News & CommentaryArchive
Oct 28, 2009
Microfinance: Autism or Hormone Replacement Therapy?
This has been a banner year for gathering real evidence about microfinance. There have been two randomized control trials (in India and the Philippines) of the standard microcredit product released, the publication of Portfolios of the Poor with its groundbreaking survey work, and several more studies using rigorous methodologies looking at various aspects and variants of microfinance including savings, vocational training, group vs. individual liability, comparing men and women, and even revisiting the most often cited prior studies and discovering that the positive effects found were probably errors.
All of the evidence from these rigorous studies points if not to a precise conclusion, at least in the same general direction: the story we’re all familiar with about microfinance isn’t really true. First let me say in no uncertain terms that the evidence does not point to harm—where there is a difference it tends to be positive. At the same time, large numbers of poor women are not escaping poverty by starting businesses with a small loan. The evidence (all drawn from the studies linked above) we have tells us:
* Borrowers aren’t much more likely to start a new business
* Many borrowers do not invest significantly in business goods
* Most borrowers do not raise their incomes dramatically
* Borrowers don’t spend more on food or education
* Women are not better users of capital than men
* Group liability does not necessarily have an impact on repayment rates
But does all of this research matter? Will it change what donors believe about microfinance?
In other words, is microfinance more like autism or Hormone Replacement Therapy?
To explain, consider the history of the belief in a relationship between vaccination and autism. More than a decade ago now there were several studies done that showed a link between the MMR vaccine and autism. Those studies had, in hindsight, glaring and obvious methodological flaws. Since then there have been a flood of high quality, large-scale studies with gold-standard methodologies which have shown no link whatsoever between vaccination and autism (for a great survey of the history of autism research see this). A recent survey in the UK suggests that the incidence of autism has remained constant for decades (it’s just terminology and diagnosis that has changed). How many minds have been changed by the research? To an outside observer it certainly seems as if the answer is zero. The anti-vaccine crusaders are as vocal as ever.
On the other hand, you have the example of hormone replacement therapy. A very well-done study a number of years ago concluded that HRT held health benefits for post-menopausal women, helping them avoid not only discomfort but bone loss and heart disease. Then a second, even better study was run that showed that HRT, in fact, raised the incidence not only of heart disease but of stroke and invasive breast cancer (for a good review of the history of research about HRT see this). What was the result of this research? The use of HRT stopped nearly instantaneously. One study was enough to change everyone’s mind and permanently change the practice of medicine. As far as I know there are no large, well-funded organizations of post-menopausal women demanding the return of HRT.
In the case of autism, evidence hasn’t made a whit of difference in many people’s beliefs and practices. In the case of HRT, evidence changed everyone’s minds immediately. Now that we are starting to have evidence on microfinance, will it change minds and practice? Will microfinance behave like HRT? Or will the microfinance industry behave more like autism, with an ever loyal army of defenders of the mythic masses of entrepreneurial women who climb out of poverty on the back of a $100 loan?
It’s a non-trivial question. The perpetuation of the myth of vaccination causing autism is bad for everyone, including those who espouse it. They and their children, friends and neighbors are now more exposed to potentially life-altering diseases. It also distracts funding and research from pursuing the actual causes of and treatments for autism. If supporters of microfinance dig in their heels and continue to peddle the myth, harm will also be done. That harm will come in the form of misdirected donations, missed opportunities for innovation and experimentation, and in the form of large numbers of poor people with continued limited access to the financial services that will make the most difference to them. The biggest risk is that it will do harm because as the gap between the reality and the myth of microfinance becomes clearer, more and more people will reject microfinance entirely for “failing.”
This isn’t a plea to shut down microfinance, nor an attempt to unfairly tarnish it. It’s a plea to recognize what microfinance really does and to figure out how to make it more effective—and that requires rejecting the myths and taking the evidence seriously. That’s why I hope microfinance is more like HRT than autism.
On a related note, I’d be very interested to hear any opinions on why some things are susceptible to evidence and others are not. I’m at a loss to explain the different reactions to research on autism and HRT. What do you think?