Markets for the Poor 2017 - Columbia University
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Page 1 of 6 MARKETS FOR THE POOR B8354 Schedule: T/R - B Term, 9:00:00 AM to 10:30:00 AM SPRING 2017 URIS HALL 330 (TUESDAYS AND THURSDAYS) -------------------------------------------------------------------------------------------------------------------------------------------------- INSTRUCTOR: Suresh Sundaresan Office Location: 401 Uris Hall Office Phone: 212-854-4423 Fax: 212-316-9180 E-mail: [email protected] Office Hours: Mondays 2.00 to 3.00 TA: TBA REQUIRED COURSE MATERIAL o Copies of slides/articles that will be distributed in class and posted in Canvas. REQUIRED PREREQUISITES AND CONNECTION TO THE CORE No pre-requisites. Just an open mind about exploring the importance of delivering financial and other core services to communities that are under-served, and a willingness to study and analyze the literature and cases pertaining to the markets for the Poor. COURSE DESCRIPTION A. Course Description: The purpose of this course is to give students an in-depth discussion of academic and policy/practitioner research to be able to address and evaluate the following questions. a) What are the challenges in measuring poverty? b) How pervasive is poverty and what are the underlying drivers of poverty? c) Has economic growth in developing countries (such as Brazil, China and India) helped to alleviate poverty? d) How pervasive is poverty in the United States? e) What are informal credit markets? Who participates in them? What are the interest rates and default rates in these markets?
Transcript of Markets for the Poor 2017 - Columbia University
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MARKETSFORTHEPOORB8354
Schedule:T/R-BTerm,9:00:00AMto10:30:00AMSPRING2017
URISHALL330(TUESDAYSANDTHURSDAYS)--------------------------------------------------------------------------------------------------------------------------------------------------
INSTRUCTOR:SureshSundaresanOfficeLocation:401UrisHallOfficePhone: 212-854-4423Fax: 212-316-9180E-mail:[email protected]: Mondays2.00to3.00TA:TBA
REQUIREDCOURSEMATERIAL
o Copiesofslides/articlesthatwillbedistributedinclassandpostedinCanvas.
REQUIREDPREREQUISITESANDCONNECTIONTOTHECORE
Nopre-requisites.Justanopenmindaboutexploringtheimportanceofdeliveringfinancialandothercoreservicestocommunitiesthatareunder-served,andawillingnesstostudyandanalyzetheliteratureandcasespertainingtothemarketsforthePoor.
COURSEDESCRIPTION
A. CourseDescription:
Thepurposeofthiscourseistogivestudentsanin-depthdiscussionofacademicandpolicy/practitionerresearchtobeabletoaddressandevaluatethefollowingquestions.
a) Whatarethechallengesinmeasuringpoverty?
b) Howpervasiveispovertyandwhataretheunderlyingdriversofpoverty?
c) Haseconomicgrowthindevelopingcountries(suchasBrazil,ChinaandIndia)helpedtoalleviatepoverty?
d) HowpervasiveispovertyintheUnitedStates?
e) Whatareinformalcreditmarkets?Whoparticipatesinthem?Whataretheinterestratesanddefaultratesinthesemarkets?
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f) Whatarethechallengestotheflowofcredittothepoorborrowers?Howcantheybesurmounted?
g) WhatistheroleofmicrofinanceindeliveringfinancialservicestothePoor?Howsuccessfulhasbeenthiseffort?Whatarethechallenges?
h) WhataresomeoftherecentcapitalmarketinnovationsinthemarketsforthePoor?Cantheyhelptoscaleupandbringdowninterestrates?
i) Whataresomeoftheinnovationsintroducedbycorporationsandgovernmentsinthisfield?
Withaviewtoaddressingthequestionsabove,thecoursewillbeginbyexamininghowpovertyismeasured,andcharacterize(usingdifferentmeasures)howpervasivepovertyis.Inthiscontext,wewillpayspecialattentiontosimple(exogenous)measuresofpovertyrates,andmulti-dimensionalmeasuresofpoverty,whichlinkpovertytosomeunderlyingdeprivations(suchaslackofaccesstoeducation,healthcare,livingstandards,etc.).Wewillalsoexaminehowthepoororganizetheirlives,budgettheirconsumptionexpenditures,andsurveytheiraccesstocertainservices.Afterthisthecoursewillpresentevidenceontheextenttowhichpovertyhasbeenalleviatedindifferentpartsoftheworld,andhowtheresultscomparewiththeMillenniumDevelopmentGoals(MDG)setbytheUnitedNationsin2000.NewlyestablishedSustainableDevelopmentGoalswillbebrieflypresented.Wewillalsoexploretheextenttowhicheconomicgrowthincountrieshasinfluencedpovertyrates.Inthiscontext,wewillexaminethepovertyalleviationprocessandmajorindicatorsofpovertyinBrazil,ChinaandIndiabeforeandaftertheseeconomiesbegantoexperiencesignificanteconomicexpansion:thisdiscussionwillshedsomelightontherelationshipbetweeneconomicgrowthandpovertyrates.
