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I am curious if any strides have been made in regards to microlending helping the poorest of the poor. One consistent theme in the paper regardless of urban or rural status, gender, or country, seemed to be that the best off amongst the poor were the best at using microloans to increase their income. The paper gives a few possible explanations, of which I think most are plausible. While it is great the microloans are helping anyone do better, I hope to see some type of focus on allowing the very very poor to utilize them as well. I found it interesting that the microloans did not increase investment in children as much as I would have expected. I was encouraged by the fairly frequent switch in spending from “temptation goods” to more durable goods as a result of having loans, as this changed the spending habits even with money that loan recipients already had prior to receiving a loan. For once, it seems as though men made better decisions with money than women, doing better at growing a business with a loan than women often did. I am also intrigued if delaying repayment of loans has become any more popular. It looked like a promising way to have recipients of loans be able to better use the loan to grow their business or create a better crop yield. But, it also appeared like the flip side was worse as people did default on loans, disincentivizing the lenders from using a delayed repayment system. I found the fact that microlending is highly profitable for lenders in the current form to be quite odd. Upon further analysis it makes sense as to how it would be, but I never really considered lending these small amounts of money to be a great way to make money as a lender. Overall, the reading was interesting and makes me optimistic about the future of microlending and what it can do to help people be better off.

Ella Hall

I am interested in learning about which way the microcredit space has gone since this paper. The paper notes that many of the social impacts many had thought the microcredit programs would have improved, like women’s empowerment, investments in education, or use of healthcare services, have not improved. However, the paper also noted that the purpose of microcredit loans is for businesses to be created, and there is evidence that businesses are being created. I am wondering if there have been any advancements in trying to target or change the microcredit programs to target social impacts like education or women’s empowerment, or if people have continued to emphasize the true purpose of the loans, creating businesses, being enough of a positive impact.

Ben Barbour

I thought that this paper was incredibly interesting. Microcredit seems like it benefited a lot in certain areas and did not have many significant effects in other areas. I found this to be interesting, and perhaps thought it might be the size of the loan. The loans to South Africa were relatively small at $127, but showed increases in food consumption, income, and other factors of wellbeing. This is interesting because it shows that the loans are enough in the other countries, and it might be other outside factors effecting possible gains from microcredits. There are other examples in the paper about differing effects of microcredit. Its interesting how something meant to help can have really diverse aftereffects. In West Bengal, they created two groups, one that pays back the loans in a traditional way, and one that has a 2-month grace period. While the grace period performed better overall, they still had average results due to some incurring big losses. This was one of the most interesting stories in the paper, it really emphasizes how different attitudes towards saving, investment, and well-being can affect the future. It also may be a factor of luck, so those that took a loss may not necessarily have bad habits. Overall, I thought that the paper provided a lot of interesting information on microcredits and microinsurance, but it also showed further evidence that there is no silver bullet to solving the problems of poverty. We cannot just throw money at problems and expect them to be solved.

Claire Jenkins

I found this post very interesting and eye-opening. One of the major key takeaways from this paper was that microfinance providers need to realize that providing working capital loans to microentrepreneurs is not the only goal; microfinance providers need to evolve and improve their services and products in order to meet the varied needs of the poor. The first thing that really stood out to me was how much the design really matters and makes an impact; even very small changes, such as more flexible repayment options, can yield significant results. If the poor were given a two month grace period, we would see increased investment in businesses and higher average profits in the following years. The paper pointed out that grace period borrowers "saw 30% higher average profits" and "invested 6% more of their loans in their businesses." In addition, giving cash to women had very notable effects. Women have higher loan repayment rates and tend to put more of their earnings back into the home or into child services, as compared to men. It has been shown that women invest less in their businesses, and allocate more money to household purchases or other expenses. I think this a very important finding to note, and it is one that has come up in class continually. Empowering women through giving them more access to credit can have major implications for development. Women will more likely invest in human capital, such as health and education, for their children, which will have great long-run positive impacts for society.

