Posts Tagged:

 

March 18, 2010

As a Matter of Policy, Put Policies to the Experimental Test

Posted by David Roodman in Uncategorized Tags: ,

Columnist Tim Harford in today’s Financial Times (free with registration, I think):

It is a shame, then, that there is so little appetite from politicians for the same standards of evidence outside medicine. In fact it is more than a shame – it’s a scandal. While randomised trials are not going to tell us when to raise interest rates or get out of Afghanistan, there are many policies that could and should be tested with properly controlled trials. Is Jamie Oliver right to emphasise healthy school meals? Run a trial. Should young offenders be sent to boot camp, or to meet victims of crime? Run a trial. What can we do to persuade households to use less electricity? Run a trial.

Yet such trials are not common in the US, and downright rare in the UK. There is no financial, ethical or practical excuse for this. Trials are cheap. (Even if they were expensive, solid practical knowledge is well worth paying for.) This is not a question of carrying out dangerously speculative crank experiments, but simply adding the essential ingredient of randomisation to a standard pilot project that would have happened anyway. Randomising is often what distinguishes proper evidence from statistical mush, by removing biases in the setting of experiments – such as running pilots only in the most needy areas.

What I like about this column is that Harford does not allow himself to become bogged down in the quagmire questions about what randomized controlled trials (RCTs) can and can’t tell us. That has been my focus as I have worked to understand what we know about the impacts of microfinance. He takes RCTs’ superiority as given (where they are practical) and proceeds to a moral call: those who advise and make policy on everything from education to child rearing should institutionalize experimentation. That, in order to support vital societal learning about what helps children learn math, say, what causes breast cancer, or whether sleeping face down kills babies.

Comment »

 

December 31, 2009

Kristof Calls for Microsavings Revolution

Posted by David Roodman in Uncategorized Tags: ,

Nicholas Kristof’s column today is about the promise of microsavings. He starts by describing what must be a Village Savings & Loan Association (VLSA), operated by Catholic Relief Services in Nicaragua:

“We used to buy a three-liter bottle of Coke every day,” recalled Socorro Machado, a 49-year-old homemaker in a village here in northwestern Nicaragua. That was a bit less than a gallon, and the cost of $1.75 consumed a large share of the family’s budget.

Then Catholic Relief Services, an aid organization, arrived in the village with a new program to promote savings. It provided a wooden box with a padlock and organized savings groups of about 20 people who meet once or twice a month, typically bringing 50 cents or $1 to deposit in the box.

Some of the money is lent out to start a small business, but the greatest benefit of these programs seems to be that they provide a spur to save.

“Now we buy a bottle of Coke just once a week, and we put the money in savings,” Ms. Machado said. She saves about $5 a month in her own name and another $5 a month in her son’s name and has plans to buy a computer for him eventually.

Kristof also cites the Dupas & Robinson randomized study showing benefits of microsavings for entrepreneurs.

For more on VLSAs, see the notes from my interview with Hugh Allen; this fine report from CARE, which pioneered this particular approach to savings groups; or this CARE video. On MatchSavings, which Kristof mentions, see this post, which contains a video of an excellent discussion.

Comment »

 

December 29, 2009

Randomistas Attempt Message Control

Posted by David Roodman in Uncategorized Tags: , ,

As I mentioned, 2009 is a milestone year in the study of the impacts of microfinance. It’s also a case study in how subtle conclusions get distilled and simplified and misunderstood as they ricochet around the media. Remember Tim Harford plaintively tweeting, “Note to all microfinance enthusiasts: I DO NOT WRITE MY OWN HEADLINES”? It is tempting to blame “the media” for all this oversimplification. But the media responds to incentives such as people’s narrowing bandwidths and preferences for clear-cut conflictual stories. And the media pass those incentives back to people like me who position themselves as experts. And sometimes we respond. Anyway, it gets harder to blame the media as we hurtle into a media-R-us world. 2009 is the year of Twitter too.

So what’s my point? Other than an invitation to blame yourself (which I’d prefer to blaming me), it is that public conversations about complex topics are inevitably cacophonous and inefficient, even comical. I guess the best you can do is keep at it.

I gather that Abhijit Banerjee, Esther Duflo, and Dean Karlan, the leaders in testing microfinance with randomized trials, have felt somewhat dismayed at how their careful experiments and nuanced conclusions became “Perhaps microfinance isn’t such a big deal after all” and “Billions of dollars and a Nobel Prize later, it looks like ‘microlending’ doesn’t actually do much to fight poverty.” As blogging guests of Nicholas Kristof yesterday, they attempted to regain control of the message:

MFIs have managed to find ways to be financially sustainable and to keep growing fast.

This is itself is a remarkable achievement. Very little works in many of these countries in terms of delivering to the poor; previous attempts to deliver credit, through state-run banks, for example, collapsed in the face of widespread corruption and defaults. Many microcredit institutions are led by dynamic entrepreneurs who have mastered quality service delivery on a large scale, a tough challenge in many developing countries.
…
[A]s we see it, microcredit seems to have delivered exactly what a successful new financial product is supposed deliver—allowing people to make large purchases that they would not have been able to otherwise. The fact that some people expected much more from it (and perhaps they are right, may be it will just take longer), is perhaps inevitable given how eager the world is to find that one magic bullet that would finally “solve” poverty.

Read More…

3 Comments »

 

December 15, 2009

Wall Street Journal on Microcredit-Moneylender Links

Posted by David Roodman in Uncategorized Tags: ,

Ketaki Gokhale, who won a Daniel Pearl Memorial Journalism Internship to work at the Wall Street Journal this year, and who ignited some controversy this summer with a story asserting widespread microcredit overlending in India, has continued to cover microfinance in India. (For more on Pearls, see yesterday’s post.) A new article continues on the same theme and may also receive a lot of attention…but maybe not as much as before, since this time, I think, Gokhale has done better at staying within the evidence.

The headline (whoever wrote it) nicely emphasizes correlation, not causation: “As Microfinance Grows in India, So Do Its Rivals.” True, the statistics at the beginning seem a bit misleading:

Even as the government and nonprofit organizations came together to create the Indian microfinance market in the 1990s, traditional moneylenders’ share of total rural Indian household debt grew to 29.6% from 17.5%, according to a government survey. Another recent survey by the Reserve Bank of India found that between 1995 and 2006, the number of registered traditional moneylenders increased 56% to 19,627 from 12,601.

I say “misleading” because most growth in Indian microcredit is extremely recent, as Gokhale documented, largely occurring after the 1990s and even after 2006. Through 2006, self-help groups won far more clients than Grameen-style microcredit. Meanwhile India has changed profoundly in the last 15–20 years, so one can imagine lots of reasons for the growth of moneylending apart from microcredit.
Read More…

Comment »

 

December 7, 2009

Making Headlines

Posted by David Roodman in Uncategorized Tags: ,

Over the weekend the Financial Times carried a column by Undercover Economist Tim Harford on the randomized microcredit impact studies.

Longtime readers of this blog (every time I use a phrase like that I think to myself that there must be at least one of you…) will probably not learn much from the column, except about Tim’s impressive ability to compress so much down to a few words, and about his dubious judgment, in giving me the last word. But the headline might catch your attention: “Perhaps microfinance isn’t such a big deal after all.”

As with the Boston Globe story in September (”Small change: Billions of dollars and a Nobel Prize later, it looks like ‘microlending’ doesn’t actually do much to fight poverty”), ACCION International was swiftest to respond. (Here is ACCION’s letter in the Globe.) Beth Rhyne, published a piece on the blog of ACCION’s Center for Financial Inclusion, which she heads, entitled “Not a big deal? Microfinance is about inclusion.” ACCION’s new President and CEO Michael Schlein posted a comment on Tim’s site:

Tim Harford’s article “Perhaps Microfinance isn’t such a big deal after all” is right – and wrong.

He’s right that microfinance has been oversold and is often described as the panacea that will bring an end to global poverty. He’s right to see the backlash coming. But he’s wrong to say it isn’t a big deal. It is.

To which Tim tweeted:
Read More…

Comment »

 

December 7, 2009

They’re Talking about Me

Posted by David Roodman in Uncategorized Tags: ,

From an interview on devex.com with Kiva’s Chelsa Bocci:

I saw the “Finance Access Initiative” blog by Abby Gray coming to Kiva’s defense about David Roodman’s article. I thought that was a great example of social media in action. I was wondering initially, did you think that you wanted to do a social media campaign after Roodman’s article came out?

That wasn’t the top priority when David Roodman’s article came out. I mean, social media campaign can mean so many different things, and I want to better understand what you’re asking. There were a lot of goals that were set after that article came out, and, for the most part, we welcome this kind of publicity because it’s all about asking the right questions, and I think it gives Kiva an opportunity to answer some of those. It’s been a very positive thing for us. We’re using the social media channel a lot to bring more awareness to some of those articles, and some of the follow-up questions, and bloggers we’ve seen taking an interest in some of the things we have going on. We didn’t set up to do a formal campaign around that publicity, but we have definitely been using those channels to direct or educate our existing community on how we view the situation.
…
What did you learn from the Roodman experience?
Honest, honest answer is that we’re still learning. Every month is new time for us. Things change and grow so quickly.

