COURSE SYLLABUS – MICROFINANCE (90- 858)
SPRING SEMESTER (2011/12 Academic session)
Heinz School of Public Policy, Carnegie Mellon University
FACULTY
Tayo Fabusuyi
Email: tfabusuyi@cmu.edu
VENUE & COURSE HOURS
GHC 4215, Wednesdays, 5.30 – 8.20pm. Office hours by appointment
COURSE DESCRIPTION
Microfinance provides financial services to the poor and has often been touted as a model example of a
social entrepreneurship innovation that addresses both social and economic problems. However, it has
been under scrutiny of late in light of concerns over consumer protection and increasing
commercialization of the field, and questions remain about its effectiveness in lifting its clients out of
poverty. The class will address these issues from both a philosophical and developmental perspective
and provide in-depth discussion on the emerging issues in the microfinance world.
The class will be organized into three sections. The first section introduces the un-banked cohort and
explains the need to design financial tools that specifically target this population. Section II focuses on
what works, what doesn’t and why. The section provides analytical frameworks that underpin the
design of microfinance tools and identifies areas where challenges and controversies exist in
microfinance. The final section documents creative and innovative approaches that are currently being
mainstreamed and provides insights on how the microfinance frontier could be extended.
The objective is to prepare students to take on roles as policy analysts and technical advisers on
Microfinance and Development in foundations, governments, multilateral development institutions
and international agencies. Participants will have an appreciation of the broader context that
underpins the microfinance field; understand how and why the formal credit market fails to meet the
financial needs of the poor; be knowledgeable about the challenges and controversies facing
Microfinance, and be equipped with a framework to objectively examine and assess these issues.
COURSE MATERIAL
The recommended textbooks for the class are:
 Armendariz de Aghion, Beatrice, and Jonathan Morduch, The Economics of Microfinance. The
MIT Press, 2005
 Daryl Collins et al., Portfolios of the Poor: How the World’s Poor Live on $2 a Day. Princeton
University Press, 2009
 Brigit Helms, Access for All. The World Bank, 2006 (Blackboard)
CLASS FORMAT
Classes will be interactive. It is essential that students participate in these discussions, both in class and
on Blackboard. Required readings for each week will be marked with an asterisk and students should,
at the minimum, read these materials before the class as they are expected to come to class prepared for
the discussions on these readings.
GRADING
Participation, in-class and on Blackboard: 20%, Policy brief: 20%, Presentation and paper on featured
discussion: 20%, Final examination: 40%. The policy brief and final examination will be completed
individually while the featured discussion and paper will be done in groups of 3-5 students depending
on the class size.
POLICY ON PLAGIARISM AND CHEATING
Please adhere to the instruction on completing the policy brief and essay. I also want you to refer to
CMU’s policy on plagiarism and cheating at http://www.cmu.edu/policies/documents/Cheating.html
The repercussion from plagiarizing or cheating may range from not receiving credit for the assignment
to a failing grade in the course. Any questions on the University policy should be directed to the
Intercultural Communication Center at Warner Hall, Room 418.
COURSE OUTLINE AND READING LIST
03/21: Overview and Characteristics of the Unbanked
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B. Helms, Access for All. Chapters 1 & 2*
Daryl Collins et al., Portfolios of the Poor: How the World’s Poor Live on $2 a Day. Chapter 7*
The New Yorker, “Millions for Millions,” October 30, 2006
The Economist, “The Hidden Wealth of the Poor: A Survey of Microfinance,” November 5, 2005
and “Financial Services for the Poor – The Big Save,” September 24, 2011
Featured Discussion: Women and Microfinance
03/28: Coping Mechanisms and the Rationale for providing Financial Services to the Poor
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Daryl Collins et al., Portfolios of the Poor: How the World’s Poor Live on $2 a Day. Chapters 1 & 2*
Armendariz de Aghion, and Jonathan Morduch, The Economics of Microfinance. Ch. 2 & 3*
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Besley, T. (1994). “How do Market Failures Justify Interventions in Rural Credit Markets?” World
Bank Research Observer, Vol. 9, #1
