Jonathan J. Morduch

About half of the world’s adults lack bank accounts. Most of these “unbanked” are deemed too expensive to serve, or not worth the hassle created by banking regulations. But what may be good business from a banker’s perspective isn’t necessarily what’s best for society. The inequalities that persist in financial access reinforce broader inequalities in the distribution of income and wealth.

This is the opening for microfinance and also its challenge. Microlending has been sold as a practical means to get capital into the hands of small-scale entrepreneurs who can then earn their way out of poverty. The idea appeals to our impulse to help people help themselves and to our conviction that bottom-up development depends on the embrace of the market. By eschewing governments and traditional charities, the sector promises to sidestep the bureaucracy and inertia that have hobbled
other attempts to expand the opportunities of the poor.

More than ever, Americans need to be financially savvy. The past few years have shown that mortgages can be complicated, business-cycle downswings severe, and investing far from obvious. And, for many of us, saving is not easy. Creating a successful financial life takes a high level of know-how and stamina. Not surprisingly, efforts to increase financial literacy among Americans have won wide support

Is credit a human right? Muhammad Yunus, the most visible leader of a global movement to provide microcredit to world’s poor, says it should be. NYU’s John Gershman and FAI’s Jonathan Morduch disagree. In their new paper, Credit is Not a Right, they ask whether a rights-based approach to microcredit will in fact be effective in making quality, affordable credit more available to poor families – and, more importantly, whether it is a constructive step in terms of the broader goal of global poverty reduction. Jonathan Morduch argues his case in this video.

About forty percent of the world's people live on incomes of two dollars a day or less. If you've never had to survive on an income so small, it is hard to imagine. How would you put food on the table, afford a home, and educate your children? How would you handle emergencies and old age? Every day, more than a billion people around the world must answer these questions. Portfolios of the Poor is the first book to explain systematically how the poor find solutions.

The authors report on the yearlong "financial diaries" of villagers and slum dwellers in Bangladesh, India, and South Africa--records that track penny by penny how specific households manage their money. The stories of these families are often surprising and inspiring. Most poor households do not live hand to mouth, spending what they earn in a desperate bid to keep afloat. Instead, they employ financial tools, many linked to informal networks and family ties. They push money into savings for reserves, squeeze money out of creditors whenever possible, run sophisticated savings clubs, and use microfinancing wherever available. Their experiences reveal new methods to fight poverty and ways to envision the next generation of banks for the "bottom billion."

In this paper, we examine the economic logic behind microfinance institutions and consider the movement from socially oriented nonprofit microfinance institutions to for-profit microfinance. Drawing on a large dataset that includes most of the world's leading microfinance institutions, we explore eight questions about the microfinance "industry": Who are the lenders? How widespread is profitability? Are loans in fact repaid at the high rates advertised? Who are the customers? Why are interest rates so high? Are profits high enough to attract profit-maximizing investors? How important are subsidies? The evidence suggests that investors seeking pure profits would have little interest in most of the institutions we see that are now serving poorer customers. We will suggest that the future of microfinance is unlikely to follow a single path. The recent clash between supporters of profit-driven Banco Compartamos and of the Grameen Bank with its "social business" model offers us a false choice. Commercial investment is necessary to fund the continued expansion of microfinance, but institutions with strong social missions, many taking advantage of subsidies, remain best placed to reach and serve the poorest customers, and some are doing so at a massive scale. The market is a powerful force, but it cannot fill all gaps.

The urgency of reducing poverty in the developing world has been the subject of a public campaign by such unlikely policy experts as George Clooney, Alicia Keyes, Elton John, Angelina Jolie, and Bono. And yet accompanying the call for more foreign aid is an almost universal discontent with the effectiveness of the existing aid system. In Reinventing Foreign Aid, development expert William Easterly has gathered top scholars in the field to discuss how to improve foreign aid. These authors, Easterly points out, are not claiming that their ideas will (to invoke a current slogan) Make Poverty History. Rather, they take on specific problems and propose some hard-headed solutions.

Written by 1506 eminent contributors, this new edition of The New Palgrave Dictionary of Economics retains many classic essays of enduring importance and contains 1,872 articles. Published in eight print volumes and for the first time in online format, this is the definitive scholarly reference work for a new generation of economists.

