Research on Microfinance by NYU Wagner's Jonathan Morduch Points to Complexities and Challenges
NYU Wagner Professor Jonathan Morduch's research into the reach and potential of microfinance, the acclaimed poverty-fighting tool, drew him to the attention of The New Yorker magazine. In its March 17 2008 edition, an article entitled "What Microloans Miss" tapped his expertise on the complexities of micro-lending to the poor.
Professor Morduch directs the Financial Access Initiative (FAI), an inter-university research effort based at the Robert F. Wagner Graduate School of Public Service at NYU.
Meanwhile, an article in the New York Times Magazine featured comments by FAI Managing Director Christina Barrineau of NYU. The article, "The Celebrity Solution," March 9, 2008, illuminated the star power behind microfinance programs in developing countries, personified by such philanthropists as Natalie Portman, the actress.
FAI is a consortium of leading development economists focused on substantially expanding access to quality financial services for low-income individuals. FAI was launched with a $5 million grant from the Bill & Melinda Gates Foundation in late 2006.
Professor Morduch Explores Whether the Very Poor Can Afford MicrofinanceProfessor Jonathan Morduch, lead researcher and director on the NYU Wagner-based Financial Access Initiative (FAI), presented his new paper, "How Can the Poor Afford Microfinance," at the First Annual Forum on Financial Access.
The well-attended Forum was hosted at New York University by the Financial Access Initiative on February 1, 2008. FAI is supported by the Bill and Melinda Gates Foundation.
A leading expert on microfinance, Professor Morduch is co-author of The Economics of Microfinance (MIT Press, 2005) and Professor of Public Policy and Economics at NYU Wagner.
His paper addresses existing gaps in data and analysis needed to answer the fundamental question of whether microloans can be an effective tool for the very poor and make deep inroads against poverty. It reveals that we actually know very little about the returns to capital of the poor --and that the evidence that does exist is flawed.
The groundbreaking work is significant in part because microfinance has gained international acclaim through anecdotes of cash-strapped microentrepreneurs propelled out of poverty by a tiny bit of extra cash in the form of a microloan.
That image hinges on three linked assumptions: first, poor households have high economic returns to capital; second, the resultant disposable income affords paying high interest rates; third, these high rates allow microlenders to become self-sustainable.
Morduch notes that a previous study in Mexico showed very high returns to capital for poor households, indicating that for these households the microcredit story holds. However, preliminary work by the same researchers in Sri Lanka tells a different story: estimated returns to capital are lower than in Mexico-9% per month for male-owned businesses, and zero or even negative for businesses run by women. "The evidence suggests that the poor are a diverse group," says Morduch. "The question so far has been posed as whether or not the very poor can truly benefit from microcredit. A better question is: how many and to what degree?"
"How Can the Poor Afford Microfinance?" moves on to address the lack of existing data and analysis that allows us to answer the fundamental question of whether microcredit is an effective tool for the very poor.
"Separately, Professor Morduch was recently quoted in a Financial Times article on microfinance headlined, "Bangladesh bank offers loans to Poor."
The professor's paper, along with the article link, are below.
NYU Wagner Co-sponsors Albany Briefing on Performance-Based Management
NYU Wagner faculty experts framed a two-hour discussion on performance-based management on Tuesday, October 23, 2007, at the New York State Museum, Terrance Gallery, Albany, N.Y. The dialogue before about 110 state commissioners, deputy commissioners and other high-level government officials marked the first NYU Wagner/ Accenture Executive Briefing Series for senior state officials in Albany; it was entitled “Supporting High Performance Government: Leading Large Scale Change in New York State Government.” NYU Wagner’s Professor Dennis Smith, an expert on performance-based management in public safety and other realms of government responsibility, presided over the discussion along with Jeffrey Mullins, Senior Executive, Accenture. NYU Wagner Professor Dall Forsythe, who formerly served as New York State budget director, moderated the main discussion among four state commissioners, among them Gladys Carrion (Children and Family Services), David Hansell (Temporary and Disability Assistance) David Swarts (Motor Vehicles), and Denise O’Donnell (Criminal Justice Services).