Dercon, S. (2002), “Income Risk, Coping Strategies and Safety Nets” World Bank Research Observer,
December, Vol. 17, #2*
Prahalad C. & Hammond A., “Serving the World’s Poor, Profitably” Harvard Business Review,
September 2002
The Economist, “Bankable Banks – Are the poor a good investment?,” November 3rd, 2005 and “The
Poor – Smooth Operators,” May 14th, 2009
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Featured Discussion: RoSCAS
04/04: Models and Spectrum of Financial Services
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B. Helms, Access for All. Ch. 3*
Debraj Ray, Development Economics, Princeton University Press, 1998 Ch. 14*
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Hoff, K. and Stiglitz, J. (1990), “Imperfect Information and Rural Credit Markets – Puzzles and
Policy Perspectives”, The World Bank Economic Review, Vol 4, #3
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Armendariz de Aghion, and Jonathan Morduch, The Economics of Microfinance. Ch. 4 & 6*
Prescott E.S. (1997), “Group Lending and Financial Intermediation,” The Federal Reserve Bank of
Richmond Economic Quarterly, Vol 83, #4
Dercon, S. et al (2006), “Insurance for the Poor,” QEH Working Paper Series, #125
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Policy brief and guidelines to be posted on Blackboard, due 04/18
Featured Discussion: Pros and Cons of Peer Monitoring and Group Lending approach
04/11: Controversies and Existing Challenges I – Cost of Money & Ownership Structure
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Daryl Collins et al., Portfolios of the Poor: How the World’s Poor Live on $2 a Day. Chapters 5*
Muhammad Yunus, “Creating a World without Poverty,” Public Affairs, NY. 2008 Chapters 1 & 2*
Commercialization and Mission Drift, CGAP Occasional Paper #5, January 2001
Cull, R. et al (2009), “Microfinance meets the Market”, The Journal of Economic Perspectives, Vol. 23,
#1*
“Who is making money from Microcredit?” http://www.pbs.org/now/shows/338/video.html
Foreign Capital investment in Microfinance – Balancing Social and Financial Returns, CGAP Focus Note
#44, February 2008
The Economist, “From Charity to Business”, November 3rd, 2005 and “In Praise of Usury”, August
2nd, 2007
Lewis J. (2008), “Microloan Sharks”, Stanford Social Innovation Review, Summer 2008
Featured Discussion: Grameen and Compartamos
04/18: Controversies and Existing Challenges II – Value Added and Key Constraints
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B. Helms, Access for All. Ch. 4 & 5*
Dichter T. & Harper M. (eds), What is wrong with Microfinance? Practical Action, 2007 Ch. 2 & 5*
Accessing the Development impact of Microfinance Programs. Study commissioned by SIDBI and
funded by DFID, UK. Available at http://www.sidbi.in/NOTICES/Impact_study.pdf
Bauchet et al, “Latest Findings from Randomized Evaluations of Microfinance”, CGAP Access to
Finance Forum #2, December 2011
Chowdury A. (2009), “Microfinance as a Poverty Reduction Tool – A Critical Assessment”, DESA
Working Paper #89
Morduch J. (2000), “The Microfinance Schism”, World Development, Vol 28, #4
Schicks J., “Over-indebtedness of Micro-borrowers in Ghana: An Empirical Study from a Customer
Protection Perspective”, Center for Financial Inclusion, Publication #15, November 2011
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The Economist, “A Partial Marvel”, July 16th, 2009 and “Froth at the bottom of the pyramid”,
August 25th, 2009
Policy brief due
Featured Discussion: Governments’ Role and Optimal Policy Measures
04/25: Emergent Approaches and Looking Beyond Microfinance
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B. Helms, Access for All. Ch. 7*
PBS Video http://www.pbs.org/frontlineworld/stories/uganda601/uganda-601.html?c=4wm
Creating Pathways for the Poorest: Early Lessons on implementing the Graduation Model, CGAP Brief,
December 2009
McKinsey Quarterly, “Capturing the promise of banking in emerging markets”, February 2010 and
“A new idea in banking for the poor”, November 2010
Dolan C. & Scott L. (2009), “Lipstick Evangelism: Avon trading circles and gender empowerment
in South Africa”, Gender and Development. Vol. 17, #2*
Bruett T. (2007), “Cows, Kiva, and Prosper.Com: How Disintermediation and the Internet are
Changing Microfinance”, Federal Reserve Bank of San Francisco Community Development Investment
Review, Vol. 3 #2*
Mas I. & Radcliffe D., “Mobile Payments go viral: M-PESA in Kenya”, from Yes African Can, The
World Bank, August 2010*
Using Technology to Build Inclusive Financial Systems, CGAP Focus Note #32, January 2006
Featured Discussion: The Future of Mobile Money
05/02: Course Review
Final Examination