David Roodman and his open book blog was mentioned in The New York Times' Opinionator section in a piece about microfinance.
From the Article
Microfinance may be most effective at helping poor people avert the traumas of a day-to-day, hand-to-mouth existence.
That’s what a number of creative researchers are doing today. One example is the collaboration between Daryl Collins, Jonathan Morduch, Stuart Rutherford and Orlanda Ruthven that culminated in the excellent book “Portfolios of the Poor: How the World’s Poor Live on $2 a Day.” The book takes a penetrating look into 300 poor families in Bangladesh, South Africa, and India, with interviews conducted every two weeks to track expenses, earnings and cash flow at a granular level. What the researchers found was striking, and it gets to the question of what it really means for most people to be poor: to live with perpetual uncertainty.
“What the research taught us is that the problem of living on $1 or $2 a day is that you don’t actually earn $1 or $2 every day,” explained Jonathan Morduch. “That’s just an average. Some days you receive $5 and then nothing for two weeks. Life is unreliable. So the challenge for the poor is that you need to put together the right sums to deal with the right challenges in life. And what we saw microfinance was doing for people was offering them a reliable source of money. With microfinance, you get a sum of money that’s promised on the day it’s promised in the amount that’s promised. It’s often the only reliable service that poor people have — and that’s incredibly powerful.”
Morduch is far from a microfinance booster. He co-authored a study in 2009 (pdf) that challenged a 2005 study that had often been cited as evidence for microfinance’s success in alleviating poverty. But one big reason why studies have not shown evidence of the impact of microfinance, he said, is because researchers have been looking at the wrong things. They were focused on direct measures like income or household expenditures. Morduch and his colleagues suggest that microfinance may be most effective at helping poor people avert the traumas of a day-to-day, hand-to-mouth existence. It may allow them to smooth out their cash flows so that life is not such a bumpy and stressful ride. But this also needs to be more thoroughly examined.
And contrary to the depiction of poor people as passive victims of microlenders — as the field is often portrayed by its critics — Morduch and his colleagues found that the families they followed were “strategic” in their use of credit, often mingling a variety of formal and informal sources. “They weren’t always making the best choices — some did well, some didn’t — but they were very actively managing their affairs,” he said. “Our view is that there’s a lot more going on with microfinance — that it’s helping people keep an income flow, deal with health problems, keep their kids in school, get food on the table every day, and perhaps invest in businesses.”
David Roodman, a senior fellow at the Center for Global Development, who is writing a book on microfinance through an “open book” blog, summarized it well. The stories in “Porfolios,” he wrote, are neither about “ascent out of poverty nor of descent into indigence, but of people getting by by grasping financial tools within reach.” (For those interested in an examination of the Norwegian documentary that sparked the Bangladeshi government’s actions against Grameen, Roodman has a thoughtful post here.)