The GiveWell blog ran some disappointing news yesterday. They took a look at the Grameen Foundation’s village phone program. The village phones program is much beloved; it’s been highly touted as an effective way to lift people out of poverty. The foundation gives a loan to an entrepreneur (usually female), who then rents the phone to people in her village. It gives her a new source of income, and provides access to telecommunications for her village.
Here’s the problem; it doesn’t seem to work. The phones aren’t that useful to the people living in the villages. Having access to the phone had “absolutely no impact of the phones on trading activity or availability of goods in local markets” and very small (non-significant) impacts on profits and measures of well-being (school enrollment, consumption of meat, etc.).
They also don’t provide significant income to the phone owners. “Their hours worked rose significantly both for their new phone business and for their already-existing businesses, but their profits and wages paid did not rise…” In other words, the phones were a bad investment.
Combined with the recent studies finding that microfinance doesn’t have the hoped-for impact on poverty, we’re rapidly running out of magic bullets.
“we’re rapidly running out of magic bullets.”
What about Migration!
I wonder if the results would be any different in a different locale. Do the communities where Grameen is working have any sort of money transfer system via cell phone like MPESA or ZAP here in Kenya (Safaricom/Zain)? These systems seem to have revolutionized rural livelihoods here – and though even in poor communities many people have a mobile, I’m sure there could still be some use for the option to “rent” per minute or per transaction…
Please, could you point me to those studies you reference showing that microfinance is not helping people lift themselves from poverty as we hoped?
For studies, google:
– miracle of microfinance, duflo
– manila, dean karlan
Those studies lack external validity so let’s take them with prudence before making generalizations. Something good out of that new evidence is that the hype on microfinance has slowed down so now we can see what works and doesnt, just like in the case of phones.