Technology and Global Development
15-502
Instructors:
M. Bernardine Dias and Yonina Cooper
TA: Aysha Siddique
Spring 2009
Lecture 13
Economics and
Microfinance
Outline
•
•
•
•
•
•
Logistics
Microfinance Videos
Campaign Assignment
Final Project
Economics
Assignments for
next week
Logistics
• Capacity Building HW questions?
• No class on Thursday
• Other questions/comments?
Microfinance Videos
Riz Khan
“Princess Maxima, Microfinance & ‘The Unbanked’”
• What is microfinance? Microcredit?
• According to Princess Maxima, why is it
important for the world’s poorest to have
access to banking or financial services?
• According to Roshaneh Zofar, what has
been the impact of microfinance on the
world’s poor?
• What were some of the challenges
Roshaneh faced in setting up her
microfinance business?
Senegal Ecovillage
Microfinance Fund
• How was the fund started?
• Why was it successful?
Microfinance:
Does It Really Work?
• What is seen as a major drawback to microfinance
system compared to traditional banks?
• Why is a high interest rate typically charged by some
microfinance persons?
• How do the locally owned microfinance groups
differ from a MFI?
• What were some of the problems with microfinance
that were discussed in the video?
• What were the claims that microfinance falls short
in eradicating poverty?
Campaign Assignment
Discussion
Final Project
Economics
Role of the State
• Much of the world has State Owned
Enterprises (SOEs)
– Some activities are not even companies, but
Govt. Departments (e.g., Dept. of Telecom)
• Markets (and the belief they are better)
are growing
– Privatization
•
•
Not the same as competition!
Selling off to highest bidder or letting new
entrants emerge
What about markets?
• Markets need:
– Perfect information
– No barriers to entry
•
I.e., meaningful competition
– No externalities
• Markets are meant to be efficient, not equitable
• Well functioning markets are competitive
Costs and Prices
• They are not the same!!
• Profit margins vary
• Long-run and short-run marginal
costs differ
– Bill of materials (BOM) excludes
R&D, software, etc.
– BOM also excludes marketing and
other soft costs
Role of Government
in a Market World
•
Consumer
–
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Regulator
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–
–
•
Worked in Andhra Pradesh, India, for
Fiber to the Village
Create level playing field
Set up transparent rules of the game
Standards
NOT AS
–
–
Producer (left to private enterprise)
Allocator /controller (“command and control”)
Role of Innovation
• Source of much of economic growth
– Services in the economy
– Source of more of the JOBS
– Small companies matter
Gini Coefficient
•
•
Measure of attribute
distribution vs. population
= A/(A+B)
Criticisms
–
–
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Data issues
(not unique to Gini)
Granularity (sample
size/geography; data steps)
Households vs.
individuals differ
•
E.g., poorer families may
have 2 earners
Gini Coefficients Over Time
Jobs in Developing Countries
•
Job creation
–
–
Sharing vs. growing the pie
Changes in jobs
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•
–
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Changes in demographics
How do you grow jobs?
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–
•
Fraction in agriculture
Globalization
Small enterprises
Entrepreneurship
Role of Competition is important
–
Globalization means competition is not just domestic
•
e.g. WTO obligations
Developing Country Issues
•
•
Higher risk perceived in developing countries
Lack of insurance schemes
– Social Security, farmers, etc.
•
Credit is expensive
– Cell phones example
(innovation beyond technology)
•
•
Prepaid (reduces distances)
Low-cost banking
– Kiosks are inevitable for interfacing
Other References
• 15502 lecture slides from 2006 and 2007 –
jointly prepared by Rahul Tongia, Joe
Mertz, Jay Aronson, and Bernardine Dias
• Most images are from TechBridgeWorld
(www.techbridgeworld.org)
What Next?
• Legal and political context
• No class next two Thursdays
• Assignments:
– Due Thursday
• Homework # 3
– Due Next Tuesday
• Read
http://extension.osu.edu/~hcrd/people/staff/Sachs-End%20of%20Poverty.pdf
• View
http://www.ted.com/index.php/talks/bill_clinton_on_rebuilding_rwanda.html
– Due Next Thursday
• Campaign Assignment
– Preparation questions on all reading and viewing assignments are available
on the course website in the “assignments” section.
• Special note: first do the reading/viewing and then look at the questions and
come prepared to discuss them in class.