News and Announcements
- May 14/13 | Announcement |
NEW HAVEN, CT - Speaking at an event in Mexico City, Yale University economist Dean Karlan released the findings of two new studies examining microcredit loans for women in Mexico. Microcredit is the practice of offering small short-term loans to those typically outside the normal banking customer base. The new results show that offering the loans did not substantially change clients’ economic standing, but had some beneficial effects, including increased happiness. While microcredit has received widespread recognition as a tool to help the poor, including a Nobel Peace Prize for the innovators of microcredit at the Grameen Bank in Bangladesh, the expansion of for-profit banks into this market has sparked controversy, especially as interest rates for microlending can reach the equivalent of 100% APR or higher.Though microcredit is often positioned as a springboard to entrepreneurship for those in the developing world, the researchers found that access to the loans did not increase rates of starting new businesses. The data did show some positive outcomes, including increased happiness, trust in others, and increased influence for women in household financial decisions. The loans also enabled people to pay back other debt and to avoid selling off assets in difficult times. For those who already had businesses, revenue and expenditures increased, but this growth did not translate into higher profits.The study results also show that despite high interest rates the loans overall had few negative effects. According to Karlan, “It is important to understand that microcredit alone does not transform people into successful entrepreneurs, but having a loan available when you need it can make your life much easier.”The study, conducted with the non-profit Innovations for Poverty Action (IPA), involved partnering with Mexico’s largest private microlender, Compartamos Banco, to evaluate the impact of a loan product for women, Crédito Mujer. The product targets female customers who want to start businesses, and lends to women in groups, with the group members guaranteeing repayment of one another’s loans. The publicly traded bank worked with Karlan, IPA, and economists Manuela Angelucci of the University of Michigan, and Jonathan Zinman of Dartmouth to randomly assign its expansion into some communities, and to delay expansion in others temporarily. This allowed the communities in which Compartamos was not yet operating to serve as a comparison group for the study. IPA’s researchers followed up 18-36 months later to measure impacts of access to the microloans on business outcomes, personal finance, health, and well-being.Annie Duflo, Executive Director of Innovations for Poverty Action, noted that the study’s primary findings mirror what IPA researchers have found in the Philippines, Morocco, and India. “The key question for fighting poverty around the world is understanding what does and does not work,” she said. “Rigorous evaluations such as these let us answer these difficult questions, and we’ve found that microcredit can be helpful, but is probably not transformative. We hope the fact that our data from Mexico largely agree with studies conducted by IPA and others will help bring the field to consensus.”The bank also worked with the researchers to randomly assign some branches nationwide to lower interest rates. This study, designed to address the tension between for-profit banks, who require a sustainable business model, and critics who have accused the bank of extracting profits from the poor, found that the lower interest rate brought in enough new customers to keep profits unchanged. Karlan concludes that “Taken together the studies show that microcredit might not do what everybody hoped it would, but it does have positive effects, and by lowering interest rates, private institutions can expand to new, underserved customers without impacting their bottom line.”###About Innovations for Poverty Action:Innovations for Poverty Action (IPA) is dedicated to discovering what works to help the world’s poor. Established in 2002, IPA designs and evaluates programs in real contexts with real people, and provides hands-on assistance to bring successful programs to scale. IPA partners with researchers in top universities and implementing organizations around the world to ensure that poverty-fighting activities are supported by rigorous evaluation. IPA shares the evidence generated with development practitioners, policymakers and donors, and provides technical assistance and support to governments and non-governmental actors to implement successful programs and bring them to scale around the world. IPA has ongoing research operations in 51 countries across Africa; North and South America; and South and South East Asia. Additional information can be found at www.poverty-action.org.Contact: Jeffrey Mosenkispress@poverty-action.org203-772-2216
MIF, Innovations for Poverty Action to Study High-Growth Entrepreneurship in Latin American and Caribbean RegionApr 25/13 | Announcement |
The Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group, and Innovations for Poverty Action (IPA) have signed an agreement to establish a High-Growth Entrepreneurship Research Fund. The fund will support studies focused on growth of small and medium enterprises (SMEs) in Latin America and the Caribbean, and will be administered by IPA’s SME Initiative. The fund will be launched with a total value of over $680,000, including a contribution from the MIF of $506,000.