Aftercharacterizingpoverty,thecoursewillturntotheroleofmarkets(broadlydefinedtoincludeprivatemarkets,corporatesocialinitiatives,andgovernmentinitiatives)thataddresstheneedsofthepoor.Thecoursewillfirstintroduceandexamine“informalcreditmarkets”suchasRotatingSavingsandCreditAssociations(ROSCA),Paydayloans,andmoreestablishedmarketsinconsumercredit.Wewillexaminehowthesemechanismswork,whattheprevailinginterestratesinthesemarketsare,andthemotivationsforpoorborrowerstoselectthesemarketsfortheirconsumption/savingsneeds.Thesemarkets,outsidethebankingsector,playanimportantroleintheprovisionofcredittoasectorunderservedinformalcreditmarkets.
Thediscussionofinformalcreditmarketswillbefollowedbymicrofinance,broadlydefinedtoincludea)loans,b)savings,andc)insurance.Afterdescribingtheextentofthemicrofinancemarket,wewilldrilldowntosomebasicissuesinmicrofinance:a)aremicro-loaninterestrateshigh?b)Whataresomeofthefactorsthatcontributetohighinterestrates?c)Whatistheroleofpeer-monitoringinloanenforcement?d)Issuessuchasjoint-liability,group-lending,absenceofcollateralwillbeaddressed.Potentiallyundesirableconsequencesofexcessivecommunitypressureasamechanismtoensurelowdefaultswillbeexamined.Resultsofcarefullyconductedpovertyimpactstudiesusingrandomizedsamplingmethodswillbesummarized.
Thecoursewillthenturntodifferentprovidersofmicrofinance:Non-GovernmentalOrganizations(NGO),creditunions,non-bankmicrofinanceinstitutions(MFI),banks,etc.Wewillshowtheseinstitutionsdifferintermsoftheborrowerstheyattract,andtheformoflendingtheyprovide.Thecoursewillprovidesomeinsightsonhowaccesstocapitalmarketsbywayofdebtissues,initialpublicoffers,andcollateralizeddebtobligationshavechangedthelandscapeofmicrofinance:ineffectthecreditmarketsforthepoorhaveboth
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veryoldinstitutionssuchasNGOsaswellasinstitutionssuchasSKS,whichhavesuccessfullytappedequityfinance.Securitizeddebtissuanceshavealsobeenmadeinmicrofinance,andwewillreviewthismarket.Theadventofmobilephonetechnologyhasallowedsometelecomcompaniestousethistechnologytodeliververysmallloans:thishasthepotentialtoimprovethescalabilityofmicrofinance.
Inaddition,wewillexaminesomecorporateandgovernmentinitiativesthathavealteredmarketsforhealthcare,marketinganddistributionofgoodsproducedbythepoor.The30-BahtmedicalcareprograminThailandandthee-ChoupalinitiativebythecorporatecitizenITCinIndiaareillustrativeofhowsometimescorporationsandGovernmentscanaltersignificantlythelandscapeofthemarketsforthepoor.
A. CourseOutline:
1. Poverty,itsmeasurement,CausesandManifestations(about1.5lectures)
• Lecturenotestobedistributedinclass.(*)• Creditmarketswithimperfectinformation(adverseselection,ex-antemoralhazard,andex-
postmoralhazard).• Howtowritecontractsandenforcethem?• GrameenBank(Bangladesh)BusinessModel.• GrameenAmericaCaseAnalysis.(Thecaseisinthecoursepacket).
2. InterestRatesonMicroloans.Aretheytoohigh?(about1.5lectures)
• Lecturenotestobedistributedinclass.(*)• Breakingdowninterestrates(operatingexpense,defaults,costoffunding,andprofitmargins)• Benchmark–marginalproductofcapital.• “ReturnstoCapitalinMicroenterprises:EvidencefromaFieldExperiment,”bySureshDel
Mel,DavidMcKenzie,andChristopherWoodruff,WorldBankPolicyResearchWorkingPaper(2007).
• CaseAnalysis-APcrisisandsuicidesofborrowers:WhokilledBhavaniManjula?,2010,AstoryofMicrofinanceinAndhraPradesh.(Thecaseisinthecoursepacket).
3. InformalCreditMarkets(Paydayloans,pawnbroking,ROSCAs,etc.)(about1lecture)
• Lecturenotestobedistributedinclass.(*)• WhymarriedwomenpreferROSCAs?• SiwanAndersonandJean-MarieBaland,“TheEconomicsofRoscasandIntra-household
ResourceAllocation,”TheQuarterlyJournalofEconomics,Vol.117,No.3(Aug.,2002),pp.963-995.