The event was part of a series of quarterly breakfasts for senior leaders in government convened by the Research Center for Leadership in Action (RCLA) at NYU Wagner and sponsored by Accenture, and the first to be held in Albany and focused on state government. The briefings, which in the past have included New York City government leaders, use a “fishbowl” technique to ventilate the issues and then open the conversation to the whole room. In this case, Bethany Godsoe, the director of RCLA, welcomed the state officials on behalf of Wagner and the Center, while Professor Smith, who helped organize the event, described its focus – the use of outcome measures to manage improved state government performance.
The next breakfast briefing is planned for late November/early December, and it will be the first leading, large-scale change briefing to focus on city/state collaborations. Anyone who would like to attend or has ideas for Prof. Smith on future topics or speakers is invited to let him know.
Expanding Banking Access to the Poor: New Gates Foundation Initiative Based at WagnerThe importance of access to finance in building the wealth of low-income individuals in developing countries is clear, but there are many questions about how to improve that access most effectively. The anecdotal success stories about microfinance are well known; substantive research on how to increase and improve access is still lacking.
Now, a five-year Financial Access Initiative funded by a $5 million grant from the Bill & Melinda Gates Foundation will bring together top researchers from Harvard, NYU, Yale, and Innovations for Poverty Action to assess existing research on global financial access, generate new evidence through field work, and inform regulatory policy.
"As donors in this space, it is critical that we make decisions informed by sound research," said Bob Christen, Director of Financial Services for the Poor at the Bill & Melinda Gates Foundation. "We hope that the Financial Access Initiative will yield data, analysis, and research that decision makers need to deliver financial services that markedly advance the well being of the poor."
One of the biggest hurdles to opening up financial sectors to those living in poverty is a lack of hard data and analysis about how poor households manage their finances and cope with risk: which financial products do the poor use and why, who has access to what, at what cost and where. The impact of regulation and government policy on the broad availability of finance is still badly understood. Most fundamentally, despite the anecdotes, rigorous evidence is lacking on the economic and social impacts of different interventions and policies.
Director and Principal Investigator Jonathan Morduch said: "The Financial Access Initiative will systematically address important knowledge gaps and contribute to a much stronger understanding of the issues hindering access to good financial services."
Under the direction of Morduch, a professor at New York University, the Initiative is based at NYU's Robert F. Wagner Graduate School of Public Service and is co-directed by professors of economics Sendhil Mullainathan of Harvard and Dean Karlan of Yale. Christina Barrineau, who formerly headed the International Year of Microcredit for the United Nations, will lead the Initiative as Managing Director.
Field research will be coordinated by Innovations for Poverty Action, an organization based in New Haven, Connecticut, and headed by Dean Karlan. The research will build on studies with existing microfinance partners in a dozen countries including Mexico, Peru, India, Pakistan, Ghana, and the Philippines. The Initiative is also developing new collaborative relationships to broaden the potential of the research and dissemination of findings.
To reach Christina Barrineau, call 212.998.7536 or send email to Christina.email@example.com.
Microfinance and social-justice philanthropyProfessor Jonathan Morduch's research about microfinance, a growing prescription for global poverty, will have him delivering talks this spring at the World Bank, Yale School of Management, Wharton School, Columbia Graduate School of Business, and the University of Chicago Graduate School of Business. He spoke with NPR affiliate KQED out of the San Francisco Bay Area on Apr. 6, 2007 about microfinance and social-justice philanthropy, and was turned to for an article on the microfinance movement in the April 16 issue in Time magazine.
School financing is 'big business' writes Prof. StiefelIn an essay published in Newsday, Wagner Professor Leanna Stiefel examines the current debate over public-education financing, and explores what type of school-aid formula is required to ensure that students in poor districts have the opportunity to meet state learning standards.