This essay focuses on the design of insurance products for poor customers. Several promising innovations are described: credit life insurance, health insurance partnerships, and weather insurance. Each was created to serve populations that were previously unserved, and workable institutional solutions are emerging. The next step must be to shift from the question of what creates workable institutions to the question of how to refine designs to best serve low-income populations. In doing so, current approaches must be reassessed in order to most improve clients’ lives and to avoid doing unintended harm.

This book evaluates alternatives in widening insurance and social protection provision - including sustainability and poverty effects, in thematic papers and case studies, development assessments, and policy analyses.

The United Nations' Millennium Development Goals (MDGs) have galvanized the development community with an urgent challenge to improve the welfare of the world's neediest people. This paper reviews the mounting body of evidence showing that the availability of financial services for poor households is a critical contextual factor with strong impact on the achievement of MDGs. Evidence from the millions of microfinance clients around the world demonstrates that access to financial services enables poor people to increase their household incomes, build assets, and reduce their vulnerability to the crises that are so much a part of their daily lives.

Microfinance was pioneered in the developing world as the lending of small amounts of money to entrepreneurs who lacked the kinds of credentials and collateral demanded by banks. Similar practices spread from the developing to the developed world, reversing the usual direction of innovation, and today several hundred microfinance institutions are operating in the United States.

Replicating Microfinance in the United States reviews experiences in both developing and industrialized countries and extends the applications of microlending beyond enterprise to consumer finance, housing finance, and community development finance.

This book reviews experiences in both developing and industrial countries and extends the applications of microlending beyond enterprise to consumer finance, housing finance, and community development finance, concentrating especially on previously underserved households and their communities.

This article uses data on young teenagers to investigate how sibling composition affects schooling outcomes in South Africa and Tanzania. The results, while not estimated very precisely, establish additional evidence of positive associations between school completion and the number of sisters a child has (controlling for the total number of siblings), but the evidence from South Africa shows that they are not general findings. The estimates are conditional on the given family structure, and of course, family structure may not be fully exogenous to schooling choices.

Presents survey data of the household incomes of local officials in northern China and their relation to market liberalization, increases in consumer demand and the provision of local public goods. Description of the rank-and-file bureaucrats; Political status in rural China; Survey data and economic setting; Effects of political variables on income levels; Analyses; Economic reform.

Presents a study on win-win proposition, a principle of good banking, by leading microfinance advocates which can alleviate poverty through microfinance institution. Logic of the win-win proposition; Advantages of financial sustainability; Limits of the proposition.

Examines use of informal insurance arrangements in households of low-income countries. Relationship between household consumption and income; Ways in dealing economic hardships; Systems of reciprocal transfers; Role of public policy in reducing economic vulnerability; Overview on microcredit, insurance and employment guarantee schemes.

Focuses on the role of subsidies in microfinance as evidenced by the Grameen Bank of Bangladesh. Difficulties in maintaining high repayment rates; Role of the bank in alleviating poverty; Recognition of the myriad benefits that have been attributed to program participation.

When capital and labor markets are imperfect, choice sets narrow, and parents must choose how to ration available funds and time between their children. One consequence is that children become rivals for household resources. In economies with pro-male bias, such rivalries can yield gains to having relatively more sisters than brothers. Using a rich household survey from Ghana, we find that on average if children had all sisters (and no brothers) they would do roughly 25-40% better on measured health indicators than if they had all brothers (and no sisters). The effects are as large as typical quantity-quality trade-offs, and they do not differ significantly by gender.

Many interesting economic hypotheses entail differences in behaviors of groups within a population, but analyses of pooled samples shed only partial light on underlying segmentations. Finite mixture models are considered as an alternative to methods based on pooling. Robustness checks using t-regressions and a Bayesian analogue to the likelihood ratio test for model evaluation are developed. The methodology is used to investigate pro-son bias in child health outcomes in Bangladesh. While regression analysis on the entire sample appears to wash out evidence of bias, the mixture models reveal systematic girl-boy differences in health outcomes.

Examines the ways in which farm households in developing countries may self-insure, with a particular emphasis on the idea that farm households may seek to smooth their consumption by altering their methods of production. Quantifying the importance of risk; Consumption smoothing and risk; Income smoothing; Simplicity and complexity in low-income economies.