News and Announcements

  • Microcredit does not live up to promise of transforming lives of the poor, six studies show

    Jan 21/15 | Announcement | 
     
    January 22, 2015, NEW HAVEN, CT - Microcredit—providing small loans to underserved entrepreneurs—has been both celebrated and vilified as a development tool. Six new studies from four continents bring rigorous evidence to this debate, finding that while microcredit has some benefits, it is not a viable poverty alleviation tool.
     
    The studies, conducted by researchers affiliated with Innovations for Poverty Action (IPA) and The Abdul Latif Jameel Poverty Action Lab (J-PAL), conclude that while microloans can increase small business ownership and investment, the small, short-term loans generally do not lead to increased income, investments in children’s schooling, or substantial gains in women’s empowerment for poor borrowers.
     
    “The studies do not find clear evidence, or even much in the way of suggestive evidence, of reductions in poverty or substantial improvements in living standards. Nor is there robust evidence of improvements in social indicators,” the introductory paper to the studies reads.
     
    The six studies, conducted independently in Bosnia and Herzegovina, Ethiopia, India, Mexico, Mongolia, and Morocco, and released in the American Economic Journal: Applied Economics, followed over 37,000 individuals in total. Across all six studies, researchers conducted randomized evaluations in which one group of potential borrowers received access to microcredit, while the other group received no such offer. By comparing outcomes between these two randomly chosen groups, researchers were able to identify the effect of expanded access to microcredit on business activity, financial behavior, and household welfare. The results showed modest, but not transformative, improvement in the lives and financial well-being of individuals one to four years after they accessed microloans.  
     
    All studies found some evidence of expanded business activity, but these investments did not often result in significant increases in profits. In Mexico, for example, where Innovations for Poverty Action (IPA) followed over 16,000 households, those with access to the loans showed increased business revenue and costs, but these did not translate into increased profits or income. In general, microcredit had mixed effects on household income and consumption.
     
    In some instances, however, microcredit did afford people more freedom in how they earn and spend money. In Morocco, borrowers cut back on wage labor as business sales and profits improved. In Mexico, microcredit helped women avoid selling assets to pay off debts.
     
    Results from all six studies show little support for the assumption that microloans, which are often offered to women, increase women’s empowerment or investment in their children’s education. Researchers found in Morocco, for example, that the loans made no difference in the chances of children being enrolled in school or on a number of women’s empowerment measures.
     
    Economist Esther Duflo of the Massachusetts Institute of Technology, a co-founder and co-director of J-PAL, co-author of the India and Morocco studies, and founding editor of the American Economic Journal: Applied Economics, said, “These loans do help, but the changes are not transformative, certainly not transformative enough to justify charitable donations to the standard microcredit model. We have seen, though, that these are viable profit-making products, and so investors interested in a double-bottom line should take note.” Duflo suggests researchers and non-profits focus their attention on other approaches for financial inclusion for the poor.
     
    “We must think beyond the standard microcredit model. Modern microfinance—savings and insurance, and more flexible credit products—often has generated larger impacts than simple credit,” said economist Dean Karlan of Yale University, founder of Innovations for Poverty Action, and chair of finance at J-PAL, who co-authored the Mexico study. “Financial services can make important differences in people's lives, but we need more innovation and evidence to determine what is best to do, and meanwhile we should set our expectations appropriately,” Karlan said.
     
    --
     
    Contacts:
     
    Heidi McAnnally-Linz, Innovations for Poverty Action, 203-974-2976, hlinz@poverty-action.org
     
    Sophie Beauvais, The Abdul Latif Jameel Poverty Action Lab (J-PAL), 617-324-4498, sbeauvai@mit.edu
     
    Innovations for Poverty Action (IPA) discovers and promotes effective solutions to global poverty problems. IPA designs, rigorously evaluates, and refines these solutions and their applications together with decision-makers to ensure that the evidence created is used to improve opportunities for the world’s poor. In the ten years since its founding IPA has worked with over 250 leading academics to conduct over 400 evaluations in 51 countries.
     
