012Posted by David Roodman Tags: tweets
Comment »Ripost to RupertMay 8th, 2012Posted by David RoodmanRupert Scofield has replied to my retort to his review, etc. Clearly neither of us has swayed the other much, but I appreciate the friendliness and honesty, not to mention vividness, of his latest post. He has conceded to me the argument over what the economic studies say. So his main thesis now is:
He then tells a couple of good stories of encounters he has had with borrowers, the first being of a borrower who says she climbed from poverty thanks to microcredit. He concludes:
I’d respectfully correct a few things Rupert says about me: 3 Comments »Weekly Tweets for 2012-05-04May 4th, 2012Posted by David Roodman Tags: tweets
Comment »84,788 New Data Points on Financial InclusionMay 2nd, 2012Posted by David RoodmanIf you follow microfinance blogs, you probably know that the World Bank has released a big database called Global Findex. With muscular funding from the Gates Foundation, the World Bank ran an ambitious polling project to learn about what financial services people use and how they use them—or why they don’t. Some 150,000 people were interviewed in 148 countries. And that’s just the first round: the surveys will be repeated, the grant lasting 10 years. It’s clear from the work done so far (led, I believe, by Asli Demirguc-Kunt, and co-authored by Leora Klapper), as well as from the outreach effort, that the World Bank was the right institution for the job. The data set appears to be of high quality. Ditto for the “metadata,” which tell number-crunchers like me exactly how variables are defined and stored. The project’s home page offers an almost bewildering slate of options for exploring the data. The technical paper is quite readable and contains lots of good figures and tables. CGAP’s main blog is running a series on the implications of the new data. (Don’t miss Jonathan Morduch’s piece reconciling the macroview from this data set with the micro view from Portfolios of the Poor.) I have to admit I’m not very excited about this database. Probably that’s a reflection on my lack of imagination as a researcher. While it’s true that I didn’t know before that 52.9853% of adults in Afghanistan who have an account at a formal institution make 1–2 withdrawals per month, and that 67.14356% make 1–2 deposits, I’m likely to forget those facts as fast as I type them. Meanwhile, the big picture is unsurprising. Half the world is still unbanked. And, what do you know, more people have bank accounts in countries where more people have money. 5 Comments »Rupert Scofield Reviews Due DiligenceApril 27th, 2012Posted by David Roodman Tags: reviewsRupert Scofield, the co-founder, president, and CEO of FINCA, just reviewed my blog-linked book on his book-linked blog. He doesn’t find my analysis very persuasive. Inevitably, the reaction is mutual. He says that I “[set] the statistical/methodological bar pretty high,” so that the body of evidence on which I am willing to rely is thin; and I “[overreach] in the sense of drawing bold, sweeping conclusions.” It is true that I admit only the best evidence. I explain why in chapter 6: almost every time I have poked into a non-randomized study, it proves wanting. (Not that there can’t be high-quality non-randomized studies, ones that exploit natural experiments. The best attempt I’ve seen for microfinance was in Thailand.) Rupert does not respond directly to my judgments about the reliability of various forms of evidence. He presents almost no evidence that I’m too conservative in my assessment of the evidence. Meanwhile, I think he underestimates the power of the randomized studies:
Then why have the microcredit studies found impacts on investment and profits, and the microsavings studies found impacts on income? Why did the study of the South African lender (see below) find it increasing employment? I disagree too that I overgeneralize from that thin evidence set. Consider this line from the book that he quotes: “On the limited high-quality evidence available so far, the average impact of microcredit on poverty is about zero. In contrast, the one high-quality study of savings does find economic gains.” I mean that to say: “If forced to generalize from available evidence, here’s what we should conclude.” I think that’s pretty much what it says. And I do think it is my job to generalize (responsibly). My work was funded by philanthropy on the faith that it would influence action. People who must act now, including Rupert and his employees, must do so on the evidence on hand now, and that always involves extrapolation—extrapolation from the contexts in which the studies were done to the contexts in which one is working. The practical question is not whether to generalize but how (even as we collect more evidence). That is where I try to help. 2 Comments »Weekly Tweets for 2012-04-27April 27th, 2012Posted by David Roodman Tags: tweets
