The Microfinance Insider is a forum for graduate students engaged or interested in working in the field of microfinance. Through weekly posts and comments we hope to inspire students and foster the creation of a knowledge community of bloggers with a commitment to financial access and first hand industry information.

Friday, June 19, 2009

"Put Your Money Where Your Butt Is"

A friend of mine is trying to quit smoking. This will be his fourth time. After failed attempts with the patch, gum, and hypnosis, he is getting desperate for something that ‘works.’ He says that despite knowing how unhealthy smoking is for him, the fear of cancer, early death, premature aging, etc, just isn’t enough to scare him into quitting. As stupid as it sounds, he tells me, “I don’t have cancer right now, so holding off quitting one more day won’t matter.” It would seem that the disconnect between fulfilling his immediate desire (not quitting) and the possible outcome of this decision (dying of cancer) is too wide to impact his behavior.

His “plight” immediately came to mind when I came across this paper: Put your Money where your Butt is: A Commitment Contract for Smoking Cessation. Authors Xavier Gine (World Bank), Dean Karlan (Innovations for Poverty Action), and Jonathan Zinman (Innovations for Poverty Action) research the effectiveness of CARES (Committed Action to Reduce and End Smoking), a commitment product designed for people who want to quit smoking. In this study, research participants were offered the opportunity to open an interest-free savings account. The account required clients to make weekly deposits (of their own money) in the amount they would have otherwise spent on cigarettes. After six and again at 12 months, CARES clients underwent a urinalysis to test for recent nicotine consumption. CARES clients who passed the test received the balance of their deposits; those who failed (or did not take) the test forfeited the entire balance to charity.

The results were surprisingly positive, especially considering the bank account offered zero interest and there was a high likelihood of losing money. At six months, smokers randomly offered CARES were 3 to 6 percentage points more likely to pass than the control group, and CARES clients were 32 to 35 percentage points more likely to pass than the control group. The 12-month test revealed that smokers offered CARES were 4 to 6 percentage points more likely to pass the test than the control group, and CARES clients were 34 to 53 percentage points more likely to pass the test than the control group. The study also found that CARES treatment compares favorably to those found for nicotine replacement therapy in randomized controlled trials in other settings. The take-up rate was promising, as well: more than 1 in 10 of the people offered the treatment product signed up for the CARES program.

I’m not sure how this type of arrangement would work for my friend, but it does offer a provocative way to think about the potential of smoking cessation treatments.

The Washington Post Reviews Portfolios of the Poor

Carlos Lozada from the Washington Post reviewed Portfolios of the Poor today. The review describes Portfolios as a valuable departure from the rhetoric of global poverty.

"As the economists rumble, however, the poor get on with the messy business of living. On this, two new books chart a refreshingly distinct path. "Portfolios of the Poor and The Beautiful Tree avoid the big picture and zoon in on the basics of dialy poverty, exploring how poor families manage their money and educate their children. Their conclusions leave room for hope, based less on trust in big answers than on faith in human ingenuity."

Read the full review here:

Monday, June 15, 2009

NPR Boston host interviews Portfolios of the Poor authors

This morning, Tom Ashbrook, the host of On Point (WBUR) spoke with researchers Stuart Rutherford and Daryl Collins and one of their survey participants, Lufefe, about what it really means to live on $2 a day. Lufefe, along with hundreds of others, participated in a year-long survey of the poor’s financial practices. Rutherford and Collins, along with Jonathan Morduch and Orlanda Ruthven, gathered meticulous financial diaries that demonstrate not only don’t the poor live hand-to-mouth, but they manage their money well enough to save for life’s big emergencies and celebrations. If you visit WBUR’s site, you can listen to the program and also view a series of photos taken in the Langa Township where Lufefe lives and where much of the research was conducted.

Collins and Rutherford’s research is available in Portfolios of the Poor. Visit the book’s web site here:

Wednesday, June 10, 2009

Upcoming Microfinance Events in New York

Summer seems perpetually just around the corner. Solution? Escape the humidity and dreary evening thunderstorms at the following microfinance events. Bring your friends!

Monday, June 15
Location: Clemente Soto Velez center, 107 Suffolk St (at Rivington)
Join Kiva and ACCION USA for an evening of entertainment and networking! The event will include live music, a silent auction, raffle prizes, and a food & drink cash bar. View the invitation here. A "blender" is an event in which two organizations come together to explore their common goal of raising awareness about microfinance and the impact of microloans on the lives of entrepreneurs.

Please RSVP to

Thursday, June 18
Microfinance in Our Midst: A Path to Economic Independence in New York
Location: TBA
Presented by the Microfinance Club of New York (MFCNY) and Women Advancing Microfinance (WAM), this panel discussion brings together representatives of diverse financial institutions, ranging from small business loans (SeedCo Financial), community development credit unions (Brooklyn Cooperative Federal Credit Union), group lending programs (Grameen America), diversified lending and economic development organizations (The Business Center for New Americans), as well as the Empire State Development Corporation, which supports lending and asset building programs across the state.

This panel is packed with microfinance experts! Moderated by Daniel Delehanty, Vice President of Community Development Banking at Capital One Bank, panelists include: Edwin Hong, Senior Vice President, Seedco Financial; Leslie Kane, Vice President of Strategy and Finance, Grameen America; Jeffrey Metzler, Vice President of Economic Empowerment, Empire State Development Corporation; Samira Rajan, CEO, Brooklyn Cooperative Federal Credit Union; Yanki Tshering, Executive Director, Business Center for New Americans.

Panelists will outline the relative differences between the domestic and international microfinance sector. They will consider questions like:
-What is the profile and needs of the underserved community which they target?
-What services do they provide (both financial and non-financial) and what is their impact?
-What are the relative advantages and challenges of their business structure?
-How has the current economic crisis affected their business structure?
-Is their business sustainable?

Please RSVP to Please include your name, company name, and membership status.

Fee: MFCNY and WAM members-free; non-members-$10

Tuesday, June 9, 2009

EUROPEAN BOOK TOUR: Portfolios of the Poor

The office is quiet this week: FAI directors and staff are in Europe promoting the launch of Portfolios of the Poor: How the World's Poor Live on $2 a Day. Comprised of the financial “diaries” of over 250 families in Bangladesh, India, and South Africa, Portfolios of the Poor tracks the financial practices of the poor with unprecedented detail. Households maintained meticulous records for a year, reporting on their income, savings, expenses, and loans, every two weeks. This attention to detail revealed an unexpected lesson about poverty: the poor lead complex and active financial lives; not despite being poor, but because they are poor.

Published less than a month ago, Portfolios of the Poor has already received a considerable amount of press:

May 26

Noted Times columnist Nicholas Kristof reviews the book here:

May 18

Portfolios of the Poor is featured in the New York Times Idea of the Day, an editor-run blog dedicated to "highlighting the most interesting writing on the Web."

May 17

Portfolios of the Poor co-author, Daryl Collins, discusses the complex and sophisticated instruments with which the poor manage their unpredictable incomes in a Boston Globe article.

May 14

PRNewswire New York reviews Portfolios of the Poor.

May 14

The Economist magazine features Portfolios research and stories.

February 14

An early review from the Financial Times highlights lessons of Portfolios of the Poor.