The Question of Small Loans
A bit out of my area, but I’ve enjoyed reading about the empirical studies that are now beginning to come in about microfinance. Microloans sounded so good, so easy.
Now we have studies of how they are working in Hyderabad, India by the Poverty Action Lab at MIT, in the Philippines by Dean Karlan of Yale and Jonathan Zinman of Dartmouth, and in Shanghai, also by Dean Karlan.
These studies suggest they do little to reduce poverty. They may allow more people to go to school. They may establish track records that allow entrepreneurs to get bigger loans that make a real difference. But they are not the panacea that their promoters once claimed.
Here’s a link to a recent article in the Economist.
And damming microfinance with faint praise from a blog by Chris Blattman that is always interesting.
More people going to school is a pretty big accomplishment. Having a few dollars more to buy clean water and a steady supply of fuel can be really nice. Not a major reduction of poverty, but still welcomed relief.
If you get the opportunity, there’s a very interesting book called, “The Blue Sweater” by Jacqueline Novogratz who started the Acumen Foundation. After starting out with all the enthusiasm and knowledge of a secure white woman who had worked her way up the commercial banking ladder, she finds herself in Africa where she just wants to do good but its not until she lives and breathes the culture that she can begin to make a dent in the entrenched poverty. The book is a bit awkward: it starts out as a coming of age memoir and develops into an Acumen Foundation corporate document, but it does make you think about the underlying philosophy of philanthropy