Lasting, I thought the section of the paper that talked about savings design was very compelling. It is important for policy makers to consider the fact that often times the poor don’t have the ability to save enough for productive investments. The poor are faced with various challenges such as temptation and having to value/think about the present more than the future. Savings design can be used to help savers overcome these challenges. It was very surprising to me that even small reminders to save had a somewhat large impact on savings. These reminders put the future in perspective for people. In my behavioral economics class, we have learned about nudges that can influence the behavior of individuals. These reminders, letters or text messages, are serving as a nudge for these people to save; it influences their behavior in the way that it increases average savings balances overall by 6%. Even more so, when the reminders referred to a specific purchase goal, average savings balances increased by 16%. This made me realize the greater point that even very small policy changes can make significant impacts.

Mark Natiello

I found this paper very interesting and informative regarding microcredit which I didn’t have too much prior knowledge on. I learned that microcredit can be extremely beneficial to small businesses, aspiring entrepreneurs, and poor households. While it was identified that increasing access to credit does have positive outcomes for some people, strategies like group lending, saving, delaying of payments, and borrower screening can have larger impacts on people in need of these loans. I found some parallels between this paper and others we have read in previous classes. The section on savings design and commitment savings reminded me of some of the development strategies used by countries like South Korea. Commitment savings accounts require the saver to deposit a certain amount of money in a bank account and give up access to cash for a period of time. Ashraf, Karlan, and Yin did a study in the Philippines that showed that commitment savings accounts are effective in increasing savings, especially for people with self-control issues. In another study regarding commitment savings for farmers, they put funds into a special account where withdrawals were restricted for defined periods. Along with increased savings in previous planting seasons, it was found that the treatment group had a 26 percent increase in agricultural input use and a 22 percent increase in value of crop output in the subsequent harvest. We have identified increased savings as a way to catalyze development because the savings can then be invested into things like working capital that can help increase profit margins and returns for farmers or workers and this is a prime example of that. We see that “forced savings” help prevent purchases that don’t contribute to investments and incentivize people to invest in themselves, their businesses, and working capital.


I went into this paper not really knowing what microfinance was. Thankfully, this paper draws an interesting and relatively nuanced picture of what microfinance is as well as what it can be. The whole thing was phenomenally written with enough detail to make a solid economic argument but enough lay explanation to make it accessible. It seems that everywhere we look in development economics Banerjee and Duflo show up with their rigorous empirical analysis procedures. I really liked the idea of creating randomized trials (like those in medicine) to test the efficacy of micro-finance. I initially reacted similarly to how I view medical trials: frustrated that not everyone gets the treatment, but understanding the importance of rigorous testing. Then I realized that if these microfinance loans ended up hurting those who took them out (whether through exploitative interest rates, inability to repay, or lack of contract enforcement) then one would hope to be in the control group! I was also very surprised by the interest rates on these loans: 200% APR on a loan that was worth 40% of the median borrower's monthly income seems outrageous.
I enjoyed the strong ties to behavioral and experimental economics with the focus on human psychology, rather than profit maximizing behavior to see how subjects really do respond to micro-loans instead of how they would in theory. I felt that the sms/email messaging puzzle example was particularly salient since a rational actor would not change their spending patterns based on the wording of a text! If a rational actor did not save to buy the bike that was because they wanted other things instead. At the same time, they do not neglect economic incentives as a driver of choice. In the rainfall insurance uptake study discussed at the end of the paper, they show that trust in insurance agents and price of insurance had statistically similar effects. The discussion of rainfall insurance also made me think a lot about the conversation that we had earlier in the year about increasing mean output through insurance markets for subsistence farmers.

