32. Financial Markets and the Birth of Microcredit
READ: "Financial Markets in Developing Countries: An Introduction"; Muhammad Yunus, "Banker to the Poor" (excerpts)
Answer the "thinking question" at the end of the first reading. According to Yunus, how has the Grameen Bank achieved an amazing 98 per cent repayment rate for its loans? Why hasn't the absence of collateral resulted in more frequent defaults? How is the repayment of Grameen bank loans structured, and what is the logic behind this structure? Why must Grameen borrowers be part of a group of five borrowers to obtain a loan? Do you see any limitations to the Grameen Bank "model"? Can institutions like the Grameen Bank make a significant contribution to economic development in poor countries? Why or why not?
33. Final Library Project Due/ No Class
34. The Grameen Bank (video)
READ: Start reading Dean Karlan and Jacob Appel, "To Borrow: Why the Taxi Driver Didn't Take a Loan." Because this is a long reading, read as far as you can in your usual hour and fifteen minutes of homework; you will read the rest for Thursday (we will discuss it on Thursday).
Why did Erlyn prefer to borrow from moneylenders than from microcredit organizations? How did the author's 2004 study of microcredit in South Africa differ from his later study of microcredit in the Philippines? How do you interpret the difference in results? What did the Sri Lanka study reveal? How about the Hyderabad study of communities with and without microcredit? Overall, what conclusions can you draw from all these studies about the impact of microcredit? How might microcredit be made more effective as a tool to fight poverty?
35. Microcredit Today: Assessment
READ: Finish reading Dean Karlan and Jacob Appel, "To Borrow: Why the Taxi Driver Didn't Take a Loan"; "Under Water"; Muhammad Yunus, "Sacrificing Microcredit for Megaprofits"
Review the questions about the Karlan/Appel reading listed under class 24. Why have microcredit programs run into trouble in India? To what extent do political issues mix with economic ones? Do you agree with Yunus that "commercialization has been a terrible wrong turn for microfinance"? Are there any advantages to turning microcredit organizations into for-profit businesses?
36. The Global Convergence
READ: Martin Wolf, "In the Grip of a Great Convergence"; Kishore Mahbubani, "The Great Convergence: Asia, The West, and the Logic of one World"