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January 17, 2010

Eavesdropping on a Microfinance Conference

Posted by David Roodman in Uncategorized Tags: , ,

Couldn’t make it to the annual research conference hosted by the Centre for Microfinance (CMF) and the College of Agricultural Banking (CAB) in Pune, India, last week? Neither could I. Not invited? Actually neither was I. But as far as I can tell, CMF is the brightest spot on earth for quality research on financial services for the poor. They are worth watching. I suppose this post is the next best thing to being there. Better, in jet lag and carbon terms.

Abhijit Banerjee presented the CMF-executed Spandana RCT. I embed the slides here less for the content, which is familiar, than the form. Someone at the Poverty Action Lab makes slides like I do, and probably because of similar influences, in my case Edward Tufte and Andy Goodman.

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September 28, 2009

Microfinance and the Market Test

Posted by David Roodman in Uncategorized Tags: , ,

Here’s the end of Rich Rosenberg’s new review of Portfolios of the Poor:

Hundreds of millions of poor people “vote with their feet,” demonstrating how much they value microfinance by flocking to it in droves when it becomes available, and most especially by repaying loans faithfully again and again when the predominant motive to repay is not collateral or even group pressure but rather their desire to keep future access to a valued service.

It may turn out that a year-long microloan doesn’t improve income as much as a year of women’s primary education or other social services. But the robust value proposition behind microfinance is not that each “dose” is more powerful, but rather that each dose costs much less in subsidies. Social programs like primary education and health care usually require large continuing subsidies, using up scarce tax dollars year after year. Microfinance is different: when it is done right, relatively small up-front subsidies lead to permanent institutions that can continue providing services year after year with no further subsidy needed, and expand those services to reach many millions of low-income clients who badly want them. (This, by the way, is not an argument for microfinance. It’s an argument for microfinance done right.)

In the conceptual framework for my book, this is akin to the institutional development definition of success: If a microfinance institution is growing, competing, innovating, winnings thousands or millions of clients, creating jobs—isn’t that the essence of economic development? You can see this view also in Elisabeth Rhyne’s letter to the editor in response to last week’s Boston Globe article. I will analyze the success of microfinance in this perspective in chapter 8—my next task. I think this viewpoint deserves more attention than it gets, even as I am mindful that one can’t ignore impacts on clients (otherwise, we should hail the global success of the tobacco industry as a boon for the poor).

I agree with Rosenberg that Portfolios of the Poor is a great book. In my set-up, it speaks more to chapter 7, on the the ways in which microfinance enhances and restricts freedom. In my own review of the book, I wrote about what I learned from it (e.g., for the poor, microfinance is distinctive in its reliability) and what I wanted to read more about (e.g., roles of men and women within the household in the decisions studied in the book).

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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.

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June 10, 2009

Distrusting the Debtor

Posted by David Roodman in Uncategorized Tags: , ,

A central question in judging microcredit: When can we as creditors trust the judgment of the poor as borrowers? These days we can all reel off examples of unwise borrowing in rich countries (though I daresay unwise lending is more to blame for the current crisis). Do the world’s poorest people, with less margin for financial folly, borrow more prudently? Two things I’ve read recently tend toward opposite answers to this question.

A rough concept paper by Bindu Ananth, Dean Karlan, and Sendhil Mullainathan asks us to

Consider the case of a vegetable vendor in Chennai: Nearly every morning, she takes out loans to buy vegetables from a wholesaler, and in the afternoon she pays the loan off with her daily sales. She does this every day, paying an interest rate of 10% per day. Fruit vendors, flower vendors, and other vendors of perishable products take out similar high interest, short-term loans to finance their working capital.

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May 23, 2009

Cross-post Review/Jyothi Makes the Economist

Posted by David Roodman in Uncategorized Tags: , ,

On CGD’s Voices from the Center blog, I just posted a review of Portfolios of the Poor: How the World’s Poor Live on $2 a Day, by Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven. The Economist did a story on the book featuring Jyothi the informal savings collector of Vijayawada, India. If you read my draft chapter 2, you know about Jyothi already. The common source for Jyothi’s story is of course Stuart Rutherford, who met her and wrote about her in The Poor and Their Money.

Last year, I had the privilege of joining Stuart for a day of research outside Dhaka, Bangladesh, which consisted of him and his long-time collaborator S.K. Sinha asking people about their experiences with ASA. Here, he is meeting a man who belonged to ASA in its early days:

Stuart Rutherford interviewing Bangladeshi, March 2008

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February 17, 2009

Chapter 2 main post: How the Other Half Finances

Posted by David Roodman in 2. How the Other Half Finances, Uncategorized Tags: ,

Aside from the “bookend” chapters (now there’s an odd metaphor), this book is really a series of perspectives on microfinance: the historian’s perspective, the microfinance manager’s perspective, the economist’s perspective, and so on. The first perspective, in chapter 2 (.doc .pdf), is that of poor clients. To borrow the title of Stuart Rutherford’s great book, it is about the poor and their money.
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