David Roodman's Microfinance Open Book Blog

In the strange world of quantum mechanics, a thing is everywhere until you look at it. I don't mean that it could be anywhere. It is everywhere. An electron in your fingernail possesses a probability distribution that represents how likely it is to be in any given place once observed. Nearly all the probability, but not quite all, is concentrated in a tiny volume around some atomic nucleus. Observing an electron with laboratory tools localizes it. Its probability distribution collapses to a singularity.

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.

In an article that was published in tomorrow's(!) Wall Street Journal, reporter Ketaki Gokhale emphatically asserts that "a credit crisis is brewing in 'microfinance'":

Here in Ramanagaram, a silk-making city in southern India, Zahreen Taj noticed the change. Suddenly, in the shantytown where she lives, lots of people wanted to loan her money. She borrowed $125 to invest in her husband's vegetable cart. Then she borrowed more.

Think of microcredit as you read John Kenneth Galbraith, who wrote that financial euphorias share common denominators:

This is of no slight practical importance; recognizing them, the sensible person or institution is or should be warned. And perhaps some will be. But...the chances are not great, for built into the speculative episode is the euphoria, the mass escape from reality, that excludes any serious contemplation of the true nature of what is taking place.

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