In recent years, much research has been carried out in the United States about the characteristics of small, rapidly growing firms, a category that was named “gazelles” by economist David Birch, who was among the first to identify the disproportionate impact such firms have on job creation. However, to date there is little reliable information on gazelles outside the U.S. Through the new High-Growth Entrepreneurship Research Fund, the MIF and IPA will begin to build a systematic body of evidence on the role gazelles play in contributing to economic development and poverty alleviation in developing countries.
Over a planned 4-year period, the Research Fund will provide competitive grants to innovative research projects that seek to identify the factors that accelerate or restrict the growth of SMEs. Other planned activities of the Research Fund include: establishing a small working group of academics and practitioners that will define research topics of interest and provide feedback on the selection and design of research projects; carrying out a descriptive study on the general characteristics of “gazelle” firms in Latin America and the Caribbean; and disseminating policy briefs and other materials to make research findings available to policymakers, researchers, and other interested parties.
About the MIF
The Multilateral Investment Fund (MIF), funded by 39 donors, supports private sector-led development benefitting low-income populations and the poor - their businesses, their farms, and their households. The aim is to give them the tools to boost their incomes: access to markets and the skills to compete in those markets, access to finance, and access to basic services, including green technology. A core MIF mission is to act as a development laboratory - experimenting, pioneering, and taking risks in order to build and support successful micro and SME business models. More information at www.fomin.org.
About Innovations for Poverty Action
Innovations for Poverty Action (IPA) is dedicated to discovering what works to help the world’s poor. Established in 2002, IPA designs and evaluates programs in real contexts with real people, and provides hands-on assistance to bring successful programs to scale. IPA partners with researchers in top universities and implementing organizations around the world to ensure that poverty-fighting activities are supported by the utmost methodological rigor. IPA shares the evidence generated with development practitioners, policymakers and donors, and provides technical assistance and support to governments and non-governmental actors to implement successful programs and bring them to scale around the world. IPA has ongoing research operations in 48 countries across Africa; North and South America; and South and South East Asia. Additional information can be found at www.poverty-action.org.
Roughly two billion people in the world live on $2 a day or less. Of these a staggering 50 per cent are estimated to be micro entrepreneurs, running a small business to make ends meet but employing only a handful of people. If just a small proportion of these entrepreneurs were encouraged to grow and invest in their business, and hire more employees, it could transform the fortunes of the developing economies, and billions of people living in poverty. In this article, Stephen Anderson-Macdonald discusses the "Managerial Capital and Business Transformation in Emerging Markets" project, among others, which examines how transformational entrepreneurs can be identified and nurtured.
- Feb 26/13 | From the newsroom |
The Small & Medium Enterprise (SME) Initiative is pleased to announce that it is now accepting a FIFTH ROUND of applications for it its Competitive Research Fund on Entrepreneurship and SME Growth. The goal of this fund is to support innovative research that is in line with the initiative’s objective to build a systemic body of evidence on the contributions of SME growth to poverty alleviation and economic development. We hope that this competition will have a catalyzing effect to stimulate high quality research that can produce relevant evidence to innovate, implement and scale programs that promote SME growth. For this round of grants, complete proposals should be emailed to email@example.com by 5:00 pm EST on April 15, 2013.
- Feb 14/13 | From the newsroom |
Writing in the UK’s The Independent newspaper, Memphis Barker discusses the rise of the evidence-based development movement. Referencing Bill Gates’ recent op-ed he says:Gates writes in his op-ed of how, “if I could wave a wand, I'd love to have a way to measure how exposure to risks like disease and malnutrition impact children's potential”. A wand is hardly necessary. IPA highlights how de-worming children in schools in Kenya, killing the parasites that steal the nutrients from their stomachs, reduces absenteeism by 25 per cent and leads to higher earnings in later life.Read the whole piece here.
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