    The Abdul Latif Jameel Poverty Action Lab (J-PAL) was established in 2003 as a research center at MIT’s Department of Economics. Since then, it has built a global network of 113 affiliated professors and regional offices in Africa, Europe, North America, South Asia, South East Asia, and Latin America and the Caribbean. J-PAL’s mission is to reduce poverty by ensuring that policy is informed by scientific evidence. It does this by working with governments, non-profits, foundations and other development organizations to conduct rigorous impact evaluations in the field, policy outreach to widely disseminate the lessons from research, and building the capacity of practitioners to generate and use evidence. Over 200 million people have been reached by the scale-up of programs evaluated by J-PAL and found to be effective. Find J-PAL on Twitter, Facebook, LinkedIn, and YouTube.
     
    About the Authors: Manuela Angelucci, University of Michigan; Orazio Attanasio, University College of London; Britta Augsburg, Institute for Fiscal Studies; Abhijit Banerjee, Massachusetts Institute of Technology; Bruno Crépon, Centre de Recherche en Économie et Statistique; Ralph De Haas, European Bank for Reconstruction and Development;Florencia Devoto, Paris School of Economics; Jaikishan Desai, Victoria University of Wellington; Esther Duflo, Massachusetts Institute of Technology; Emla Fitzsimons, Institute for Fiscal Studies; Rachel Glennerster, Abdul Latif Jameel Poverty Action Lab; Heike Harmgart, European Bank for Reconstruction and Development; Kristin Johnson, Metropolitan State University of Denver; Dean Karlan, Yale University; Cynthia Kinnan, Northwestern University; Costas Meghir, Yale University; William Parienté, Université Catholique de Louvain; Alessandro Tarozzi, Universitat Pompeu Fabra;  Jonathan Zinman, Dartmouth College

     

  • Malawi Business Times on how to help farmers save more

    Dec 30/14 | From the newsroom | 
    Malawi’s Business Times features IPA Researcher Jessica Goldberg, of the University of Maryland, and Chief Program Officer Jessica Kiessel, from a recent IPA conference on achieving better banking in Malawi. The article describes an IPA study conducted by Goldberg, along with Xavier Giné and Dean Yang designed to encourage farmers to save more of their harvest profits for the next planting. The project, described here, found that offering direct deposits, with sales profits to be automatically deposited in bank accounts significantly increased how much farmers saved, and subsequent spending and yields in the following harvest. The full article is here.
  • Dean Karlan's Charitable Giving Tips in Project Syndicate

    Dec 26/14 | From the newsroom | 
    IPA Founder Dean Karlan shares his perspective on how to be an effective charitable giver in Project Syndicate. Among other things, he discusses why to think about charitable giving goals like dieting goals, how to create smart ones, and how to stick to them. He also explains how smart givers create an investment “portfolio” of charities aligned with their goals, and offers some of his charities of choice who run evidence-based programs. Read the full piece here.
  • Vox's holiday giving guide features IPA & evidence-based charities

    Dec 23/14 | From the newsroom | 
    Writing for news site Vox.com, Dylan Matthews gives their holiday charity recommendations, formed around the kind of evidence produced by IPA and its partners. He discusses deworming, free distribution of bednets, and direct cash transfers, among others. Crucially, he points out what he calls "meta charities" like IPA and GiveWell, that channel other efforts efficiently, can return more than a dollar for each dollar invested. Read the full piece here.