The joke internally is that today is short term, tomorrow is medium term, and the next day is long term. But it’s really hard to plan because we’re growing so fast. Everyone around here would absolutely agree that they highly value what we do to grow our social media presence. Again, back to the challenge of tracking and metrics, that is where I’m tasked to get creative and really put some thought into it.

I think it’s been a wonderful experience, and we’re headed in the right direction. But, that being said, we have a lot of work to do.

[Sorry blogging has been light. I just came through eight days straight of rehearsals and performances.]

Comment »

 

November 9, 2009

New York Times on Kiva, GlobalGiving, Etc.

Posted by David Roodman in Uncategorized Tags: ,

[Update: Matt Flannery, Co-Founder and CEO of Kiva.org, replied to the NYT article.]

Reporter Stephanie Strom wrote a story in today’s New York Times about my blogging of Kiva in October, and the issues it raised. She goes beyond my post in writing about GlobalGiving. Naturally, I think it’s a fascinating article.

The article also quotes Tim Ogden of Philanthropy Action:

The problem is that they [socially connected nonprofits] are no more connecting donors to people than the child sponsorship organizations of the past did.

That to me goes a bit too far, at least if it is read to apply only to Kiva (and in context, it may not). As I wrote in my original post:

Indeed, Kiva’s P2P connections are more solid than those of child sponsorship 15 years ago. The people in the pictures, we can assume, really do get microcredit. Following in the Tribune’s footsteps, Nicholas Kristof tracked down one of his borrowers, a Kabul baker, with little difficulty.

I grant that when the Kiva model is carried beyond microfinance, the connection between giver and receiver may be no more direct than in the old days of child sponsorship, and that may be what Tim is saying. With child sponsorship, as I wrote, the Chicago Tribune found that many pictured children had not received promised services. Microfinance seems distinctive in building clearly defined and recorded relationships between the microfinance institution and each beneficiary. Even if my Kiva loan is not actually going to the woman pictured on kiva.org, I’m reasonably confident (I hope not naively) that that woman is getting credit.

Update: I’ve been surprised by the predominant negativity of the new wave of comments from the NYT article. The older comments vary more—some accuse me of condescension to think that users didn’t understand how Kiva really works, others expressed disillusionment, and others said “I didn’t know but love them anyway.” On reflection, I think the NYT headline, “Confusion on Where Money Lent via Kiva Goes,” is unfortunate because it makes it seem like Kiva is embezzling the money into bank accounts on the Cayman Islands. No one is seriously suggesting such wrongdoing.

6 Comments »

 

September 20, 2009

Boston Globe on Microfinance Impact Studies

Posted by David Roodman in Uncategorized Tags: ,

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.

2 Comments »

 

September 3, 2009

Microfinance Gateway Article on New Impact Studies

Posted by David Roodman in Uncategorized Tags:

Thirty years into the movement, it might seem strange that researchers are still asking whether microfinance reduces poverty. In fact, by the standards used to judge whether drugs are safe and effective in the bloodstreams of people, the safety and effectiveness of microfinance injected into the fabric of villages and barrios remains unproven. Somewhat by chance, 2009 is turning out to be a pivotal year in the study of the impacts of microfinance. A new generation of studies is emerging that promises to give us a clearer view of the effects.

That’s from the article I was invited to write for CGAP’s Microfinance Gateway, which has just been posted. To write it, I synthesized several pieces on this blog on the study of impacts. Comments welcome, here or there.

1 Comment »

 

August 27, 2009

Economist Chimes in on Bubble vs Hot Air in Indian Microcredit

Posted by David Roodman in Uncategorized Tags: ,

The Wall Street Journal article (blogged here) asserting a microcredit bubble in India provoked a sort of response in the Economist.

The article gives a good platform to Vikram Akula, the most eloquent advocate for the view that talk of bubbles is hot air, and has thoughtful quotes from Jonathan Morduch and others. I found this interesting:

Indeed, the real story of the past year may be of a regrettable slowdown in the growth of microfinance. According to ACCION International, a global network of microfinance schemes, although there are isolated pockets of frothy lending—in Bosnia and Nicaragua, for example—the microfinance industry has not been entirely immune from the credit crisis, and growth has slowed due to weaker demand and funding difficulties.