Alexandra Lindsay

I find the different behaviors of men and women across these studies most interesting. The report says "Serving women… is good for business and good for fulfilling a social mission" (12). Women, specifically, tend to put more money back into their home and towards the needs of their children. With women putting more money into the healthcare and education of their children, the well-being of the overall society will grow, as we have seen through out the semester. This is why from a development economics perspective, extending microcredit to women is especially important. Additionally, women tend to be better paying back their debts. It is especially interesting that there only were high returns for women in poor countries when these factors stand- the country has high female participation, the women had "larger, higher profit businesses at the outset," and it was an in-kind gift rather than a cash grant. Another issue that the report recognizes that, in an India study for example, microcredit did not empower women to give them more of a say where the household spends its money. It also did not improve education and health in this sense. With women putting more money into their children, as mentioned earlier I'm struggling to understand how these factors could not be improved.

Claire Kallen

I found this paper to be very interesting, this was my first experience with microfinance. The part I was most interested in was the social aspect of investing. Specially women's role. In the paper it said that women, when allowed to invest, were turning large profits of about $14 which is a significant sum considering the average yearly income was much lower. To me this showed that by empowering women it would put money back into the economy as well which is a subject we have discussed a lot in this class and is something I have been researching outside of class for our final paper. It was interesting to see that women would put more money back into social causes when investing as this was what I have also seen in my research for our final paper. Something I was interested in was that women for so long were no trusted with finances but we see here that when it happens it is incredibly beneficial. That was my biggest take away from this paper when it comes to a past issue that was resolved- the issue being women's lack of resources to financial management and the resolution being their empowerment.
Looking at the data, it is clear that by increasing the female role in finances that there will be a significant positive change and that is something that will continue if women are given the tools that they need. I think this example especially shows that we need to be constantly changing our social norms in order to have the best outcome possible. That is something that is interesting to compare to environmental concerns today and how we will need to adapt our social norms in order to survive the current climate crisis and other environmental concerns.
Overall I found this paper to be very interesting and I enjoyed reading about the different examples and finding the "best practices" when it comes in to investing and loans and the different situations in which loans should be changed.

Teddy Bentley

This microfinance concept is a very interesting paper. I have not heard much about microfinance in the past. I think it is a very interesting concept and found the argument in the paper very compelling. It makes sense that focusing on individuals when lending out capital is more important and effective when finding what individuals need. People do many different things when they are making decisions when making investments. There is not one solve all solution when finding a strategy to effectively loan money. When looking at individuals goals and needs you can get a much better picture into how to effectively allocate capital. Being able to effectively loan money is one of the most important ways to stimulating the economy so this is a very important concept to do well for economic development.
I think the idea of group liability is very ineffective but I understand why that would be a thing. Group liability to me seems like something that would deter people from borrowing money. Having to rely on others to make payments would make me more reluctant to borrow. The discrepancies between how women and men are affected by loans was also very interesting. When women are able to control their finances there is such a positive impact other families. Men seem to get in the way of saving money so creating bank accounts solely for women is a surprisingly effective development tool as well.

Brad Stephenson

I am very interested to see how the strategies for making accessible credit for smaller, less profitable companies in developing countries changed between 2011 and the present as they showed small returns in this paper. I believe that a major point of microfinance is to make available credit to the poorest households and companies to generate increased returns in the long-term. While this paper says that these companies and households gained the least relative gains from increased capital, I wonder if any strategies regarding the selection of candidates, the payment methods for these loans, and amounts of funds evolved to become more effective for these groups. I feel that this paper highlights an opportunity for future innovation in microfinance for less profitable businesses in developing countries and would love to learn more about the progression of this section of microfinance. The paper highlights that the issue may also be that these small companies operate in less profitable industries, meaning that increases in available credit may not make a large difference no matter the strategy. It would be interesting to see if any microfinance initiatives successfully aided smaller, less profitable businesses.

Grace Owens

I found it interesting that this paper mentioned that the evidence from the 3 randomized trials of increasing access to credit doesn’t change anything significantly, as many would think. The evidence did show that people started to consume fewer temptation goods such as alcohol and tobacco, which we talked about in the beginning of the course being a contributing factor of poverty. Perhaps there was no evidence in the evaluations of an impact on healthcare, education, and female empowerment because the timeframe was not long enough for a more drastic and noticeable change. I also noted that there is much variation in results by country for instance, results of profit of women in Ghana versus Sri Lanka. I wonder if this ties into if women’s empowerment is needed prior to this to be successful. As was mentioned in a previous comment, it surprised me that in this case, men did better than women in growing businesses with a loan.


