NYT on Grameen Bank

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"The elephant in the room is the question: If microfinance doesn’t accomplish anything positive, then why are 128 million poor families busy taking loans? Should we assume that poor people simply don’t know what’s in their best interest? Or do we need to look more deeply into the way poor people survive?

That’s what a number of creative researchers are doing today. One example is the collaboration between Daryl Collins, Jonathan Morduch, Stuart Rutherford and Orlanda Ruthven that culminated in the excellent book “Portfolios of the Poor: How the World’s Poor Live on $2 a Day.” The book takes a penetrating look into 300 poor families in Bangladesh, South Africa, and India, with interviews conducted every two weeks to track expenses, earnings and cash flow at a granular level. What the researchers found was striking, and it gets to the question of what it really means for most people to be poor: to live with perpetual uncertainty.

“What the research taught us is that the problem of living on $1 or $2 a day is that you don’t actually earn $1 or $2 every day,” explained Jonathan Morduch. “That’s just an average. Some days you receive $5 and then nothing for two weeks. Life is unreliable. So the challenge for the poor is that you need to put together the right sums to deal with the right challenges in life. And what we saw microfinance was doing for people was offering them a reliable source of money. With microfinance, you get a sum of money that’s promised on the day it’s promised in the amount that’s promised. It’s often the only reliable service that poor people have — and that’s incredibly powerful.”"