The bottom line at the bottom of the pyramid is that financial services remain shockingly scarce. “I have a hard time to see how there can be a bubble when the microfinance industry still has not served 90% of its clients,” says Álvaro Rodríguez Arregui, a former chairman of ACCION and now chairman of Compartamos Banco. He estimates that there are currently 100m microfinance clients out of one billion poor people who want access to financial services.

Mr Rodríguez thinks that occasional local bubbles may even be better than bubble-free growth. “It is great to have a gold rush because that is the only way to develop a competitive industry. When entrepreneurs rush into an industry, you get innovation, efficiencies, more product offerings and better pricing, with the ultimate beneficiary being the customers.” As he points out, “before the Compartamos IPO, there were 200 microfinance institutions in Mexico, today there are 800. Which is great!”

1 Comment »

 

August 15, 2009

Creepy Movies

Posted by David Roodman in Uncategorized Tags: ,

Catching up on my RSS feeds after a week of ignoring them, I hit two videos that made my skin crawl a bit. The first is a music video from a group called The Green Children, shot in Bangladesh. The song is “Hear Me Now.” It was written “to celebrate the amazing women who are microcredit clients of Grameen Bank.” Half the iTunes proceeds will support microcredit in Kerala, India. One shot that bothers me comes near the end and is of a brick breaker. Brick breakers in Bangladesh do exactly what it sounds like they do, smashing masonry into aggregate for concrete all day; they are the poorest of the poor in a very poor land. They are not symbols of microenterprise success even when they smile for the camera.


Read More…

2 Comments »

 

August 13, 2009

Wall Street Journal Also Raises Microcredit Bubble Fears

Posted by David Roodman in Uncategorized Tags: , ,

In an article that was published in tomorrow’s(!) Wall Street Journal, reporter Ketaki Gokhale emphatically asserts that “a credit crisis is brewing in ‘microfinance’”:

Here in Ramanagaram, a silk-making city in southern India, Zahreen Taj noticed the change. Suddenly, in the shantytown where she lives, lots of people wanted to loan her money. She borrowed $125 to invest in her husband’s vegetable cart. Then she borrowed more.

“I took from one bank to pay the previous one. And I did it again,” says Ms. Taj, 46 years old. In four years, she took a total of four loans from two microlenders in progressively larger amounts — two for $209, another for $293, and then $356.

At the height of her borrowing binge, she says, she bought a television set. The arrival of microfinance “increased our desires for things we didn’t have,” Ms. Taj says. “We all have dreams.”

Today her house is bare except for a floor mat and a pile of kitchen utensils. By selling her TV, appliances and jewelry, she cut her debt to $94. That’s equal to about a fourth of her annual income.

Interestingly, one inspiration for my own post on this subject was another dispatch from India.
Read More…

4 Comments »

 

July 20, 2009

Microcredit RCTs in the Economist

Posted by David Roodman in Uncategorized Tags: ,

The Economist just carried a nice piece on the new, randomized generation of microcredit impact studies. The article covers two studies in brief: the one by Abhijit Banerjee, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan of group microcredit in Hyderabad and the brand new one by Dean Karlan and Jonathan Zinman of individual loans to microenterprises in Manila. See my review for a fuller summary of the first and watch this space for a review of the second soon (update: here it is).
Read More…

Comment »

 

June 29, 2009

Newsweek Blogs Roodman & Morduch 2009

Posted by David Roodman in Uncategorized Tags:

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.

2 Comments »

 

June 17, 2009

Actual Poor Person, Live on the Air

Posted by David Roodman in Uncategorized Tags: ,

National Public Radio’s “On the Point” talked to Daryl Collins and Stuart Rutherford about Portfolios of the Poor…and, wonderfully, to one of the circa-$2/day people whose finances were chronicled. His name is Lufefe and he lives in Langa township outside of Cape Town, South Africa. He enters the show at 20:00.

Comment »

 

March 9, 2009

Daljit and Me

Posted by David Roodman in Uncategorized Tags:

I was on PBS’s Foreign Exchange yesterday. Host Daljit Dhaliwal asked me about microfinance, the effect of the financial crisis on foreign aid, and the Commitment to Development Index.

1 Comment »

 

February 26, 2009

Kojo and Me

Posted by David Roodman in Uncategorized Tags:

…and Sam and Beth.

I just talked about microfinance on the Washington, DC-area talk show hosted by Kojo Nnamdi. Also on were Sam Daley-Harris and Elisabeth Rhyne.

You can listen to the one-hour show in Real Audio or Windows Media.
Read More…

Comment »