I am not familiar with Microfinance so this paper really helped me understand the topic more. My understanding of microcredit is that it is credit given to poor families and smaller businesses to help them begin to create profit in the long run.I think this paper is very interesting when talking about individuals specifically women vs men. By allowing for women to invest into the economy, more development occurs and the economy is stimulated which ultimately results in growth. In the past, women have played larger roles in the home and have spent most of their money on their children or at home accessories. Giving women microcredit is vital for economic development for those reasons alone. Women continuing to make social strides will only continue to give them more opportunities financially. My question is, have there been any significant changes to allow for women to gain easier access to microcredit programs? I feel like if these programs reach out to women as a target group, this will make them more motivated to participate in investing and putting money into the economy.


The topic I found most interesting was rainfall insurance. It provided a good example on why people’s risk-averse nature often deters them from increasing productivity on their farm, and also how beneficial eliminating risk can be. It was difficult to fathom why many farmers would not invest in rainfall insurance although 89% of households stated that drought was the most significant issue they face and less than 25% claimed they did not invest because they did not need it. Many of the reasons for these low take-up rates seemed to center around a lack of borrower education, making me wonder why education was not highlighted more as a solution to increasing take-up rates for such a beneficial concept. I hope we focus on rainfall insurance and other similar types of microinsurance in class tomorrow as I would like to better understand exactly why individuals choose to not utilize it when it can be so advantageous for them.

Max Thomas

Like others have mentioned, it appears that microcredit and microsavings programs sometimes fail in reaching groups most in need of savings/credit: the extremely poor and women. Instead, as the paper notes, the largest beneficiaries of MFIs tend to be “men with relatively high incomes.” How has access to microcredits for women and the extreme poor changed in recent years? I would think that increased investments in women’s education would increase uptake in these groups.

Have there been any comparative studies between the effectiveness of microlending and the effectiveness of UBI systems? I would think that a UBI could yield similar changes in consumption patterns as a microcredit while increasing the number of people reached by development policy. I do think, however, that it would be difficult for a poor country to finance a UBI system, especially under a corrupt government. Instituting a UBI in a developing country would likely require some form of FDI.

What standards do micro savings institutions have to uphold? Reading this paper, I was surprised that MFIs were allowed to impose large withdrawal fees and avoid paying interest to savers. Though these MFIs are likely safer than other savings strategies in developing countries, their practices seem ethically questionable.

Kevin Thole

My main takeaway from the microcredit paper is that you can't provide a service and expect one set outcome. At the end of the day, human agency determines if microcredit loans are effective at alleviating poverty or not. In most of the studies, access to microfinance had a positive, albeit modest, effect on many variables but the most salient one was stability. A huge issue that people in poverty face is an irregular cash inflow. Microfinance loans serve to give these people peace of mind even if all the money isn't used for investment spending.
It's not surprising that many people didn't use microfinance loans for investment purposes because not everyone is an entrepreneur. Some people would not be well-served if they used loans to start a business because not everyone has the skills to start one successfully and there is not enough market share to go around for everyone to own a business. Some people need money to reduce stress on whether or not they will be able to pay their bills.
I found the part about how formal savings accounts increase savings interesting. I wonder if there's a selection bias where people who were planning on saving more anyways chose to participate in savings accounts.

