Rationally Speaking Podcast Rationally Speaking #136 - David Roodman on Why Microfinance Won't Cure Global Poverty
Jun 15, 2015
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Loans Often Serve As Commitment Devices
- Many borrowers use loans to juggle finances or self-discipline spending rather than to invest in income-raising businesses.
- Loans can act as commitment devices to prioritize essentials like school fees.
Measure Choice Affects Conclusions
- Poverty reduction is a vital metric but RCTs showing no short-term income gains should temper expectations for subsidized microcredit.
- Microsavings shows more promise for consumption smoothing than microcredit in available studies.
Financial Services Reduce Risk For The Poor
- Financial services mainly reduce risk and help poor people manage volatile incomes and catastrophic events.
- Poor households need savings, credit, insurance, and transfers to gather lumps of money for key expenses.