Microfinance in the jungle

IPA’s Doug Parkerson recounts adventures in microfinance with hunter-gatherer communities in the Bolivian jungle:

As we lumbered along a pitted and muddy logging road on the backs of motorcycles, I wasn’t sure what to expect of the Tsimane’.

When I was a kid my family lived for a couple of years in the highlands of Papua New Guinea, and I wondered if the Tsiman houses and clothing would be at all similar to the bamboo huts and grass skirts that I so clearly remember from my childhood.

You can imagine my surprise, then, when we finally arrived in a village four hours later to see a woman wearing a “Republicans for Voldemort” shirt.

It’s surprising to me that we aren’t seeing more evident impacts of microfinance when stories like this are so common and compelling:

The only person in each village with access to financial services is the school teacher. Teachers are paid by the state directly into a bank account in San Borja.

We spoke with one teacher in a less remote village who had taken advantage of the financial services to make a major purchase in each of the last three years. The first year he saved up by leaving a portion of his salary in his account each month. At the end of the school year, he bought a motorcycle. The next year he took out a loan against his salary to buy a metal roof for his house. The loan payments were automatically deducted from his pay each month. The third year he took another loan to buy a second motorcycle.

Without the access to formal savings and loans it is doubtful that he would have been able to make the purchases.

The randomized evaluation jury is still out on microlending, but I remain optimistic.

One thought on “Microfinance in the jungle

  1. I too am optimistic, but would like to emphasize that this is likely borrowing facilitated by a national bank and is not a “conventional” uncollateralized microfinance loan. Rather, the teacher is practicing a developing country version of payday lending with his wages automatically garnished. He can move consumption forward in time, but all benefits will arise from smoothing or due to constraints towards saving up…