Chaz Cunningham

From not having much previous knowledge of microfinancing, I found this paper to be very well structured and informative. One thing I really found interesting was this emphasized idea of selecting borrowers to be maximize returns of microfinancing. As the paper stated, borrowers can either choose to invest their loans into business, smooth their consumption or manage risk. However, their is another 'risk' in giving loans to low performers that will not see great returns based off their consumption preferences. I think the psychographic tool described in the paper is a very unique and interesting idea yet I am still confused as to how accurate this evalutaion of honesty is in this design. I was thinking of a way to set a benchmark on borrower returns at a certain point to see how well they are performing with their loans.
One point made in the paper that I did not fully understand is about how women were able to "shield" their income to serve as an explanation for why their consumption levels increased as a result of borrowing. Is this suggesting that the women were not getting taxed therefore having a higher level of disposable income? I thought the point about women's spending less of the loan on business investments and more so on household expenditures and family necessities was cirtical This is because although business investments are the most highly regarded investment for return mentioned in the reading, household expenditures are crucial for increasing welfare and overall family health.

Jacob Thompson

One aspect of this paper that intrigued me was the disparity between giving business owners cash and giving them in-kind grants of inventory and equipment. The authors found that when business owners were given in-kind grants, they saw higher returns to capital than when given cash. This is somewhat expected, as owners given cash loans have to option to spend said cash on other items not related or beneficial to their business. However, what really caught my eye was that these in-king grants had no real effect on women with lower than average profits, especially when considering that there was a beneficial effect for men. While these grants benefit higher performing female entrepreneurs, they provide no real benefits for those who produce less. This raises the question for me, what could we do in order to benefit the lower producing cohort of women? Is microlending a viable option to help them, or would we need to look into policy changes elsewhere? I’m also curious as why lower profit women have a harder time turning physical capital into higher returns. While there is an overall benefit for women in that larger businesses owned by females are better able to produce profit, I find it unusual that this relationship stops when involving smaller female-owned establishments.


I thought it was interesting how micro finance impacts are not directly increasing health, education, and womens empowerment, but rather promote better spending techniques on durable goods and absorb shocks. I think the use of randomized trials drastically increase the validity of their results and highlights the importance of how results in one area of the world cannot be compared to another country.I think microfinance is important but as the article says, it should be more focused on how to benefit the borrowers instead of insuring the safety of the lenders investments.

Kaylann Adler

One part of this paper that I found interesting was the idea of group liability in microfinance. While I understand the assumption that group lending will make it more likely that borrowers will choose people that they think to be more responsible and lower the risk of defaulting on the loan for the bank, I also think this model doesn’t seem to help people as much as microfinance was supposed to; as the paper mentions, since risk-averse people likely wouldn’t want to co-sign for their peers, they probably don’t want to take out formal loans, and they also probably wouldn’t want to take out these microfinance loans either. The study in the Philippines that was referenced in this section also mentions that there was no difference in repayment between loans given to individual and group borrowers, but also notes that these “results likely rely heavily on cultural context and institutional incentive,” so I wonder if there are any other studies that have been done on repayment from individual versus group borrowers in microfinance that might have the same results.

Matt Condon

After finishing this paper, the topics that stuck with me the most were the new, experimental mechanisms of managing savings accounts and credit systems in these developing countries. For example, the results showing that giving micro-borrowers a grace period before beginning to repay their loan benefitted them in the long run was encouraging for the future of small businesses. However, I was especially interested in the psychographic test developed to help determine to whom to offer microcredit. This was an incredibly resourceful way of solving the issue of a lack of tangible collateral available in poorer nations. This idea, if it gains traction and becomes a widely acceptable way of facilitating loans in developing countries, could have a plethora of interesting applications. As far as I can tell from this article, this psychographic test concept has only been tested at the microcredit level, but it begs the question about whether the same strength of results would be seen if the test were given for larger loans. If this test becomes accepted as a legitimate way of conducting business, could it make financial markets more competitive and less reliant on collateral? I think that the experimental nature of this test could open doors and lead financial companies to begin using developing nations as a testing ground for other outside-the-box practices. The consequences of these new strategies failing at a micro level are minuscule for a large company, but the discovery of successful programs like this could lead to revolutionary new practices. This testing strategy also could be beneficial to everyone involved; the company gets a low-stakes testing ground for new ideas, and developing nations would have access to much needed credit.

