We’ve thought and written a lot about microfinance lately. As of now, here’s where we stand. What microfinance is and isn’t First, it’s important to recognize that most of what you’ve heard about microfinance is false. It isn’t primarily about funding business expansion.. It isn’t a “proven solution” to poverty. And it doesn’t leverage your…
The GiveWell Blog
Year: 2009
VillageReach’s answer to the “room for more funding” question: Scenario analysis
We’ve just updated our review of our top-rated organization, VillageReach. (Our July 2009 version is still available for posterity.) The big picture remains the same – we feel this organization has a stronger case for cost-effective impact than any other charity we’ve seen – but there have been changes in VillageReach’s financial situation and plans,…
Incentives for microfinance charities
I’m very concerned about the incentives for microfinance charities. As I see it, these are the things that they are “rewarded” for: Profitability, for obvious reasons. Any for-profit investors in microfinance institutions are presumably putting great pressure on them to produce a good bottom line. (We believe it’s not safe to use profitability as a…
You can’t take the “repayment rate” at face value
We’ve written before about problems with the way a microfinance institution’s “repayment rate” is commonly cited. We’ve been surprised to find that most institutions do not report what most of us would think of as a “repayment rate,” i.e., the percentage of loans/dollars due that have been paid on time. Instead, they report proxies such…
Is borrowing good for the borrowers?
Just because someone is repaying their loans doesn’t mean they’re benefiting from the loans. We have given some conceptual/anecdotal support for this idea in the past, linking to David Roodman’s posts on possible “overlending” and comparing microloans to payday loans. Lately we’ve been investigating something a bit more concrete: how often, and why, do microfinance…
Orphanages
We haven’t done much work on charities that try to help orphans and vulnerable children, and we intend to do more. Here are some preliminary thoughts, though. At first glance, this area might seem among the simplest and least controversial. SOS Children’s Villages states, “Our sponsors and donors help children whose parents are not there…