quote:Karlan and his co-author, Jonathan Zinman, an associate economics professor at Dartmouth, looked at a bank in the Philippines that offered microloans. They created their controlled experiment by altering the algorithm the bank used to evaluate creditworthiness so that some borderline applicants were randomly denied loans while other otherwise identical applicants had loans approved. The researchers then followed up with the borrowers and nonborrowers to see what difference the loan had made.
This study can't really judge microlending as a whole since their target population were borderline applicants. I think it speaks more toward the determining factors in receiving a microloan and how well the bank chose that line.
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I guess I had a different experience in that I did not see microloans pitched as a miracle cure, just a potential viable utility in elevating people out of poverty.
My bad, I guess I should start watching more TED.
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My impression had not been that microlending was phenomenally better than other forms of charity work, but that it was powerful because it actually provided you with a return investment or at least allowed you to keep giving with the same money.
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Eh. There are no silver bullets; should this surprise anyone? But every bit helps. It's worth recalling that it took Europe 400 years to climb out of grinding poverty, after being stuck at subsistence for a good millennium. And even before that - and I just realised that this is the first time I've used the phrase literally - Rome wasn't built in a day.
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Yeah, this isn't a big surprise to anybody familiar with the international development literature. Or rather, it isn't a surprise at all. These are entirely consistent with previous results.
Raymond: except most of the microlending institutions are nowhere near self-supporting; they're less banks and more a way of channeling development aid.
dabbler's right, too. Unfortunately, it almost certainly wouldn't pass an institutional review board to do a randomized experiment with applicants who weren't marginal. There's too much possibility for causing significant harm.
What might fly (and would in many ways be more interesting) would be arranging with several villages/neighborhoods that are generally similar to randomly divide them into a group receiving microlending aid and a group receiving more traditional development aid in the same total amount. Then compare effects at the village/neighborhood level.
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That is the primary hope I had had for microlending, but — sadly — anecdote alone was enough to scare me off of any actual participation in programs like Kiva. I've been told that any long-term participation in programs like that will eventually, by default, become an act of charity. And a little bit of microloan fallout really depresses the markets for future participation.
That, and most of them quit Kiva when it turned out that the donor-to-borrower monetary connections on Kiva were essentially fictional.
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Samprimary: Yep, pretty much fictional. True in the sense that some of the money from Kiva had gone to that borrower, but untrue in the sense that you had no influence on how money was allocated.
Still, better than the older "you fed this child!" promotions, where frequently the children you "fed" hadn't been fed, or sometimes was just a photo model (and given a different name to be presented to you).
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I know a woman who was doing sponsoring a child, until she learned that the child she was sponsoring had died and they just transferred to another child without telling her.
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The real truth is she was never sponsoring a specific child. Her money was just going into a general fund, and the selection of children was unrelated to who put money into the fund.
The child she was "sponsoring" was just one of many provided for by the organization, and when the child died, they just started sending her information from another one on that list. Nothing was switched except whose information she received. Where her money went (except, in one view, a tiny portion of it) did not change at all.
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I have a hard time believing that people think that they are sponsoring only won rather than helping a community and having the "sponsored" child be the face of that community. Can you imagine how foolish it would be to actually sponsor a single child? "No, Jimmy. You can't give your starving little sister any of your food. Your sponsor only wants to sponsor you." "Here are new shoes for you, Albert. Try not to get mugged."
Posts: 11187 | Registered: Sep 2005
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kiva's system isn't like that, really. What happens is that the microfinance institute (MFI) fronts the money to the borrower, then puts the loan on kiva and we support it. It's like buying something with a credit card. The fact that you spend none of your own money until the bill comes due at the end of the month doesn't change the fact that it's you who bought it, not the credit card company.
I've quit loaning through kiva because of several questionable business decisions the kiva team has made. But I disagree that there's any fiction going on in the transactions. The disbursal dates are clearly posted as well as the date the loan is loaded on kiva. It makes no sense for the MFI to force the borrower to wait an extra month or two before they're funded. Often the borrower needs the money for time-sensitive things like spring planting.
The borrowers are in remote locations quite often, as well, and it's much cheaper for the loan officer to make one trip, get the paperwork done, take the photos, front the money, and then come back to the office to load the loan onto kiva. Because kiva only supplies at most 30% of the funding of a given MFI, they are justified in using other funds to fund a given loan if for some reason it goes unfunded on kiva. Your money still covers the loan you chose.
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quote:But I disagree that there's any fiction going on in the transactions.
There was plenty of fictionalizing. It's not a speculation. They were forced to come clean and change their ways.
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National Geographic had an interesting article this month (last? It's my mom's subscription, I only read it at her house) about an organization that trains health care workers in rural India with a bottom-up approach. One of the things that was mentioned (pretty much in passing) was that some of their workers have started microlending pools in their communities wherein the women pony up a small amount to join, then the money is lent to each woman in turn to buy supplies to start or improve a business (with, I would imagine, input and advice from the other women.) That seems like a really good use for microlending because a) they're using their own money to do it and b) if someone doesn't pay back, they're accounable to the people they live with in their village-- who have also been invested in helping that person's business to succeed.
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