Connor Verrett

What struck me as odd was that many of the studies on microfinance seemed to come with the asterisk that the results outside of the study should be taken with caution. Additionally, while it seemed like microfinance was a net positive in most cases. The positive results seemed completely different in every scenario. It appears difficult to extract any form of external validity on microfinance studies in general and that the positive results very much rely on a case-by-case analysis. I also found the section on business to big for microfinance but not well enough established for traditional banking very interesting. Would the solution to this be expanding microfinance to them or reforming traditional banking to be reached by them. I was also shocked by how well simple reminders worked. This is something we talk a lot about in my behavioral economics class but to see it in the context of development economics really caught my eye.

Matt DiTondo

One thing I noticed throughout this piece, which has been a theme throughout the class, is how interventions have different effects than they were initially predicted to. Microfinance was supposed to, or at least is was branded as means to, spark entrepreneurship in the developing world. Yet, the gains in entrepreneurship have been modest. While there were some slight increases in businesses opened (a sign of entraprenuership), we fail to see evidence of other forms of entrepreneurship in the form of increased revenues or number of employees. Instead, we see a shifting of recipient expenses and a changing basket of goods consumed. We also see, much less liberalization of entrepreneurship and returns from loans for women , another thing these programs were specifically supposed to address. However, while these points are often used to devalue the importance of Microfinance, that doesnt necessarily mean that the programs have failed.

Jacob McCabe

I found this article interesting because it attempted to tackle an issue that is holding back many developing countries. The introduction of microfinance is something that we, as people living in a developed country, see as an essential part of growing and maintaining a business. The distinguishing point that this article makes is that the needs and approaches of poor business owners vary greatly, and therefore so do the designs of microfinance that will work successfully. I was surprised at how low some of the take-up rates for these opportunities were, but then had to remind myself that many of the clients for these institutions had very little knowledge of financial processes and how they work. I noticed what seemed like an apprehension of trust from the customers, something that was affirmed in the microinsurance study where farmers were 10% more likely to purchase the insurance when someone from an organization they were familiar with was present. It is difficult to put yourself in the shoes of the people in developing countries as it is so far from the reality that we know that some would not even believe it. Because of this, we may have a warped understanding of how to best finance these communities and spur development. I appreciate the way that this paper recognizes some of these realities and provides empirical data on good ways to approach these businesses.

Sally Ennis

I really enjoyed this article as it clearly demonstrated the impacts of microfinancing on developing countries and lower income families. Something that I found really interesting was in the Grameen-style lending had different effects on rural and urban areas. More specifically, they reported that those that had access to microlending led to "the probability of starting a business increased by 1.7 percentage points relative to comparison areas, implying that approximately one in five of the additional MFI loans in treatment areas was associated with the opening of a new business." However, in the rural areas they did not see the implementation of these microloans to lead to an increase in new businesses. There are two points of discussion that came to mind: one being that I am curious as to what the success rate is for the new businesses in the urban areas are and the other being that this difference in the formation of new businesses makes sense because there are more opportunities in urban areas than there are in rural areas, making it easier to create a new business. This highlights that the purpose of the microloans matters as different families face a wide range of needs, so having a definitive goal for the use of microloans is not effective.

Mary Wilson Grist

I appreciated Banerjee and Duflo’s point that even though there was a lack of positive results in terms of health and women’s empowerment, microcredit worked in the dimension that it was supposed to. While positive results in health and women’s empowerment are obviously the long term goal for any anti-poverty initiative, it does not mean that a certain initiative is failing if those results do not occur immediately. Access to loans through microcredit helped households to make choices and decisions about investments, something that they did not have the luxury of making beforehand. While one would hope that eventually the resources from microcredits would allow women to work outside the home and allow healthcare to be a primary financial priority for the families, Banerjee and Duflo still consider the current progress of microcredit a success. As Alex mentioned in her post, “serving women is good for business and good for fulfilling a social mission” (12). The hope is that these microcredits will give women the chance to be in charge of a household financials and in turn lead to more stable payments etc.

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