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4. SecuritizationofMicro-loans(about1lecture)
• Lecturenotestobedistributedinclass.(*)• IntroductiontoSecuritizationofMicroloans.• BRACsecuritizationexperience.• Alignmentofincentives,and“skininthegame”.• IFMRCaseAnalysis.(Thecaseisinthecoursepacket).
5. RoleofTechnologyintheMarketsforthePoor(about1lecture)
• Lecturenotestobedistributedinclass.(*)• Analysisofdifferenttechnologydrivenbusinessmodels:
i. M-PESA.ii. FINO.iii. EquityBank/M-Shwari
• EquityBankCaseAnalysis.(Thecaseisinthecoursepacket).• Leap-froggingtechnologiesindevelopingworld.
6. AlternativeModelsforDeliveringFinancialServices(about1to2lectures)
• UniversalIDschemesandintegratingKYCrequirements.• No-frillbankaccounts.• Increasingroleofcapitalmarketsinmicrofinance.• CreditBureausandcreditratingofMFIs:informationsharing.• Alternatemodels:NGOs,CUs,NBFIs,Banks,IPOs,etc.• SKSCaseAnalysis.(Thecaseisinthecoursepacket).• Riskofmissiondrift?
7. NotablePrivateSectorDevelopments(about1to2lectures)
• Peer-to-peerlending(tohouseholds).o Lendingclubmodel.
• Modelsoffinancialservicestoencourageinclusivegrowth.o OnDeck.o NextStreet.
• Eliminatingmiddlemen.• ITCeChoupalCaseAnalysis(Time permitting, The case is in the course packet).
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LECTURESBYPRACTITIONERS[tentativelist]
• SimonaHaiduc,OpportunityInternationalo TheBusinessModelofOpportunityInternationalandtheirworkinMalawi.
• BradSwanson,DevelopingWorldMarkets(OnMay1st).o InvestingintoMicrofinance/PrivateEquity.
COURSEOBJECTIVES
Inadditiontoprovidingstudentswithanin-depthdiscussionofacademicandpolicy/practitionerresearch,thepurposeofthiscourseisalsotoprovideasoundandcomprehensiveworkingknowledgeofthemarketsforthepoorwithanemphasisonhowtheinstitutionsservingthemhaveevolvedovertime,adaptingtotechnologicalinnovations.Inadditiontoprovidingthestudentswithaclearknowledgeofinstitutions,pricingrelationship,applicationsandanalytics,thecoursewillhelpthestudentstothinkthroughmajorissuesfacinginvestors,marketmakers,issuers,andregulators.
ASSIGNMENTS
• Attendanceismandatoryforeachclasssession.TheTAwillrecordstudentattendanceatthecommencementofclass;studentswhoarrive5minutesafterthescheduledcommencementtimewillnotberecordedashavingattendedthesession.Inaddition,informedclassparticipationisexpected.Together,theycarry15%ofthecoursegrade.Studentswhohaveamedicalorotheremergencyreasonfornotattendingclassshouldcontacttheprofessorinadvanceofthesession.
• Studentsmustbringtheirnamecardsandoccupythesameseatineachclass.
• Therewillbethreequizzes,whichwillbe(roughly)assignedasfollows:
o Attheendoffourthsession.o Attheendofeighthsession.o Atthebeginningofthelastsession.
Eachquizwilllastfor30minutes,andcarryquestionstestingyourunderstandingofthematerialcoveredintheprevioussessions.Quizzesareclosedbookandclosednotes.Youcanbringonepageofnotes.Eachquizwillcarry15%weight.• Therewillbecaseassignments,whichwillrequirebothawrittenreportandclasspresentation.
Studentswillbeassignedanumberofcases,asspecifiedinthecourseoutline.Eachcasegroupwillhavenomorethanthreestudents.Eachgroupwillsubmitawrittenanalysisofthefourcases.Groupswillbecalledupontomakepresentationsinclass.Eachcasewillcarryaweightof10%.
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METHODOFEVALUATION
Attendance&Classparticipation
15%
Quiz1 15%Quiz2 15%Quiz3 15%Caseanalysis 40%
CLASSROOMNORMSANDEXPECTATIONS
• Attendanceismandatoryforeachclasssession.TheTAwillrecordstudentattendanceatthecommencementofclass;studentswhoarrive5minutesafterthescheduledcommencementtimewillnotberecordedashavingattendedthesession.Inaddition,informedclassparticipationisexpected.Together,asmentionedearlier,theycarry15%ofthecoursegrade.
• Studentswhohaveamedicalorotheremergencyreasonfornotattendingclassshouldcontacttheprofessorinadvanceofthesession.Onceintheclassroom,studentsareexpectednottoleavetheroomuntilthesessioniscompleted.
• Therewillbeaseatingchart.Studentsmustbringtheirnamecardsandoccupythesameseatineachclass.
• IwouldexpectyouNOTtousemobilephonesorlaptopsordigitalaidsduringclasshours.