     

  • Dean Karlan in conversation with PBS Newshour

    Dec 18/14 | From the newsroom | 
    IPA Founder and President Dean Karlan, recently sat down with PBS NewsHour correspondent Paul Solman to talk about an economist's view of charity. They covered how to look at charitable donations like an investment portfolio, as well as particular organizations that Karlan recommends implement evidence-based programs. Read the full interview here.
  • Dean Karlan op-ed in LA Times: Why to ignore charity overheads

    Dec 18/14 | From the newsroom | 
     
    IPA Founder and President, Dean Karlan, has an op-ed in the Los Angeles Times, in which he discusses his and student Elijah Goldberg's analysis of 55,000 charitable organizations tax returns. Despite prominence of high profile fraudulent charities in many minds ("availability bias" in scientific terms), they find high overhead expenses very rare, and discusses why donors should skip checking organizations' overheads in favor of more meaningful outcomes. Read the whole piece here.
  • Dean Karlan research on charitable giving in Wall Street Journal

    Dec 15/14 | From the newsroom | 
    IPA Founder and President Dean Karlan's research on charitable giving is featured in the Wall Street Journal. The article summarizes recent research in charitable giving, including Karlan's research with IPA affiliate John List, showing that a recognizable outside donor can increase others' giving. The piece also reviews his paper with IPA researcher Margaret McConnell, showing how social recognition can increase donations.

     

  • IPA Seeks IRB Chair

    Dec 05/14 | Announcement | 

    IPA’s growing research program is based on principles of international research ethics guidelines, to protect the dignity, rights and welfare of all participants. We are looking for an enthusiastic external Institutional Review Board (IRB) Chair with an interest in ethics, research and international development. He/She will lead IPA’s existing IRB and to help position IPA as a thought leader in conducting and promoting ethical research in the field of impact evaluation. The independent IPA IRB Chair is responsible for reviewing, in a timely and thorough manner, all research involving human participants. The IRB Chair works together with the IRB members and IPA’s Research Department to promote a culture of continuous learning for research ethics across IPA and its partners.

    Responsibilities1
    • Preside over meetings of the fully convened IRB and ensure that the IRB carries out its duly authorized responsibilities as required by federal regulations, ethical principles, state laws and IPA IRB Guidelines.
    • Review and approve protocol submissions that qualify for expedited review pursuant to federal regulations, ethical principles, state laws and IPA policies, or delegate such authority to a qualified and experienced IRB member to conduct such review and approval.
    • Ensure that membership of the IRB is recruited, appointed and oriented such that the IRB is duly qualified to fulfill its obligations to review, require modifications to, approve (or disapprove) research protocols that represent the breadth of research submitted to the IRB by IPA researchers.
    • Serve as a liaison between the IRB and the IPA research team to promote communication and understanding of the concerns of the IRB, the research team and other IRB partners.
    • Ensure that reports related to safety, noncompliance, unanticipated problems in research and adverse events are reviewed, attended to and reported pursuant to federal regulations, state laws and IPA IRB Guidelines.
    • Respond to local and federal investigations relating to protocols and actions, as required.
    • Disseminate IPA Research Ethics learning at seminars, conferences, and peer-reviewed journals.
    • In conjunction with the IRB, IPA Research Team, and IPA Senior Management Team, develop IRB policies, procedures and guidelines to stay current with societal thinking, regulatory changes and national best practice standards.
    Contacts
    Please direct your interest by sending a cover letter and a CV to Dr. Thoai Ngo, Senior Director, Research & Knowledge Management at humansubjects@poverty-action.org.
     
    Download PDF annoucement here.
     
    ----

    1 This is not a full time position. Commitment is estimated at 5days/month.

     

  • Early results on education funding study presented in Tanzania

    Dec 04/14 | Announcement | 

    IPA partner Twaweza reports on our randomized controlled trial of school funding in Tanzania. The study, explained here, is testing if making school funding dependent on student achievement changes education outcomes for students. Twaweza explains that positive early findings were recently reported to government officials. The full announcement is here.
  • IPA and J-PAL Paraguay event

    Dec 03/14 | From the newsroom | 

    Senior staff from IPA-Peru and J-PAL Latin America & Caribbean recently presented at an event in Asunción, Paraguay for practitioners and policy-makers. Paraguay's ABC, Hoy, and Viva Paraguay discussed the event, which covered both “how-to” for evidence-based policy making, and results from recent randomized evaluations in the region. More on the event can be found here.
Syndicate content
Copyright 2014 Innovations for Poverty Action. All rights reserved.