Comment »Weekly Tweets for 2012-04-20April 20th, 2012Posted by David Roodman Tags: tweets
Comment »Grameen Bank Portfolio Continues DeterioratingApril 16th, 2012Posted by David Roodman Tags: GrameenTwo years ago, I blogged weightily about the Grameen Bank’s deteriorating loan portfolio. In the second half of 2009, its repayment rate—fraction of amounts due actually paid—fell from 97.81% to 96.55%.That was hardly catastrophic in itself, but marked the sharpest drop for that indicator in its publicly recorded history. While hedging my bets, I raised some serious possibilities:
It’s humbling to look back on these words and see how poorly they forecast what followed. There was plenty of microfinance drama in Bangladesh and beyond, but not the kind I insinuated, at least not in Bangladesh. Roodman was no Roubini (or Rozas). Despite the unforeseen trauma of Muhammad Yunus’s removal—which makes a move 97.81% to 96.55% seem trivial—the Grameen Bank seems to be operating normally. For all that, I think the concerns I raised still stand. 3 Comments »Weekly Tweets for 2012-04-13April 13th, 2012Posted by David Roodman Tags: tweets
Comment »Latest Impact Research: Inching toward GeneralizationApril 12th, 2012Posted by David Roodman Tags: impacts, RCTsI contributed a post to CGAP’s blog yesterday that summarizes the evidence to date from the randomized trials of microcredit and microsavings. Just in the last six months, enough new studies have appeared from diverse locales that we can begin to generalize. It’s an important moment. So if you’re a regular follower of this blog, I encourage you to read the post. It contains things I haven’t written here. The core is a couple of tables distilling the results. Comment »Latest Microsavings Study Presented at CGD Next WednesdayApril 11th, 2012Posted by David Roodman Tags: impacts, RCTs, savingsDina Pomeranz of the Harvard Business School will come to CGD next Wednesday (April 18) for a brownbag lunch presentation of the latest randomized study of the impact of microsavings. The preliminary results are encouraging: savings accounts do indeed appear to help people “smooth consumption,” i.e., manage the financial vicissitudes of life. I would have blogged this paper already but it is marked “do not cite.” The last sentences of the public draft make clear that the authors are still refining their results. But probably after serving as a discussant at the event, I’ll turn my comments into a post. Hope to see you there. Comment »Weekly Tweets for 2012-04-06April 6th, 2012Posted by David Roodman Tags: tweets
Comment »Personal Financial HistoryApril 3rd, 2012Posted by David RoodmanIn the history chapter of my book, I document how ancient is the practice of joint liability—especially if that term includes any time one person cosigns another’s promissory note. Jonathan Swift made small loans in the 1720s to “industrious trademen” who could produce two co-signers to vouch for them. No collateral was needed. Starting around 1910, Arthur Morris applied the same formula to build a banking empire in the southeast and midwest of the United States, with loans starting at $100. So imagine my surprise when I recently opened an envelope from my grandmother full of old photos and clippings. Among them was this advertisement for the Security Finance Corporation. It probably appeared in the St. Louis Jewish Light in 1926:
Across the top you see the faces of the men who directed the company, and I assume put up the capital. Beneath is the guy they entrusted to run the operation on a daily basis, my great-grandfather Louis Levy. (We called him Daddy Lou.) All were friends, and my father remembers many of them from his childhood. Starting at $500 (more like $5,000 in today’s money), the loans should probably not be considered microfinance. Yet the two-cosigner formula is there, as is the down-market aim. I suspect that Arthur Morris’s success helped inspire the founding of the company in 1923. Since Morris carefully studied the example of the German credit cooperatives, to which the Grameen Bank can also trace a lineage, it seems that the Security Finance Corporation and Grameen are distant cousins. To give you a glimpse of the arc of a lifetime, and the cycle of generations, here are some more pictures. 