The Economics of Microfinance, 2nd edition

The Economics of Microfinance, 2nd edition
Cambridge, MA: MIT Press.

Beatriz Armendáriz and Jonathan Morduch


1 Rethinking Banking 

2 Why Intervene in Credit Markets? 

3 Roots of Microfinance: ROSCAs and Credit Cooperatives

4 Group Lending

5 Beyond Group Lending

6 Savings and Insurance

7 Gender

8 Commercialization and Regulation

9 Measuring Impacts

10 Subsidy and Sustainability

11 Managing Microfinance 

Half the World is Unbanked

Half the World is Unbanked
Financial Access Initiative Report, October 2009. Feature in McKinsey Quarterly, March 2010

Jonathan Morduch, Alberto Chaia, Aparna Dalal, Tony Goland, Maria Jose Gonzalez, and Robert Schiff

Limited information on the size and nature of the global population using financial services limits policy makers’ abilities to identify what’s working and what’s not, and it limits financial services providers’ abilities to identify where the opportunities lie and where they could learn from current successes.

A new report, “Half the world is unbanked,” provides an improved estimate of the size and nature of the global population that does and does not use formal (or semiformal) financial services.

This paper builds on a data set compiled from existing cross-country data sources on financial access and socioeconomic and demographic characteristics to generate an improved estimate of the size and nature of the global population that does and does not use formal (or semiformal) financial services.

U.S. Ratification of the CRC and Reducing Child Poverty: Can We Get There from Here?

U.S. Ratification of the CRC and Reducing Child Poverty: Can We Get There from Here?
Child Welfare, 89(5): 159-175

Aber, J.L., Hammond, A.S. & S.M. Thompson.

If the United States finally ratifies the United Nations Convention of the Rights of the Child (CRC), will it improve the country's to effectively combat child poverty and thereby improve child well-being? This article addresses this and related questions in two ways. First, the authors examine how ratification of the CRC has influenced the efforts of other wealthy Anglophone countries to reduce child poverty. Second, they draw on lessons learned from these other countries' efforts to generate predictions about America's postratification future. The authors conclude that, while the CRC is a compelling, practical tool, a communications strategy and business plan are necessary complements to achieve desired results.

Portfolios of the Poor: How the World's Poor Live on $2 a Day

Portfolios of the Poor: How the World's Poor Live on $2 a Day
Princeton, NJ: Princeton University Press. May 2009

Collins, D., Morduch, J., Rutherford, S. & Ruthven, O.

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."

Race, Gender and the Recession: Job Creation and Employment

Race, Gender and the Recession: Job Creation and Employment

C. Nicole Mason, Ph.D

This report focuses on the effect of the recession and the American Recovery and Reinvestment Act (ARRA) on economically marginalized communities. The Network highlights four key areas of impact for women of color and their families: job creation and employment, housing and social services, education, and tax cuts to individuals.

Microfinance Meets the Market

Microfinance Meets the Market
February Journal of Economic Perspectives 23(1), Winter:  167-192.

Morduch, J., Cull, R. & Demirguc-Kunt, A.

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.

Making Ends Meet: Women and Poverty in New York City

Making Ends Meet: Women and Poverty in New York City

Mason, C.N. & Salas, D.

 In March 2009, The Network in collaboration with the New York Women's Foundation will release a new report on women living in poverty in New York City.  The dynamic study will include qualitative data as well as narratives from women about the impact of poverty on communities and families.  The report will help inform funding priorities for the Foundation.

The Unbanked: Evidence from Indonesia

The Unbanked: Evidence from Indonesia
October   World Bank Economic Review 22(3): 517-537

Morduch, J. & Jonston Jr., D.

To analyze the prospects for expanding financial access to the poor, bank professionals assessed 1,438 households in six provinces in Indonesia to judge their creditworthiness. About 40 percent of poor households were judged creditworthy according to the criteria of Indonesia's largest microfinance bank, but fewer than 10 percent had recently borrowed from a microbank or formal lender. Possessing collateral appeared as a minor determinant of creditworthiness, in keeping with microfinance innovations. Although these households were judged able to service loans reliably, most desired small loans. Calculations show that the bank, given its current fee structure and banking practices, would lose money when lending at the scales desired. So, while innovations have helped to extend financial access, it remains difficult to lend in small amounts and cover costs.

Understanding Client and Occupation Barriers in New York City

Understanding Client and Occupation Barriers in New York City

Women of Color Policy Network

In 2006, the Network was commissioned by United Way of New York to access the viability of New York City's first workforce development program. Using a mix method approach of surveys, individual interviews with program participants and extensive secondary data, the Network helped identify labor and workforce trends as well as barriers and challenges to sustained employment within low-income communities. A three-part series of our findings and recommendations for future programs in workforce development was released. An Assessment of Client Barriers: A Sample of NYC Works Program Participants Industry and Occupational Assessment of NYC Works NYCWorks program staff perceptions of Client Barriers


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