|Mahmood does the math, explores microfinance's effects on poverty
RELEASED: June 16, 2005
DANVILLE, KY"This isn't even half of it," Fuad Mahmood laughs as he lugs a sheaf of papers thicker than an economics textbook out of his book bag. A rising senior and a double major in financial economics and math, Mahmood is spending his summer on the Centre College campus, working with Assistant Professor of Economics Mohua Das to conduct a quantitative analysis of the impact of microfinance on poverty.
Simply put, microfinance is a financial service in which very small loans are given to very poor people to encourage productive activity and small business ventures. "I'm trying to figure out, using numbers, if microfinance really is helping the poor," Mahmood explains. "That's my main focus. And if it is helping, I want to know by how much."
His stack of papers has been growinginch by inch, survey by literature review by journal article since last January, when a CentreTerm internship with BRAC, a microfinance institution in Bangladesh, launched him into months of research.
"They told me I could look at papers, or I could go into the field," Mahmood says. "I went into the field."
Mahmood spent his three-week internship designing and conducting surveys meant to determine whether or not microfinance was indeed easing poverty. He was interacting with people directly affected by the practice, asking questions about where the money from microfinance loans was going, whether or not this money was helping, and whether or not the loans would be taken out again.
During this time, Mahmood realized that he could take his research even further.
Because he knew he would have to write a research paper for an econometrics course taught by economics professor Bruce Johnson in the spring, he started thinking about numbers analysis of the data already possessed by BRAC. Mahmood wrote the paper and kept right on going, simultaneously working with Das to expand his research through an independent study on economic development, capital markets and asset accumulation for the poor in Bangladesh. For this third and final stage of his research, he is collecting and analyzing data from another self-designed and implemented survey and is drawing on the previous stages of his research for a paper that analyzes the outcome of microfinance practices.
"Microfinance started out as a very small thingit's not immediately impressive, it's not fancybut it picked up speed in the eighties, and in the nineties microfinance became headline news as the measure for lowering poverty," Das explains, also mentioning that the United Nations designated 2005 as the International Year of Microcredit. Microfinance has been touted by such big names as former President Bill Clinton and Senator Hillary Clinton and the World Bank. And just this week, a Newsweek article, "10 Big Thinkers for Big Business," provided microfinance with even more press as entrepreneur/philanthropist (and eBay founder) Pierre Omidyar described it as "a perfect match for the way we look at the world."
So is microfinance creating the results to deserve all this hype? Mahmood and Das are still waiting for numbers to come in and answers to be posed. As of now, Mahmood says, commentary is mixed. Many people are very enthusiastic about the venture, while skeptics claim that the practice isn't really making much difference, and that by its nature is too small in scale to have any measurable impact.
"This project has been a great opportunity," he says. "I am getting to work very closely with a professor, and I'm getting into research that involves both economic development and econometrics." Mahmood plans to go straight from Centre College to graduate school and expects that his research experience will help with the application process and with his future scholarship.
Senior Kristie Kachler contributed to this report.
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