Jonathan Morduch: Five takeaways from the Microfinance USA 2011 Conference
Microfinance expert and author (most recently) of Portfolios of the Poor: How the World’s Poor Live on $2 a Day, Jonathan Morduch reflects on some of the things he learned at the Microfinance USA 2011 conference, which took place in downtown Manhattan early this week.
1. Folks working on the international side and the domestic side have more to share with each other than ever. Why? The international side has moved beyond the focus on Grameen Bank -style micro-credit to support micro-enterprise. Even Grameen Bank has moved beyond that (most notably, they’ve become a deposit institution big-time: the last figures I saw showed them taking in $1.47 in savings for every $1 they lent). That puts focus on a wide range of new financial ideas, from mobile telephone banking to insurance. The U.S. side is also engaged in new uses of technology and ideas that are more about banking than traditional microfinance (credit scoring, debit cards, etc.) Maybe the most interesting thing about the conference was how little it actually had to do with traditional microfinance – and that turns out to open up lots of wide-ranging conversations.
2. Still, the US is different. On the first afternoon, Rachel Schneider, Daryl Collins and I had the chance to introduce a new project: The U.S. Financial Diaries. We’ll get to know 300 low-income families over 16 months (in four US regions), focusing especially on how the families are making ends meet. The project builds on similar work in South Africa, Bangladesh, and India. The project is about listening to the families and learning from their choices, not testing specific hypotheses or evaluating particular programs. The questions during Q&A brought out how different the U.S. context is: How will federal and state rules on transfer programs limit the families’ choices? How will we deal with undocumented immigrants? Why don’t people use bank accounts, even after cheap, low-fee accounts have been created? The differences give the project its reason for being, but I’m uncertain whether they’ll really turn out to be the big story or not. That’s why we do research.
3. At the session on the U.S. Diaries, Doug Sabo of Visa asked an interesting question about payment infrastructure (how we transfer money, pay bills, and the like). It was a good reminder that being able to make payments reliably and cheaply is what underpins much of the modern economy (what would life be like without ATM access, credit and debit cards, online bill-paying capability?…), but it’s easy to take for granted and thus focus on other parts of the financial system. Someone needs to find a way to make the importance of payment systems sexier.
4. Financial literacy: is the big problem that (1) we just aren’t doing enough financial literacy training? Or (2) that we don’t know how to do it well enough? Or (3) that, even when we think we do it well, demand isn’t nearly as high as we imagine it would be? Take-away: Take #3 seriously.
5. I was honored to share a plenary stage with one of my heroes, Christopher Dunford, the out-going president of Freedom from Hunger. Dunford has time and again challenged the microfinance community to hold themselves more accountable and collect better data. He’s led by example, and Freedom from Hunger has a more active research program than any other group I know (plus the willingness to talk about things that don’t go as well as expected). He’s shown true integrity and courage. Dunford’s message on Monday was largely aimed at the researchers who joined him on stage – me, David Roodman of the Center for Global Development, and Dean Karlan of Yale. Dunford said: you guys need to also think about the role you’re playing in aid allocations. We were pushing the importance of doing more careful evaluations, but Dunford asked whether that kind of pro-evaluation advocacy has gone too far. Some donors and investors, he argued, won’t move money these days unless a randomized controlled trial is part of the project. Dunford’s right: we need to have a bigger conversation on the ways that evaluations get used and positioned – and when they’re appropriate and when they’re not. I just don’t want that conversation to lead to excuses to pull back on doing evaluations (and neither does Dunford): we already have too many excuses not to hold ourselves accountable.
Jonathan Morduch teaches at the NYU Wagner Graduate School of Public Services and heads the Financial Access Initiative. He co-wrote The Economics of Microfinance and Portfolios of the Poor: How the World’s Poor Live on $2 a Day.