Evaluating the World BankThe World Bank is one of the most influential�and sometimes controversial--providers of knowledge about international development and growth. A frank review of World Bank research between 1998 and 2005 has been completed by an external panel at the request of the World Bank�s chief economist.
The panel included Angus Deaton (Chair), Princeton University; Kenneth Rogoff, Harvard University; Abhijit Banerjee, M.I.T.; and Nora Lustig, Director of the Poverty Group at UNDP.
NYU Wagner�s Professor Jonathan Morduch participated in the review with responsibility for evaluating research on finance and private sector development.
The report with responses by Francois Bourgignon, the Chief Economist, and Joseph Stiglitz, a former Chief Economist, is available at: http://econ.worldbank.org
In January, 2007, Professor Morduch was invited to join the Editorial Board of the World Bank Economic Review, the world�s most widely read scholarly economic journal. His term ends in December 2009.
Professor Furman to Head Project on Centrist Economic PoliciesJason Furman, a Visiting Scholar at NYU Wagner who worked on budget and tax issues as an economist in the Clinton administration, will become the new director of The Hamilton Project. The Project is an effort of The Brookings Institution to promote a centrist economic strategy in association with former Clinton-era Treasury Secretary Robert Rudin.
'But get real,' Professor Jonathan Morduch tells The New Yorker. 'How long are you willing to wait for the revolution?'Responding to critics of microfinance who have argued that it is merely a Band-Aid on global inequalities, Professor Morduch argues for a more realistic perspective in an interview with The New Yorker magazine.
He Proved the Impossible, Observes NYU Wagner Professor Jonathan Morduch On Nobel Peace Prize Winner Muhammad Yunus
�He proved the impossible: that the poor were bankable,� NYU Wagner Professor Jonathan Morduch said -- in what the New York Times termed its �Quotation of the Day� -- about Nobel Peace Prize recipient Muhammad Yunus, founder of the Grameen Bank and a major catalyst for the global micro-credit revolution. Morduch�s observations on microfinance appeared world-wide, carried by such media outlets as the Associated Press, NY Times, Newsday, NPR, and the Los Angeles Times.
Professor Morduch Appointed to United Nations Group on Inclusive Financial SectorsJonathan Morduch, Professor of Public Policy and Economics, has been appointed to the United Nations Advisors Group on Inclusive Financial Sectors. The Advisors Group will provide advice and guidance to the United Nations in finding ways to expand access to basic financial services.
Is There a 'Pay-to-Play' Culture in NYC Politics? Students Capstone Project Presses the IssueA new Capstone report examines 2005 donations to New York City political campaigns for the Campaign Finance Board, measuring the extent of political influence exerted by contributors. The report by the Wagner student team -- including Mary Fischietto, Eric Friedman, Paul Nelson, Anat Tamir and Kara Merrill Verma -- prompted coverage in the New York Times. Click here to read the article.
Professor Brecher Pens Op-Ed on Municipal Pension ReformAddressing a mayoral plan to trim public pension costs, Wagner Professor Charles Brecher offers fiscal analysis in an opinion piece that appeared in the New York Daily News. Click here to read the story.
Wagner Professor Discusses Microcredit and Poverty at Vatican CongressAn international conference addressing the issues of "Microcredit and the Struggle Against Poverty" featured a presentation from NYU Wagner Professor Jonathan Morduch.
The discussion topic �Comprehensive Development for the Poor: The Role of Microcredit� was presented by Morduch along with Noemi Sayson of the Philippines. Professor Morduch, Associate Professor of Public Policy and Economics, teaches on the challenges of economic and social development in low-income countries and addressed some of these issues in his lecture to the conference delegation.
An Exercise in Hard Budget ChoicesNYU�s Robert F. Wagner Graduate School of Public Service and the Committee for a Responsible Federal Budget in Washington D.C. invite you to match wits with fellow students and Washington officials to come up with a plan to balance the federal budget.