New Releases by Jonathan Morduch

"We offer the third edition of this text as a resource for professors who, like us, want to show students that economics can make a positive impact-in their own lives and in society as a whole. We designed the text with our own version of a "dual mandate": to deliver core economic concepts along with exciting new ideas in economic thought and to keep student learners engaged by confronting issues that are important in the world. Our intention is that this approach will help students see economics as a tool to better one's own life, promote better public policies, and run better businesses around the world"--

Drawing on the groundbreaking U.S. Financial Diaries project (http://www.usfinancialdiaries.org/), which follows the lives of 235 low- and middle-income families as they navigate through a year, the authors challenge popular assumptions about how Americans earn, spend, borrow, and save-- and they identify the true causes of distress and inequality for many working Americans.

Microfinance is generally seen as a way to fix credit markets and unleash the productive capacities of poor people who are dependent on self-employment. The microfinance sector has grown quickly since the 1990s, paving the way for other forms of social enterprise and social investment. But recent evidence shows only modest average impacts on customers, generating a backlash against microfinance. This paper reconsiders the claims about microfinance, highlighting the diversity in evidence on impacts and the important (but limited) role of subsidies. The paper concludes by describing an evolution of thinking: from microfinance as narrowly construed entrepreneurial finance toward microfinance as broadly construed household finance. In this vision, microfinance yields benefits by providing liquidity for a wide range of needs rather than solely by boosting business income.

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Microfinance institutions have proved the possibility of providing reliable banking services to poor customers. Their second aim is to do so in a commercially-viable way. This paper analyzes the tensions and opportunities of microfinance as it embraces the market, drawing on a data set that includes 346 of the world's leading microfinance institutions and covers nearly 18 million active borrowers. The data show remarkable successes in maintaining high rates of loan repayment, but the data also suggest that profit-maximizing investors would have limited interest in most of the institutions that are focusing on the poorest customers and women. Those institutions, as a group, charge their customers the highest fees in the sample but also face particularly high transaction costs, in part due to small transaction sizes. Innovations to overcome the well-known problems of asymmetric information in financial markets were a triumph, but further innovation is needed to overcome the challenges of high costs.

Expanding access to financial services holds the promise to help reduce poverty and spur economic development. But, as a practical matter, commercial banks have faced challenges expanding access to poor and low-income households in developing economies, and nonprofits have had limited reach. We review recent innovations that are improving the quantity and quality of financial access. They are taking possibilities well beyond early models centered on providing “microcredit” for small business investment. We focus on new credit mechanisms and devices that help households manage cash flows, save, and cope with risk. Our eye is on contract designs, product innovations, regulatory policy, and ultimately economic and social impacts. We relate the innovations and empirical evidence to theoretical ideas, drawing links in particular to new work in behavioral economics and to randomized evaluation methods.

An accessible analysis of the global expansion of financial markets in poor communities, incorporating the latest thinking and evidence. The microfinance revolution has allowed more than 150 million poor people around the world to receive small loans without collateral, build up assets, and buy insurance. The idea that providing access to reliable and affordable financial services can have powerful economic and social effects has captured the imagination of policymakers, activists, bankers, and researchers around the world; the 2006 Nobel Peace Prize went to microfinance pioneer Muhammed Yunis and Grameen Bank of Bangladesh. This book offers an accessible and engaging analysis of the global expansion of financial markets in poor communities. It introduces readers to the key ideas driving microfinance, integrating theory with empirical data and addressing a range of issues, including savings and insurance, the role of women, impact measurement, and management incentives. This second edition has been updated throughout to reflect the latest data. A new chapter on commercialization describes the rapid growth in investment in microfinance institutions and the tensions inherent in the efforts to meet both social and financial objectives. The chapters on credit contracts, savings and insurance, and gender have been expanded substantially; a new section in the chapter on impact measurement describes the growing importance of randomized controlled trials; and the chapter on managing microfinance offers a new perspective on governance issues in transforming institutions. Appendixes and problem sets cover technical material.

Present eight recommendations for microinsurance providers

Nearly forty percent of humanity lives on an average 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 systematically explain how the poor find solutions to their everyday financial problems. The authors conducted year-long interviews with impoverished 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." Indispensable for those in development studies, economics, and microfinance, Portfolios of the Poor will appeal to anyone interested in knowing more about poverty and what can be done about it.

Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy. The authors examine why this promise remains unmet for most institutions. Using a data set with unusually high quality financial information on 124 institutions in 49 countries, they explore the patterns of profitability, loan repayment, and cost reduction. The authors find that institutional design and orientation matter substantially. Lenders that do not use group-based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially. For these individual-based lenders, one key to achieving profitability is investing more heavily in staff costs-a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost