CGD Policy Blogs
Two 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.
I 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.
Dina 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.
In 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.
Of 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.