1 Comment »Chris Dunford’s New BlogApril 2nd, 2012Posted by David RoodmanOf all the microfinance network groups, none has shown more commitment to studying of the impact of its activities than Freedom from Hunger. Under the leadership of Christopher Dunford for 20 years, FfH has commissioned a series of studies using various methodologies. You won’t find much mention of them in my book because they have not been as credible is the more recent randomized ones. But I respect the culture of FfH nonetheless. Last October Chris stepped aside as the president of FfH and become a Senior Research Fellow there. One exercise of his new-found freedom is the launch of a blog called The Evidence Project, where, I gather, he will share his ruminations on the interaction between evidence and practice in microfinance and, by extension, philanthropy generally. He invites others to join him. You can get a good sense of his style, which combines passion and intellect, from his appearance on this panel last year (starts around 34:00), and from this recent comment on my blog. Chris says that his blog was inspired by mine. But from the early posts, I wonder if he faces a challenge that I do not, an apparent need to be diplomatic. E.g., he writes of whether certain evidence “divides us,” but I’m not sure who “us” is and who is on which side of the divide. I suspect the posts will get sharper as Chris settles into the new role. I hope he blogs the story, which he told me, of how Freedom from Hunger moved into microfinance. And I hope he blogs about the practical challenges of incorporating randomized trials into project execution. It ain’t as simple as “test, find what works, implement.” 1 Comment »An Object Lesson in Corporate Crisis ManagementMarch 31st, 2012Posted by David Roodman Tags: AP crisisStern advice from Daniel Rozas for the Andhra Pradesh microfinance industry on how it should manage—and should have managed—the crisis of 2010:
Comment »Weekly Tweets for 2012-03-30March 30th, 2012Posted by David Roodman Tags: tweets
Comment »Microfinance As Social BusinessMarch 28th, 2012Posted by David RoodmanIn the Huffington Post, Beth Rhyne riffs off a theme in my book, which actually comes from one of her books:
Comment »YARTOM*March 26th, 2012Posted by David Roodman Tags: impacts, RCTs*Yet Another Randomized Trial of Microcredit The latest randomized study of the impact of microcredit has popped up on the web. Snarky blog post title notwithstanding, I very much welcome having yet another randomized test of microcredit—by my count, the fifth—because only after we test in a variety of forms and circumstances can we generalize with (cautious) confidence. We have been fortunate in the diversity so far: group and individual microcredit, rural and urban locales in India, the Philippines, Morocco, Mongolia, and now Bosnia and Herzegovina. The cooperating lender in this newest study was EKI, one of a clutch of microlenders created and financed by outsiders after the explosion of Yugoslavia. I believe it is the first non-profit studied, an important distinction given all the debate about the role of the profit motive in microcredit. And, somewhat bizarrely, the study brings diversity of another kind to the literature: where the India and Morocco trials took place in overheating markets, this one occurred as economic crisis hit and a microcredit bubble popped. In December 2008, as the experiment began, EKI had a “portfolio at risk” (loan amounts outstanding owed by those at least 30 days behind on repayment) of just 1.63%. Within a year, the PAR shot to 10.83%. 16 Comments »Maybe Not So Silly?March 23rd, 2012Posted by David RoodmanA letter just posted on the blog of the Center for Financial Inclusion opens thusly:
The letter goes on to say things that seem eminently reasonable to me. But about that headline. Certainly, I knowingly compromised in writing for the Post, presenting my nuanced view while accepting that they’d go for a more provocative headline. (In fact, it wasn’t much of a compromise because they were entirely understanding when I, for example, reversed some of their edits for the sake of responsible nuance.) I’d say this in defense of the Post. They deserve some presumption that they understand their audience better than microfinance CEOs do. Perhaps for most Post readers, the conclusion that microcredit does not demonstrably, reliably reduce poverty among clients is news. Microfinance groups may have moved on, in what they do and how they talk about it, but, as the continuing growth in the popularity of Kiva suggests, the public may be well behind. Their understanding may be based on the more upbeat things these microfinance groups were saying not so long ago. Personally, though this was probably not the headline I would have written, I felt it best to defer to the Post’s judgment of its readership. At any rate, I understand why the microfinance CEOs wanted to clarify what their groups are doing. Comment » |
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