There's been a lot of back and forth between Jonathan Morduch and me on the one hand and Mark Pitt and Shahidur Khandker on the other over their influential non-randomized study that finds that microcredit reduced poverty in Bangladesh.
I was a discussant last week for the second entry in a new seminar series hosted here in Washington by 3ie and IFPRI.
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.
*Yet Another Randomized Trial of Microcredit
The latest randomized study of the impact of microcredit has popped up on the web. Snarky blog post title notwithstanding, I very much welcome having yet another randomized test of microcredit---by my count, the fifth---because only after we test in a variety of forms and circumstances can we generalize with (cautious) confidence. We have been fortunate in the diversity so far: group and individual microcredit, rural and urban locales in India, the Philippines, Morocco, Mongolia, and now Bosnia and Herzegovina.
The cooperating lender in this newest study was EKI, one of a clutch of microlenders created and financed by outsiders after the explosion of Yugoslavia. I believe it is the first non-profit studied, an important distinction given all the debate about the role of the profit motive in microcredit. And, somewhat bizarrely, the study brings diversity of another kind to the literature: where the India and Morocco trials took place in overheating markets, this one occurred as economic crisis hit and a microcredit bubble popped. In December 2008, as the experiment began, EKI had a "portfolio at risk" (loan amounts outstanding owed by those at least 30 days behind on repayment) of just 1.63%. Within a year, the PAR shot to 10.83%.
One contention in my work is that the new, experimental microfinance impact studies are more reliable than the older, non-experimental ones, not to the individual success stories on microfinance web sites.
A working paper by Ram Rajbanshi, Meng Huang, and Bruce Wydick speaks to this thesis in an interesting way. To whet your appetite for my pedagogic exegesis, here's a passage from the introduction:
Here's something interesting. Dean Karlan, who is leading a study of the impacts of microcredit delivered by the controversial Compartamos in Mexico, just asked for help in crowd-sourcing research questions and hypotheses.
Larry Reed of the Microcredit Summit Campaign has a letter to the editor in the Washington Post about my piece last weekend.
Larry Reed, the new director of the Microcredit Summit Campaign, along with Jesse Marsden, its research and operations manager, recently posted a gentle review of my book, with which I disagree.
I think the central argument is:
...he makes no effort to recognize the differences among the many microfinance programs employed globally.