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It’s good to see microfinance researchers seriously studying alternatives to microloans or other microfinancial services. Very poor people need assets and a helping hand more than a loan, so why not hand out a cow or some other income-generating assets, offer training, and provide basic healthcare? That’s what an 18-month “Ultra-Poor Programme” run by SKS Microfinance in India did. But the randomised impact evaluation performed by Jonathan Morduch of New York University, Shamika Ravi of the Indian School of Business and Jonathan Bauchet of Purdue University on this programme turned up a “null” result, similar to those of randomised studies of microfinance.

Perhaps it is surprising to see SKS Microfinance (India’s largest microlender before 2010, and now perhaps most notorious microlender) giving non-repayable one-off kickstarts to ultra-poor households. But the intention of the programme was not purely altruistic; it was to “graduate” households into microfinance, by giving them assets to start a business.

In the programme in Andhra Pradesh evaluated by Morduch/Ravi/Bauchet, people who got a free asset and training to become microentrepreneurs were found to be no better off later than those who didn’t. They also didn’t manage to reduce their debts or increase their savings any more than others. Why? The authors believe it is

explained in large part by substitution with other economic activities. […] During the study period, wages in agricultural labor were rising steadily in the region, so that households in the control group were able to improve their economic conditions in parallel with households in the treatment group. (35)

The opportunities outside the self-employment programme offered similarly improving incomes as the opportunities offered by the programme itself. To what conclusion should this lead us about the concept of entrepreneurial self-lift out of poverty? Overall, the take-home message from the authors is eminently logical:

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The Book

Governance across borders: transnational fields and transversal themes. Leonhard Dobusch, Philip Mader and Sigrid Quack (eds.), 2013, epubli publishers.
November 2019
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